Farmscape for May 5, 2020
HAMS Marketing Services says reduced U.S. pork processing capacity due to COVID-19 has resulted in an unprecedented spread between the value of live hogs and the price of processed pork.
As the result of COVID-19 the price of live hogs has crashed while wholesale pork prices are skyrocketing.
Tyler Fulton, the Director of Risk Management with HAMS Marketing Services, says, with roughly 25 to 30 percent of U.S. slaughter capacity lost due to slowdowns or shutdowns of U.S. processing plants, the capacity is so short we simply can't get all of the market hogs slaughtered and processed, resulting in a market failure.
Clip-Tyler Fulton- HAMS Marketing Services:
Thankfully the Canadian market has not seen the same influence of COVID related shutdowns and slowdowns on the pork side.
Of course we know that the beef side is a very different situation but, especially in western Canada, there haven't been any of the major plants that have shut down as a result of the COVID crisis so that's a great positive thing.
I think that those companies are taking great measures to ensure that they are able to maintain some high levels of processing capacity.
Unfortunately, because of the way that the hogs are priced, we are seeing a direct influence of the U.S. market and that direct impact of that capacity reduction.
What's happening effectively is Canadian packers are paying based on a U.S. pricing point and the U.S. pricing point is significantly lower because of the lack of ability to slaughter the hogs.
Fulton says we have seen some significant improvement in the nearby forward contract prices and producers are starting to set some targets and even do some pricing.
He says, while profitability is very poor right now, we could be looking at some record prices but only if we start to see some significant increases in production capacity.
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