AgriPost July 31 2020

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The AgriPost

July 31, 2020

Enormous Backlog Pressures Hog Values

Tyler Fulton said prices have remained unprofitable in the last three months with no prospect for any difference in that trend. He said slaughter capacity is a big concern rolling into the third and fourth quarters of this year and it will be tight. Even if all aspects of hog production work correctly, he anticipates that hog supplies will increase four to 5 per cent. Applying that against the understood packer capacity, it would be very close to being an issue. Layer on any delays in the logistics or in-plant processing, the scenario could see a backlog of hogs building, possibly right after the previous backlog from the spring. It is not a good scenario; this is the reason why there is such a weakness in the fall futures months. Photo by Harry Siemens

By Harry Siemens Tyler Fulton, with Hams Marketing Services in Winnipeg, said the hog prices continue to be very depressed with the cash market in the US struggling to make gains burdened by vast supplies. The reality is packers are not backed up to 100 per cent capacity. Producers with those extra uncommitted hogs need to negotiate prices daily, and those values are some of the lowest in a decade. Fulton said the US hog slaughter continues to run at the highest levels at this time of year, with the industry working through the COVID19 backlog. He added that forward hog

contract prices continue to struggle with little opportunity to price hogs. The best weeks left in 2020 are running around that $130 per 100 kg, or maybe $135 at best. There is not a lot of optimism that anything is going to change over the next five or six months. Fulton said, based on the most recent USDA quarterly hog and pig’s report in June, the massive year over year increase in the number of hogs available in the US for slaughter continues to pressure North American live hog values. These are hogs coming to market over the next two months. “Those year-over-year in-

creases in the double digits, over 10 per cent larger than year-ago levels,” he said. “Twenty years since any yearover-year change of that magnitude.” Fulton said the USDA took the surveys after the lowest slaughter capacity. The plants that shut down in the US dealing with COVID-19 through their labour force cut the US slaughter by one third. Two or three weeks later, the hog producers completed the survey responding to the questions in precisely the way that they usually would, meaning all of that backlog of hogs not getting slaughtered entered the report.

“It probably skewed some of those numbers in a pretty big way that we simply still need to work through over the next two months or so,” he said. Fulton said prices have remained unprofitable in the last three months with no prospect for any difference in that trend. He said slaughter capacity is a big concern rolling into the third and fourth quarters of this year and it will be tight. Even if all aspects of hog production work correctly, he anticipates that hog supplies will increase four to 5 per cent. Applying that against the understood packer capacity, it would be very close to being an issue. Layer on any Continued on page 2...

New Program to Mitigate Spread of COVID-19 for Ag Processors The governments of Canada and Manitoba announced a new $3-million cost-shared Canadian Agricultural Partnership program to support projects that will help agricultural processors mitigate the spread of COVID-19. The new COVID-19 Response Initiative will provide financial assistance to agri-food and agriproduct processors, food distributors and agri-food industry organizations for personal protective equipment and sanitation supplies; business continuity practices, training and resources to support COVID-19 mitigation; and beginning in September, financial assistance will also be available for materials, supplies and equipment rentals needed to adapt production processes to meet social distancing and other precautions related to COVID-19. Eligible costs must be directly related to the execution of a project and must be incurred between March 1, 2020 and January 31, 2021. Projects must be completed on or before January 31, 2021. Governments will contribute a maximum of 50 per cent of eligible project costs, up to $25,000 per applicant. Agriculture and Agri-Food Canada’s Emergency Processing Fund (EPF) is a federal investment of up to $77.5 million to help companies implement changes to safeguard the health and safety of workers and their families due to the impacts of the COVID-19 pandemic. The five-year, $3-billion Canadian Agricultural Partnership includes $2 billion for cost-shared strategic initiatives delivered by the provinces and territories and $1 billion for federal programs and services. For more information, visit canada.ca/ Agri-Partnership. Funding applications are available on the Manitoba Agriculture and Resource Development website, at gov.mb.ca/agriculture/canadian-agricultural-partnership/ag-action-manitoba-program/ financial-assistance-covid-19.


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