Farmscape for July 6, 2021
The Director of Risk Manager with HAMS Marketing Services says a legislated reduction in U.S. hog processing capacity will have its biggest negative impact on hog markets this coming fall and winter.
The Biden Administration has until the end of August to appeal a federal district court ruling that took effect last week which strikes down pork harvest facility line speeds allowed under the USDA’s New Swine Inspection System.
Tyler Fulton, the Director of Risk Manager with HAMS Marketing Services, says in the summer months there's not typically much of an issue with packer capacity and the available supply.
Clip-Tyler Fulton-HAMS Marketing Services:
We're currently at among the lowest weekly production numbers for the year and that's a fairly typical trend so there is some slack capacity there.
But moving into the fall time frame we do have some new concerns.
There was a new law that is concerning for U.S. hog packers because it could legislate a reduction in their processing capacity.
Some of the numbers that have been tossed around is about a two and a half percent decline in processing capacity which, at this time of year, would not be an issue.
But, at peak production time frames such as October, November, December, it could result in a pretty significant influence on the markets if the pace at which those hogs are slaughtered is slowed by legislation.
I don't think it's a story that is completely finished yet.
I think there's some questions as to how that law will be applied but it's a concern and a threat going into the fall months.
Fulton says there's a significant number of hogs moving from Ontario into the U.S. where any constraint in processing will show up in price as extra hogs that aren't committed on long term contracts are discounted.
He adds, if we do see a distinct difference in U.S. processing capacity, it will also filter all the way back to isowean producers in Canada.
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