I missed last weeks blog due to a family emergency. Since writing 2 weeks ago the whole dynamics of the US industry has changed. June hogs closed above $1.20 today on the Chicago Mercantile. The average price paid yesterday (including carcass merit premiums) for all barrows and gilts slaughtered in the US as reported by USDA was $100.41/cwt. With an average barrow and gilt carcass weight of 214.18 lb, this translates into $215.06 price paid for every pig slaughtered yesterday (383,765 barrows and gilts under USDA inspection).
Cull sows are selling for $70/cwt which means you get $280 for every 400 lb cull. WOW is the only polite word to describe the past 2 weeks of price rises.
Even though corn and soybean meal prices continue to rise, feed price haven’t risen as fast as cash and futures prices for slaughter animals. What looked to be a good summer of prices has turned into a wind-fall of profit – assuming you don’t a production system plagued with PEDv and have pigs in inventory that are available for sale and delivery at these elevated prices.
Many producers who have lost inventory due to a PEDv outbreak at a farrowing site have replaced those pigs with spot market SEW or feeder pigs. USDA reported that the average cash price for SEW pigs this week was $88.87/pig delivered and the cash price of 40 lb pigs averaged $114.03/pig. I am aware of spot market pigs trading even higher than this in the past 2 weeks.
Since 2005 when I began tracking spot SEW prices as reported by USDA, the yearly high price for SEW pigs has occurred in January thru the second week of February in all years but 2010 when the high occurred on the last week of March. Since April 1 of 2013, there have only been 10 weeks when the SEW spot price as reported by USDA has not been higher than the previous week.
The same general trend has held for the spot cash price of 40 lb feeder pigs. There has only been 1 week where the cash price of 40 lb pigs has declined from the previous week since the middle of August.
The ‘fly in the ointment’ of all of this optimism is the fact that 23% of our production is exported. Anything that alters foreign demand for our product will have an immediate impact on the futures price and producers expectations of prices. The WTO is expected to announce its final decision in June regarding the Mexican and Canadian case regarding our Country of Origin labeling law. Almost all observers expect the ruling to go in favor of Mexico and Canada. Canada (our number 2 export destination) has already listed the products that they will impose an import tariff on, and pork is on this list.