The Proposition 12 ruling changing and finally settling down with a court ruling in California with various interpretations has roiled the markets.
Bill Alford, general manager of Hams Marketing Services of Winnipeg, MB, said it was doom and gloom in late May when the prices cratered.
“And we’ve gained back half of those losses with cash prices quite resilient. It’s surprising, given all the negative news we had over a month ago.”
Alford said there’s uncertainty moving forward with other states with similar Prop 12 language that’s coming out. And pork’s moving. But it’s, again; it’s whipsawing with volatility right now. And as new information or interpretation is what it is.
Conversely, it’s a new crop year for the producer, but the input side has yet to see much relief from those high prices.
“Hog prices are up, but it’s all relative. The costs and margins aren’t there. Maybe just recently, with summer pricing coming. And typically, it will hit your highs of the year here. There may be a bit of a margin. But again, we’re going to be heading into the fall right away and more pigs and typically lower pricing,” said Alford.
He said it’s common knowledge there will need to be more compliant pork per se to fill that Prop 12 market. There’s no Prop 12-compliant production in Canada. Very little. And the same in the United States. And it’s quite a deal.
“I’ve talked to several producers calling the guys and getting some information. Oh well, I’m stall-free; that should be able to go. No, it’s not that simple. It’s square footage. You [the sow] need to be able to turn around. And nobody’s got that,” said the Hams Marketing GM.
He cautioned the producers to do the math to rearrange the barn, cutting the barn’s production by at least 15 per cent. And not knowing what the price will be when the producer does finally comply.
Referring to the on again off again walkout at the Port of Vancouver or any future labour and production stoppages, Alford said Hams Marketing’s responsibility is to their producers.
“And we’ll be working with these processors through any disruptions. And we do have relationships with all these packers in Western Canada, and we work closely to try to work through it. Ultimately, we’re an industry. We need each other,” he said. “We don’t want to impact any one producer or processor unfairly. Going to get through this if it comes to that, but hopefully, cooler heads prevail, and the product keeps moving.”
On the Prop 12 issue, the Pork Checkoff weekly report asked the question but what about Prop 12 and those big freezer inventories? It is probably not a coincidence that belly prices started to gain traction once the rules about Prop 12 implementation and handling of inventories began to clear up. Suddenly, having a big freezer inventory of bellies was not a curse. It offered suppliers that use frozen bellies the ability to continue to sell into California through the end of the year.
“If previously bellies were being offered spot because of how much there were in the freezer, now that freezer supply transferred into the future and spot availability dried up.”
The Pork Checkoff report said buyers counting on plenty of spot supply now have to scramble a bit. Starting July 1, the production that does not comply with Prop 12 must find another home. Eventually, that will be something that catches up with the belly market.
“But in the near term, we are at seasonal lows in production. And this is a good time to sell bacon at retail,” said the Pork Checkoff. •
— By Harry Siemens