Weak loonie expected to support hog prices, but not yet

CNS Canada — A weak loonie could improve the profit margin of Canadian pork producers by summer, according to one analyst, but its effects have been little seen in the current market.

Influencers outside of currency markets are driving current cash prices lower — and cash prices are relatively depressed, according to Tyler Fulton, director of risk management at Hams Marketing Services Co-op.

Fulton pegged this week’s Canadian prices at around $130-$140 per pig.

U.S. pork production is expected to see a one per cent increase in 2016, to a record 11.3 million tonnes, according to the U.S. Department of Agriculture’s (USDA) most recent Livestock and Poultry: World Markets and Trade report.

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Global production of all types of meat, including chicken and beef is expected to expand in 2016, according to USDA — and that’s dragging on pork prices.

“There’s a tonne of meat protein that’s expected to be in the market in 2016,” Fulton said.

Strength in the U.S. dollar also makes exports more difficult for U.S. producers, contributing to ballooning supplies.

“In terms of the cash market, in terms of what producers are being paid, for example, this week, it’s quite depressed,” Fulton said.

However, prices offered in the forward cash market — which are based off of the futures market — are being driven higher by the weak loonie.

By summer, Canadian producers could be able to secure prices at about $200 per pig, Fulton said.

“I would say that’s a big opportunity for producers to take advantage of, given the concerns that there are in the trends going forward.”

Jade Markus writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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