Hog prices hit fourth quarter doldrums

By Richard Kamchen

A slide in hog values over the past few weeks culminated in prices hitting six-year lows, but analysts say Canadian producers are somewhat protected by a weak Canadian dollar and should further benefit by a forecast bounce in American markets.

Chicago Mercantile Exchange lean hogs fell to a six-year low Monday with nearby futures reaching $51.80 per hundredweight. David Drozd, president of Ag-Chieve, says it all comes down to increased supply and reduced demand.
“Not only do we have increased supply and reduced demand on pork, but also with poultry and beef,” Drozd says. “So you’ve got all three competing for [smaller] market share.”

Brad Marceniuk, livestock economist with Saskatchewan Agriculture, says prices are following traditional trends.
“What we’ve seen in the last few weeks is a really big ramp up in slaughter hogs going to market,” Marceniuk says. “We had 2.38 million head [week ended Nov. 14], and 2.36 million the previous week.”

Also for the week ended Nov. 14, an all-time high of 506.9 million pounds of pork was produced in the United States.
“Overall we’ve had huge pork production numbers, extremely large slaughter numbers, so that’s really pushed prices lower,” Marceniuk says.

“Total red meat supplies in freezers are up 24 per cent from last year and total red meat is a record high for the month of September,” Drozd says, who explains that going back to 1915, both beef and pork were never higher in September.
Added to the dynamic is the fact that a rising American dollar makes it expensive to export pork and other commodities out of the country.

United States pork export sales are down to a two-year low, Drozd says. Jerry Klassen of GAP SA Grains & Products says the recent report from the World Health Organization linking red meat consumption to greater cancer risk didn’t help sales.

“It’s overhanging the market,” Klassen says.
Hog producers in Canada may not realize the full brunt of U.S. bearishness thanks to the weak Canadian dollar, all three analysts note.

Klassen believes markets could stay under pressure until February, at which time pork production levels are likely to decline.

“We’re seeing about a 350 million pound increase in quarterly production in the fourth quarter of 2015 over last year,” Klassen says. “But next year in about February, we’ll have worked through those supplies and production will start to taper off into the second quarter. The downside will be limited after that and you’ll see the market correct and have a bit of a bounce.”