May 13, 2011

 

Demand for western Canadian pork to influence hog prices

 

 

The Saskatchewan Ministry of Agriculture foresees demand for pork by consumers, especially in the export market, to be the main reason for influencing live hog prices in the coming months.

 

Cash hog prices in western Canada have declined by about 3% over the last few weeks while nearby lean hog futures prices for the June-August contracts have fallen close to 10% over the past month.

 

Brad Marceniuk, a livestock economist with the Saskatchewan Ministry of Agriculture, said an overall reduction in the North American hog supply has helped hog prices but demand has been the bigger driver over the past few months than supply.

He said that pork cutout values really drive hog carcass prices and US pork cutout values had peaked at around CAD96 (US$41.61) per hundredweight in mid-April before declining about 5% over the last few weeks.

 

A combination of concerns over weaker domestic pork demand from higher retail pork prices and some slow down in export demand has pulled cash hog prices and lean hog futures hog prices back from their highs earlier on.

 

Hog prices are expected to be steady to upward into the summer but prices probably will not be as high as anticipated a few weeks ago.

 

Based on lean hog futures prices, Index 100 hog prices for western Canada will probably average about CAD160 (US$166.22) per 100 kilogrammes over the next few months.

 

With North American pork production not expected to change significantly over the next few months, demand for pork will be a bigger factor than supply of pork in determining hog prices in the next few months.

 

Pork demand, particularly export demand, will be the key in increasing hog prices into the summer.

 

Also, the supply and demand for competing meats, particularly chicken, will be important in affecting pork prices in the coming months.

Marceniuk said with hog prices trending upward in the first part of 2011, most western Canadian hog producers were back to profitable levels in April and should be profitable over the next few months but feed prices will be main factors.

 

He noted that western Canadian barley prices have not increased to the same level as US corn prices which have given western Canadian hog producers a noticeable feed cost advantage over US producers.