The Piggy Went to Market Roller Coaster Ride Continues
I had two recent conversations with two different hog producers, one still in the business while the other one had sold out back in 2005 to Maple Leaf Foods.
Abe Wieler of Winkler said the pig business has been tough, but the two barns he's involved in with various shareholders keep on cash flowing.
"A great move," he said. "Finally, we had some money in our pockets, at least for a little while."
He made an interesting observation indicating just how much this hog industry keeps on this roller coaster ride.
The prices for smaller pigs is going up, he said and looking at the futures prices for next spring make staying in the hog business a good option.
"It's phenomenal, the rapid surge in small pig prices," reports pig commentator Jim Long. "Cash USDA early weans averaged $8 in mid-September while cash 40 lb feeder pigs were $15. Both prices were terrible leading to losses of $30-$40 per head."
The third week in November, USDA cash early weans averaged $55.71 and 40 lb feeder pigs averaged $60.53.
"It doesn't take an MBA to see the huge difference in cash flow this has brought to small pig producers," said Long.
He explained this rapid price increase is because farmers are pricing pigs now for May-June 2013 delivery.
"With Lean Hog futures for May 99.100 and June 101.025 the small pig market reflects these higher prices," said Long.
He believes the liquidation of the sow herd is greater than most if not all analysts believe. This in itself is cutting small pig supply. He suspects much of the liquidation was in small pig producers, but there are many finishing barns in North America looking for pigs to fill their pens. Finishing barns are a fixed cost. Farmers hate empty barns. The chase for small pigs to fill the barns is pushing prices higher.
It's simple, less supply and greater demand.
Long believes another factor has to do with the hottest summer on record cutting the number of pigs born. Smaller litters and fewer litters have cut small pig production.
"We also believe that the hottest summer on record led to increased sow mortality. This is another factor in fewer small pigs available. Less small pigs, fewer market hogs next summer equals record high market hog prices," he said. "We talked to a major feeder pig broker this past week who said more buyers than pigs are available."
Long expects USA-Canada sow herd will be 200-250 thousand smaller on January 1, 2013 compared to June 2012. On top of less pork in 2013, all indications are of less beef and poultry.
The pig business is a crazy business. The former producer from Niverville said looking at the pig business from the outside looking in, hog producers will simply have to realize there are three main packers in western Canada who can only take and slaughter so many pigs.
"If you don't have shackle space, you don't raise hogs." •
— By Harry Siemens