There’s a whole bunch of ‘stuff’ that hog industry people are saying about the effects of the COOL repeal, but more importantly the effects that, the exchange rate, and what the feed costs will be going into 2016 and beyond, and of course that mighty giant, consumer demand. How much pork do people eat in Canada and the United States, and how much can the processing industries in both countries sell overseas.
Tyler Fulton, the director of risk management with h@ms Marketing Services says the weak Canadian dollar and strong domestic demand for pork are benefitting Canadian hog producers. The market for live hogs has started to develop a bullish undertone and trends are generally following the normal seasonal effect of supplies easing a little bit.
“Typically, we see the peak in supplies in the fourth quarter of any given year and that’s no different here,” he said. “So we’ve started to see just slightly more comfortable numbers with respect to the U.S. and so, as a result, packers are paying up a little bit more and the good news is that all evidence kind of suggests that domestic demand is still holding up firm. It’s not going gangbusters or anything.” Fulton says they’re not making huge gains but, for Canadian hog producers right now, the profitability looks excellent.
“Producers can secure prices right now at around $200 per CKG in the summer months and average for the year that’s in the neighborhood of around $170 to $175 so, by any measure really, those are very profitable prices, especially in the context of generally steady feed prices.
The futures definitely represent a strong premium over the cash market which suggests that there’s reason for optimism for the next several months,” he said. Fulton says the value of the Canadian dollar has been the real game changer for Canadian hog producers.
He says, had the dollar not made its more recent lag, there would have been projected periods of loss in 2016 but the drop to the 70 cent level has put some extra dollars into the producer’s pockets and definitely is to the advantage of Canadian hog producers.
At the Banff Pork Seminar much discussion around this exactly and how it is impacting the Canadian pork business.
In summary – the lower Canadian dollar made Canadian producers more competitive to U.S. producer; labour, utilities, debt all in Canadian dollars creates more competitiveness when coupled with swine prices based on the U.S. market.
Jim Long, pork commentator says the recent rescinding by the US on Country of Origin Labeling. Now and in the future the labeling issues that lead to discounts and indirectly restricted the Canadian swine and pork movement to the US will be gone.
“It is the opinion of many we spoke to this will lead to more small pigs, market hogs, and pork to the US,” he said. “We do not expect this to head to expansion in Canada but could help sustain production. More small pigs and hogs from Canada also takes away pressure for the U.S. to add sows.”
Long says the demand for small pigs (early wean, and feeder pigs) has really ramped up the last few weeks. “Feeder pig brokers are calling just about any warm body who might sell some as the demand is so strong,” he said. “Third week in January, USDA prices average cash early wean price was $59.42 and 40 pound feeder pig $68.57, up $11.00 in the last two weeks.”
Long says, in Banff, the chase for small pigs was very evident and believes a combination of PRRS and AI extender issues have cut production. Large integrated production groups are buying small pigs, they are supposed to be farrow to finish, if they are buying it means they are short production, and are willing to buy pigs to keep their barns, feed mills, packing, etc. fuller. “We expect this demand is very positive for summer hog markets and we continue to believe that they are undervalued on the futures, 85¢ – 90¢ lean per pound would not surprise us.” •
— By Harry Siemens
