Pork turning point

Pork turning point

- Hog report indicates larger supplies ahead. - Pork producers counting on higher hog prices and lower corn prices. - Feedlot inventor

PORK production has reached "the turning point" toward expansion, analysts said after the release of the March hogs and pigs report last week.

The breeding herd is larger than year ago -- albeit modestly -- the marketing herd is larger than year ago and the 120-179 lb. pigs in the marketing herd are considerably larger than year ago (Table 1), noted Jim Robb at the Livestock Marketing Information Center in Denver, Colo.

"So, there are larger supplies coming over the near term," and they're coming "in an environment of relatively high feed costs," he said on a post-report teleconference hosted by the National Pork Board.

"We would have to view that as slightly negative," Robb said.

"We will have more pigs than expected," added John Nalivka, president of Sterling Marketing in Vale, Ore.

He said pork producers were experiencing losses of as much as $60 per head last summer after corn prices spiked to new record highs as the worst drought in 50 years set in across the Corn Belt.

However, over time, Nalivka said grain prices started to ease, hog prices started to rise and losses started to fade, which encouraged producers to hold production steady or increase production. "That's had a lot to do with where the industry is headed," he said.

Another factor is the ongoing improvement in pigs per litter, which was another record high of 10.01 pigs for the December-February period, said Victor Aideyan at HISGRAIN Commodities in London, Ont.

The North American industry is tremendously efficient, he said, which means that if the breeding herd grows modestly, the marketing herd grows significantly -- indicating "that there will be a robust increase in hog numbers in the second quarter and beyond."

Pork producers also shook the dice and rolled what they wanted, analysts said.

"The general thinking" since last fall has been that corn growers will plant record corn acreage this spring and that there will be sufficient moisture for a record corn harvest, which would make corn prices this year very manageable, Nalivka and Robb said, adding that producers are expanding into that scenario.

The scenario found support in the prospective plantings and quarterly stocks reports last week, which indicated that growers intend to plant 97.3 million acres to corn -- the second most in history -- and that corn stocks are far larger than expected. The combination immediately pulled corn prices under $7/bu.

Producers were counting on higher hog prices and lower corn prices, Nalivka said, so "this was a motivation (to expand) coming into 2013."

However, profits still will be elusive, the analysts said. They generally have prices this year in the low $80s, lean carcass basis, and breakevens that will eventually decline into the mid-$80s. Producers will approach profitability in the next three to four months but are not likely to actually get over the line, they said.

The hog markets were up 63 cents in the eastern Corn Belt and up $3.21 out west last week to $71.82-75.45/cwt. on a lean carcass basis last Thursday, equivalent to a $54-57 live cash hog market and 6.5% under year ago.

Packers were actively looking for hogs last week, and producers were current in their marketings, lending some strength to the markets, according to Feedstuffs sources.

 

Feedlot report

Other noteworthy reports last week included the feedlot inventory report, which analysts greeted as positive due to February placements that were far fewer than expected and, indeed, were the smallest February placements in the history of the feedlot series (Table 2).

Analysts said placements were a consequence of two major snowstorms that limited movement, big cattle feeding losses that discouraged placing feeders and tight feeder supplies to begin with.

The feedlot situation continues to set up what should be extremely limited fed cattle supplies for the rest of this year and, therefore, limited beef production, which should support high to record-high fed and wholesale beef prices, noted Bob Price at North America Risk Management Services Inc. in Chicago, Ill.

However, he cautioned that this outlook depends on consumer beef demand that already is at record-high retail prices. "Beef supplies set the direction of (beef and cattle) prices, but beef demand sets the magnitude," he said in a report to clients.

The cattle markets did increase $3.00-3.50 last week and were $127-129/cwt. in Nebraska and $127.128 in Kansas and the Southwest last Thursday, 1.6% higher than year ago.

Sources noted that cattle prices rose despite a $4-5 break in beef prices. However, they said beef could rally this week since retailers will have cleared their Easter ham and turkey supplies and will be interested in offering some beef features, especially if the weather improves enough to ignite the grills.

If packers can get higher prices for beef, cattle prices should hold steady or maybe pick up another $1-2, sources said.

 

Cold storage report

The cold storage report showed large stocks of meat and poultry (Table 3), but this was due mostly to chicken and turkey stocks as chicken companies continue to expand and turkey processors continue to work with excess production from last year and some sluggish demand out of the gate this year, sources said.

At first glance, pork stocks also looked substantial, but Dennis Smith at Archer Financials in Chicago suggested that there were actually positive signs in pork storage in that: belly stocks were down 31% from year ago at the end of February; ham stocks were unchanged from year ago versus being 10% over at the end of January; a critical export item -- butts -- was just 2% over year ago versus being 15% over at the end of January, and total pork stocks were just 2% over year ago versus being 3% over as of Jan. 31.

Ribs were up 27% but were being moved into storage in anticipation of value demand taking hold soon as consumers replace beef with pork, Smith said.

The report suggests that pork demand has been good -- "better than the market thinks," he said in a morning wire.

In the poultry sector, the chicken markets were steady to higher, with "a lot of excitement building for April," sources said. Chickens were $1.08-1.13 and 98 cents to $1.07/lb. in the eastern and midwestern regions last Thursday, 26.3% more than year ago. Chickens were record high in the East.

The egg markets were down 2 cents to $1.44-1.48 and $1.34-1.36/doz. for large-sized eggs delivered to eastern and midwestern store doors last Thursday, 18.7% more than year ago.

However, sources said they expect prices to plunge this week, possibly 15-20 cents. "The Easter push is over, and the first of the month this week is taken care of," one source said.

 

1. Hogs and pigs report (March 1)

Category

2011

2012

2013

% year before

All hogs and pigs

63.684

64.937

65.911

101.5

Breeding herd

5.788

5.820

5.834

100.2

Marketing herd

57.896

59.117

60.077

101.6

Groups in marketing herd

Under 50 lb.

18.863

19.235

19.426

101.0

50-119 lb.

16.060

16.409

16.650

101.5

120-179 lb.

12.361

12.780

13.059

102.2

180 lb.-plus

10.612

10.693

10.942

102.3

December-February period

Farrowings

2.843

2.864

2.879

100.5

Pigs per litter*

9.80

9.97

10.08

101.1

Pig crop

27.866

28.550

29.019

101.6

Farrowing intentions

March-May

2.917

2.982

2.955

99.1

June-August

2.927

2.928

2.905

99.2

*Actual number.

 

2. Feedlot inventory report (March 1)

 

2011

2012

2013

2013 %

 

-Million head-

of 2012

Feb. 1 inventory

11.571

11.811

11.073

93.8

February marketings

1.791

1.755

1.638

93.3

February placements

1.667

1.714

1.482

86.5

March 1 inventory

11.386

11.677

10.857

93.0

120-day -plus inventory

4.328

4.768

4.193

87.9

 

3. Cold storage report (selected stocks)

 

Feb. 29,

Jan. 31,

Feb. 28,

%

%

 

2012

2013

2013

month

year

Category

-Million lb.-

before

before

Dairy products

 

 

 

 

 

Butter

205.172

207.075

240.299

116.0

117.1

Cheese products

 

 

 

 

 

American

634.614

643.184

666.679

103.7

105.1

Swiss

27.049

30.401

29.984

98.6

110.9

Other

364.742

358.611

375.694

104.8

103.0

Total cheese

1,026.405

1,032.196

1,072.357

103.9

104.5

Egg products

36.326

29.659

28.557

96.3

78.6

Meat products

 

 

 

 

 

Beef products

470.808

484.610

490.313

101.2

104.1

Pork products

 

 

 

 

 

Bellies

61.577

36.425

42.667

117.1

69.3

Hams

110.238

108.450

110.506

101.9

100.2

Loins

43.440

43.989

41.867

95.2

96.4

Ribs

96.403

114.370

122.620

107.2

127.7

Trimmings

64.964

57.826

64.328

111.2

99.0

Total pork

622.673

606.425

636.693

105.0

102.3

Lamb and mutton

20.851

18.768

19.841

105.7

95.2

Veal

4.363

5.012

4.858

96.9

111.3

Total meat

1,118.695

1,114.815

1,151.705

103.3

103.0

Poultry products

 

 

 

 

 

Chicken products

 

 

 

 

 

Whole chickens

13.937

18.741

16.372

87.4

117.5

Breasts, breast meat

122.332

129.741

127.276

98.1

104.0

Leg quarters

94.769

116.367

109.227

93.9

115.3

Wings

33.732

59.737

62.788

105.1

186.1

Total chicken

599.698

657.548

636.222

96.8

106.1

Turkey products

 

 

 

 

 

Hen turkeys

81.395

78.549

88.589

112.8

108.8

Tom turkeys

59.607

66.418

83.145

121.5

139.5

Whole turkeys

141.002

146.967

171.734

116.9

121.8

Breasts

59.759

63.914

66.800

104.5

111.8

Total turkey

349.577

360.018

398.933

110.8

114.1

Ducks

2.222

1.444

1.482

102.6

66.7

Total poultry

951.497

1,019.010

1,036.637

101.7

108.9

Total meat/poultry

2,070.192

2,133.825

2,188.342

102.6

105.7

Source for Tables: National Agricultural Statistics Service.

 

Volume:85 Issue:13

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