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Advisor

Hog prices

I don't know what people are getting in the way of premiums but futures only, Dec is approaching '98 kind of levels if you take current cost of production into account. At least corn was $2 back then. Another $10 or so to go.

 

I guess the market will try to take back the recent historic windfall from the disease problem (assuming you weren't greatly affected).

 

Don't know, I'm not very well in touch with the business any more.

 

I guess the ever more consolidated industry has managed some grudging liquidation in the past, I guess it will again, eventually.

 

http://farmdocdaily.illinois.edu/2016/08/beef-and-pork-role-in-filling-the-supply-gap.html

 

A bit dated but he observes that the 2007-14 supply gap for all meats is about closed now.

 

BTW, I'm not sure about the "modern industry" but historically when hogs made a major bottom it was a V affair, overshooting anything that looked reasonable then eventually springing back sharply. Although I knew a guy who suffered a near death experience looking for that in '98. He eventually came out OK but was darn near wiped out before it turned.

 

I think he probably promised God that if he'd get him out of his mess he'd never do it again. Don't know if he kept his promise or not.

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10 Replies
Advisor

Re: Hog prices

BTW, 130 "pork farmers" went to Washington to lobby for the TPP- unfortunately nobody was very interested.

 

The current anti-trade sentiment does have implications for some "industries."

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Senior Advisor

Re: Hog prices

Problem is the kills running in the 440-450,000 range.

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Advisor

Re: Hog prices

https://macro-man.blogspot.in/2016/09/overcapacity.html

 

Of course record profits are sure to lead to an increase in production.

 

But my mind was wandering through the notion of ZIRP and overcapacity in general. The link gives that some consideration.

 

Maybe hogs still are the great tool for understanding economics even though they long since quit being a true free market in the classic definition.

 

But yeah, it makes sense to me. In most manufactured items (which hogs certainly are now), ZIRP should be more deflationary than inflationary. Except in those things that have a degree of IP protection, or have achieved classic oligopoly status- such as seed and fertilizer.

 

Seed checks both boxes.

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Advisor

Re: Hog prices

Yeah. All of those 10s of thousands of pig farmers all over North America who took market signals and kept back a few extra gilts a year ago.  Smiley Happy

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Honored Advisor

Re: Hog prices

I don`t know how many hogs are sold on the open market that`s quoted these days, probably less than 5%.  But those that still do, it`s literally feast or famine, they do really if there`s a Pedv virus and they escape it they`re in the chips, but it gets ugly when the pig factories are crankin` em out.   But the market is there just to roughly determine a contract price, any worse and it`d be like the catfish or wool market.   Like musical chairs, if you aren`t in front of a chair when the music stops, you`re out.

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Veteran Advisor

Re: Hog prices

Seems   PED  is  back  up '''' north  of  ''''  Minn.  -   will that  help  ?

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Highlighted
Senior Advisor

Re: Hog prices

That's how it used to be. Now instead of saving a few guilts they go down to the FSA office, sign up for EQIP and let the government help fund their next quad.

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Advisor

Re: Hog prices

Well, a lot of "winners" got a lot of help from the gubmint.

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Advisor

Re: Hog prices

I gave very serious consideration to building some contract buildings back in the mid-90s.

 

In the end I just couldn't get myself to borrow a lot of money to finance somebody else's expansion and haul their #$%^.

 

Turned out better than I thought it would for many, though. Back in those days you had to have a super-efficient dragline setup to come close to covering the cost of application with nutrient value- that changed.

 

I also apparently worried about the ponzi debt structure (with your debt, btw) of a lot of those operations. As it turns out, somebody ends up running it even if it is a new owner at 60c on the dollar.

 

Absent disease, that's a problem too.

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