Hog producers post summer profits, fall outlook bearish

Perry Mohr. (Dave Bedard photo)

Canada’s hog producers posted profits during the summer months, but the market outlook heading into the fall is filled with uncertainty, according to the general manager for [email protected] Marketing Services.

“From mid-May to present, I would suggest that most producers have made money,” Perry Mohr says.

“However, I think people are kind of getting disillusioned about the price being as high as it is and the talk about feed prices going down. It’s true when you talk about the new crop prices, but right now corn and soybean prices are still relatively high if you’re buying stuff in someone’s bin today.

Mohr, who works for the hog marketing service at Headingley, Man., just west of Winnipeg, said hog prices have begun a downward trend, dropping $10 per 100 kg (ckg) the last few weeks.

According to the weekly hog prices from [email protected], which represents producers in Manitoba and Saskatchewan, Signature No. 3 hogs dropped from C$191.69/ckg during the week ended July 5 to $184.21/ckg during the week ended Aug. 2.

“Ironically, part of the decline in prices is due to the Canadian dollar moving from roughly US94 cents a few weeks ago to around 96 cents,” Mohr said.

“The second component is that cutout in the U.S., which hit record levels a few weeks ago, has come off considerably. Packers went from making US$20 per hog to losing US$10 per hog in a short time. They’ve adjusted cash bids to account for that.

“Hog supplies will also increase gradually into September and October, which corresponds with a decrease in demand for pork,” Mohr added.

Supplies typically increase during the fall, because the cool weather allows hogs to reach their market weight quickly.

However, the biggest factor for the downward trend seen in hog prices is coming from the 2013-14 U.S. corn crop, which is on pace to produce a record 13.95 billion bushels, the U.S. Department of Agriculture said.

According to the Chicago Board of Trade’s closing numbers for Monday, September U.S. corn futures were at US$4.6925 per bushel. With favourable crop growing conditions forecast for the U.S. Corn Belt, prices are expected to continue to drop.

This means it will be cheaper to feed hogs, resulting in a decrease in hog prices.

“We know there is a record amount of corn acres planted and we fully expect corn prices to be US$5 per bushel or less for a good part of next year,” Mohr said. “Based on the fundamentals we have a handle on now, it will decrease hog prices.”

— Brandon Logan writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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