Canadian pork marketers aren’t sure whether to laugh or cry about this year’s fourth quarter price prospects.
The forecast is that the market will generate more money than expected. The only problem is that it’s in the wrong currency.
“It would be a lot better if our dollar was 70 cents (US) rather than 86 cents,” said Perry Mohr, general manager of Manitoba Pork Marketing Co-op.
“Hog prices, from a U.S. perspective, are seasonally very, very good. … But we’ve seen our dollar go from 82 cents to 86 cents (within the past few months), so it’s negated a lot of the good we would have gotten from the strong hog market.”
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The last three months of each year are always the most dangerous for pork prices. Most significant hog price slumps occur in the fourth quarter.
This is because U.S. hog production slows down over the summer because of intense heat but bounces back as temperatures cool, leading to more and bigger pigs heading to market in October, November and December. Packer capacity is also reduced during the quarter because they close for Thanksgiving, Christmas and New Years, causing a slump in slaughter.
This year, American farmers should be able to squeeze out a profit all the way through the fourth quarter.
“We’re in a pretty good situation going in,” said Ron Plain of the University of Missouri. “Our expectation is that we’re going to be profitable throughout the fourth quarter. We’ve got low costs and good prices.”
The United States produced its second largest corn crop this summer, so feed prices should be low.
Sluggish growth of the North American pig herd and healthy consumer demand for pork means there is no glut of hogs on the market.
Plain said slaughter prices should be 40-45 cents per pound live weight, while the average cost of producing a pig will be about 39 cents per lb. live.
Canadian producers have helped create this happy situation, Plain said, by ending their massive expansion of sow numbers that began in the 1990s.
“Canada, after a decade of very rapid growth, seems to have given up on expansion,” said Plain.
Also helping the market is the healthy demand for U.S. pork from other countries.
Mohr said both the end of Canadian expansion and the increase in U.S. exports have the same cause: the currency situation.
The falling U.S. dollar is sucking the profitability out of Canadian hog barns and blowing it into American barns.
“I would have to say it has everything to do with the dollar,” said Mohr, noting that Canadian barns financed on the expectation of a 65-75 cent dollar are probably worrying their owners and bankers.
“It’s getting pretty difficult to pencil out a break even on those things,” said Mohr.
But it could be a lot worse. If U.S. prices were falling, Canadian producers would be facing losses from both the currency conversion and a weakening price.
“We’re pleasantly surprised,” said Mohr. “This is better than we had hoped.”
