Reduced Hog Numbers Offer Potential for Profit

The Director of Risk Management with HAMS Marketing Services says tighter U.S. hog supplies can be expected to improve the profit potential for pork producers throughout the spring and summer. The U.S. Department of Agriculture's Quarterly Hogs and Pigs Report, released last week, shows a higher than expected decline from year ago levels in the numbers of all categories of pigs on U.S. farms, about two and a half percent.

 

Tyler Fulton, the Director of Risk Management with Hams Marketing Services, says supplies will be on the tighter side for the next ten months.

 

 

In North Americas as a whole we've been on a really solid run, both from a cash market standpoint and from a futures market standpoint. Since December we've seen futures values, in particular in the spring and summer time frame, increase 20 to 25 percent of their value so it's been a really solid run up.

 

It does make sense, when you've got a high degree of certainty that we're dealing with a tighter supply, it does feed into that narrative of stronger prices. There's not a ton of variation from the U.S. to Canada. We've obviously got a stronger Canadian dollar that's impacting Canadian prices a little bit negatively but overall the outlook for profitability is very good until at least September.

 

Then there's a big question mark as to whether or not we'll see enough of an increase in the values associated with that time frame or at least enough of a decrease in commodity prices. At current futures values we're probably not looking  at anything better than a break even for the November-December time frame because the futures aren't showing a lot of value and we've got new crop corn and soybean that is still very very expensive from an historical standpoint.

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