August 14, 2008

 

US sow prices jump, then fall from erratic rebound in July
 

 

US cull sow prices jumped sharply early this week at some Midwest livestock buying locations then gave back part of the gains Wednesday (August 13), but they remain more than double the low levels hit in July.

 

The turnaround in sow prices from July is the result of significantly lower prices for corn and soymeal, which make up the majority of swine rations, and an improved outlook for producer profitability into 2009, compared with a month ago, according to market analysts and livestock dealers.

 

They said some sow buyers were bidding as much as US$8 to US$10 per hundredweight higher on prices Tuesday (August 12) for the better quality cull animals, which pushed the top prices at some livestock collection points into the mid US$40s to US$50 or more on a live basis.

 

The USDA's daily sow reports Tuesday showed weighted average prices up US$6 to US$7 from a week ago and US$15 to US$18 above the mid-July quotes for the various weight categories.

 

A veteran livestock buyer in Minnesota said the rebound in prices is mainly the result of a dramatic slowdown in the number of culled animals being marketed. "A month ago, so many sows were coming in (to the facility) that we could not get them all sold, and the barn was full," he said. "Now, processors are calling around, looking for additional loads that are simply not available."

 

US analysts and livestock dealers said the situation is the same across most of the Midwest. In July, some producers were deeply culling or selling all of their sows due to the dismal outlook with feed costs at record highs and feeder pig prices declining. In some cases, feeder pigs sold for as little as the freight to get them shipped, resulting in huge losses for the pig producers.

 

Since that time, however, corn prices have declined by US$1.50 to US$2 per bushel, or 20 percent to 25 percent, while deferred lean hog futures have offered producers the opportunity to lock in a profit.

 

Resistance to the extremely low sow prices that occurred in mid-July along with a turnaround in the outlook for feed costs and hog returns later in the month resulted in slowed sales, which has extended into August.

 

There have been reports that some sow processors will not operate Friday (August 15) due to short supplies.

 

Some analysts and livestock dealers predict there will be another round of liquidation of breeding animals this fall but the number of culled animals offered for sale in any given week may not be as large as what occurred in early to mid July.
   

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