Tyler Fulton, the Director of Risk management with HAMS Marketing Services said futures markets had shown improvement in spite of substantially higher than expected live hog numbers.
In early March, most of the summer months’ futures have recovered to roughly halfway back to their highs but acknowledged it’s still very volatile, but futures values are significantly better than several weeks earlier.
“The reality is there’s a huge hog supply that to some degree caught the market off guard. We’ve seen several weeks that exceeded five percent growth over year-ago levels, and that is pretty close to double what we anticipated seeing,” said Fulton. “We usually don’t get caught off guard on the supply side with that kind of an increase, and it’s been quite consistent since the new year, and there’s no indication of it stopping. Not only are the hog numbers up significantly but hog carcass weights are also heavier.”
He said in terms of weekly pork production the United States, in particular, they are up a solid five per cent over year-ago levels. For whatever reason, the futures are willing to put this large supply on the back burner and focus a little bit more on some of the longer term positive fundamentals.
“I believe that the market still thinks that the North American market place is going to benefit from higher export sales into Asia, in particular into China as a result of the short domestic supply there relating to African Swine Fever but there’s a great reason for caution,” Fulton said. “When we get close to where we think there’s going to be a tangible benefit to North American prices, it gets pushed further down the road. When you look at the current futures values and the current hog supply, it’s had to reconcile the two.
Bob Fraser, sales and service, Genesus Ontario said Stats Canada January 1 semi-annual Hog & Pig Report placed the Canadian sow herd at 1.24 million head. That puts the Canadian herd as basically flat for approaching a decade now.

“Or you can make an argument that it is slowly bleeding to death by a thousand pinpricks as it approaches the inventory of two decades ago, after a peak of just shy of 1.6 million sows in the first quarter of 2005,” said Fraser.
Fraser added, “A decline is approaching a quarter of the sow herd. Granted productivity gains have lessened the overall production drain but still not exactly an encouraging picture.”
He said there are a variety of reasons for this, some known perhaps some unknown, but the result is a weakened infrastructure, much in need of replacement. The bulk of the new ‘good’ barns are from the hay day at the turn of the millennium when the industry grew to its peak. “Those barns are now drawing onto twenty years old, with the bulk of everything else south of that. Most could use some serious refurbishing where some should probably go away. Lack of finishing space at least in Ontario seems chronic as I am asked constantly if I know of any space. I think many producers would agree that there is much space presently in use that might be better retired,” said Fraser. “However, replacement of capital assets takes just that, capital and as Jim Long would add courage. Something that has been lacking in this industry of late.”
Fraser said for the last while; margins have charitably been thin and spotty. Olymel, both Canada’s largest pork processor and pork producer reports in 2018 fiscal year both its eastern and western hog production divisions suffered losses more significant than the previous fiscal year whereas their eastern fresh pork sector saw positive results second only to 2017 that was their best year ever. The western fresh pork sector had excellent results for the third consecutive year. This would be consistent with most of the other Canadian packers and US packers for that matter in enjoying unheard of margins for three or four years now.
He said although unless fully integrated, a capitalist pork system struggles to figure out how to perhaps better share the margins and this isn’t without consequence. Kevin Grier in his Canadian Pork Market Report suggested the Maple Leaf Foods plant in Brandon Manitoba 4th quarter 2018 kill to be 70,000 to 72,000 weekly against an 80,000 extra capacity. Olymel in Red Deer Alberta is running less than 35,000 weekly against 45,000 (single shift) capacity.
“This doesn’t work, a pork plant like a finishing barn’s per head costs soar when operating under capacity. So, the question becomes who is going to blink first. The obvious easy solution to the need for more hogs certainly in producers’ eyes is just paying more. However, to date, this seems to have only shuffled the deck chairs from one plant to the other, with no more hogs. Without a solution, it would seem a plant is vulnerable to closure,” Fraser said. •
— By Harry Siemens