Producer optimism

This week I was a speaker at the Iowa regional swine seminars sponsored by the Iowa Pork Producer Association and Iowa State University. While the industry still is reeling from the loss in equity the past 2 years, at every meeting site there was some optimism that the worst of the bleeding may be over for now.

 

Another sign that producers are optimistic is the price of SEW pigs. The spot market for weaned pigs has been around $50 or higher since the first week of this year. The weighted average in the USDA weekly price report was $41 per pig this week, $4 per pig higher than last year and $5 per pig higher than the 9 year average price for early March.

 

The same relatively high prices are being paid for 40-50 lb feeder pigs. At the same time, there are reports from production systems that they are beginning to receive calls from growers who don’t have a source of pigs identified for the next turn of the barn.

 

These high prices suggest that the buyers of the pigs sure believe the futures price for summer and fall hogs will remain. The calls suggest fewer pigs in the market this summer and fall.

 

At the same time, it appears that the US sow herd sell-off has almost stopped. The spot market for cull sows peaked at $75 a few weeks ago, with the average bid around $65. This is quite a turn around from the $18-25 bids of just a few months ago. Sells of gilts have told me that gilt orders this past month have exploded.

 

When we add this up, it appears that the pig numbers in the upcoming hogs and pigs report will be relatively stable when compared to the December numbers. The US sow herd will most likely be relatively stable, while the Canadian herd that will be counted on April 1 can be expected to show a continued decline.

 

The cloud in the optimism for the US producer is the export situation. The stalemate continues between US poultry sources and the Russians over use of chlorinated water for rinsing birds during the slaughter procedure. Russia accounts for 24% of US poultry exports, with a majority of this as chicken thighs (dark meat). In 2002 when Russia last disrupted their importation of US poultry, the price of pork and beef in the US meat case dropped sharply as poultry producers offered thigh quarters for well less than $1 per pound retail price.

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