Weekly Market Update With Tom Lilja and Progressive Ag
Last year in the midst of the pandemic shutdowns, I was writing some checks for processed hogs. I remember the low amount I paid for a couple full hogs. I stated to my wife and a couple friends that I was almost embarrassed to write checks that low. I’ll never say that for gasoline or propane. I remember thinking that I got away with something. The processing plants were shut down and those with market ready hogs were almost giving them away. Lean Hog futures hit 35 cents last spring. June 2021 Lean Hog futures hit $1.02 this week so there are no give aways anymore.
Monthly cold storage reports showed frozen pork stocks at 491.5 million pounds. This is 24.7% below last year and pork bellies were down 56% from a year ago. USDA also stated that pork production was 30 million pounds less than last year. The cure for low prices is low prices. Year to date exports are 740,000 MT vs. the 5 year average of 496,000 MT. China may not have gotten them as cheap as I did, but they got them cheap enough. China remains the 300 lb. gorilla in the room. By all accounts they are rebuilding their hog herd after its decimation from African Swine fever, but the occasional report of
an outbreak sends prices lower for a few sessions. The Chinese Ministry stated that hog slaughter will be up 65% for the first 6 months of the year vs. last year and sow capacity is at 95% of the level compared to 2017 before the ASF problem. China is better prepared for African Swine Fever outbreaks having gone through them, so if that’s the case their herd rebuild should lead to lower purchases of US pork in the coming months.
The US is also better prepared having gone through one year of a pandemic. Thoughts are that restaurant and consumer demand will increase for pork and beef as the vaccines are rolled out. Monthly Cattle on Feed Report numbers were close to estimates and viewed as neutral to market prices. Both boxed beef and pork cut out values have been increasing as packers bid for these perceived consumer seasonal demand increases. This should be a notable increase vs. the situation last spring and summer. Cash cattle trade has been strengthening in the Oklahoma and Texas markets which is favorable for futures prices. There is also more demand for grass calves. Semi- annual cattle inventory reports showed the calf crop 1% lower than a year ago.
Healthy rainfall in the southern plains has been pressuring wheat prices over the last few weeks as condition ratings for Kansas, Texas, Oklahoma and Colorado have all shown notable improvements. The March 31st planting intentions and stocks report is upon us. This is one of the biggest reports of the year. Private corn estimates are in the 92.8 to 94.3 million acre range. Soybean estimates are in the 89.7 to 90.5 million range. All wheat estimates are 44.5 million to 46.5 million acres. The acre numbers and March 1st quarterly stocks numbers will give the market direction heading into spring planting. The grain market has rallied significantly to buy acres vs. the situation last spring. It appears the market has done its job, but will high prices end up curing high prices?
Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing’s Research Department.