By Theopolis Waters
KANSAS CITY (B)--U.S. and Canadian pork producers' euphoria over hog profitability has been deflated in recent weeks because of swollen seasonal marketings, sunken pork carcass values and intense competition from plentiful beef and chicken supplies.
Pinpointing where cash hog prices will settle during the remainder of the third quarter is difficult because the markets in both countries are struggling to regain their balance, industry sources said.
Summertime heat and humidity typically erode growth performance and shipments of hogs. These factors were thought to have contributed to seasonal price highs hit in late June. At that time, average prices at the six terminal markets topped at $52.67, then began to slide and hit a recent low of $42.06, according to the University of Missouri.
What's more, packers currently are slaughtering around 370,000 hogs per day, compared with about 350,000 in July. Constricted supplies and strong wholesale pork demand buttressed $72.37 per hundredweight pork cutout values for the week in late June, versus $64.40 last week.
Lower-than-anticipated hog slaughter in late June and July may have caused an extra pop in cash prices, but the larger numbers of hogs now coming to market are basically reversing that trend and arriving on a seasonal schedule, a source explained.
Canada's pork production tends to mirror that of the United States. Indications from the north are that larger supplies and unsatisfactory dressed pork sales there are also being blamed for slumping Canadian hog cash prices.
Janet Honey, Manitoba Agriculture and Food's provincial marketing and statistics branch manager, said U.S. and Canadian swine prices dropped more than 6.1% within the past week. In Manitoba, the index 100 hog price, which includes bonuses and premiums paid to producers, shows swine values averaged about C$160.00 ($108 U.S.) per 100 kilograms for the week ended Aug. 18. This is equivalent to Iowa/southern Minnesota prices of about $43.16. The week-ended Aug. 18 Manitoba 100 index was down C$10.00 ($6.76 U.S.) from the previous week.
Leland Southard, a U.S. Department of Agriculture economist, said the balance, or consistency, that U.S. hog producers had enjoyed was altered by a stark break that occurred primarily in the belly market. High belly prices had basically supported cash hog prices.
Furthermore, the "pork demand doldrums" are beginning to take hold as the end of the vacation season nears. This means more kids are returning to school and eating less at restaurants where bacon demand has been phenomenal during the past year or so.
When producers began increasing their hog shipments during the tail end of the summer, amid a period of reduced demand for pork, they put themselves in harm's way of falling prices, Southard remark ed. Considering that the amount of total meat has been surging through the system, most USDA economists felt cash values held up well at that time, but knew an adjustment was imminent.
USDA's cattle-on-feed report also showed growth in the number of cattle placed into feedyards. In addition, USDA supply and demand figures indicate a 2% increase in poultry production, making chicken available for retail featuring.
USDA's economic forecasting committee, which meets once per month, foresees $40.00 to $42.00 average fourth-quarter live hog prices, which were converted from a 51-52% daily three-area lean national carcass base.
It also anticipates September's prices will hover around the mid-$40s, with hog bids trailing in October and November, then rallying in December.
Southard cautioned market watchers to be mindful of daily price movements, which sometimes will "react like a bungee jump," bouncing up and down until finding equilibrium.
However, MU livestock economist Ron Plain contends the government's figures are above most expectations due to USDA's structure that only allows the committee to revise forecasts when it meets. Therefore, the department cannot react to a fast-moving market or alter projections between those monthly meetings.
Plain said September's forecast from the agency will be lower compared with the August projections, "but for now they are stuck with those numbers for a couple more weeks." He predicted cash ho g prices would average $35.00 during the rest of September and around $37.00 in the fourth quarter.
Taking into account the official rate of exchange at any give time and hog carcass weight differences between the United States and Canada, Honey anticipates a Manitoba price of around C$173.00 and C$177.00 this quarter, or $47.00 to $48.00 U.S. on a live basis. Canadian producers were told to expect prices to drop to a range C$145.00 to C$150.00, or $35.00 to $40.00 U.S., for a fourth-quarter average.
U.S. hog slaughters during the second quarter of next year are expected to remain above last year's levels, which should drive Manitoba prices to the low- to- mid C$160.00s, or $43.00 U.S. live, said Honey.