Pork Commentary, April 27th, 2020
Jim Long, President-CEO, Genesus Inc.
Bad news seems to be becoming worse news. Below some observations:
At the time of writing, hog slaughter plants closed: Tyson- Waterloo and Logansport; Smithfield- Sioux Falls; JBS- Worthington. Roughly combined 80,000 head per day capacity. Other plants are slowed down due to coronavirus labor-related issues. Last week the U.S. harvested 1,995,000 head, probably 600,000 less than there needed to be.
Hogs are backing up at an unprecedented level.
Fewer hogs have led to U.S. pork cut-outs rising at an unprecedented rate as shortage of pork is pushing hog prices higher. Last Friday, U.S. pork cut-outs closed at $77.48. Ten days earlier they were $50.00, a jump of roughly $55 per head. Unfortunately, the hog price gained only about $6.00 per head and is 47₵ a lb.
For Packers that continue to operate, big gross packer margins. Plants that are closed are missing out and at same time paying all their employees not to work. Strange situation. One thing for sure, huge packer gross margins are a big incentive to keep and get plants operating.
U.S. cattle slaughter plants are having similar issues with coronavirus and employees. Last week cattle numbers slaughtered 469,000. They should have been in the 625,000 range.
Chicken slaughter last week was 9 million less birds then same week a year ago.
Put Pork, Beef and Chicken together- Huge meat tonnage decrease. At some point, real government intervention could be needed and soon, to keep food supply system operating and feeding people.
As the hog production system backs up with supply, we understand there are sow units inducing abortions and pigs being euthanized. The degree of these intervention points we are not sure. Early wean pigs are under $10.00 each. It is a mess!
U.S. sow slaughter in March was 283,000, up from a year ago by 34,000 (+ 13%). Year to date up 66,000. No doubt there is breeding herd liquidation.
The U.S. government has announced financial support to Ag for coronavirus related issues. For swine producers, it looks like a cap of $125,000 per entity. Many, if not all think this is insufficient support.
With hog losses for some at $40 per head, it appears to us that it will not do a lot for many. With 75% of U.S. hogs concentrated in 40 producers, the $125,000 cap will do little to stop the bloody losses for that group.
It is sad when you watch the news and see thousands lined up to get food from food banks, while at the same time we cannot get hogs slaughtered. You wonder when the coronavirus testing in New York that shows at least 20% of people had coronavirus titres, how any slaughter plant employee profile can stay negative. It is an impossible task.
Below are two letters. They are a call to arms for every pork producer. It’s a crisis. All need to call and or contact, State Representative, Congressman, Senator, Secretary of Ag, Vice President and President. You need to voice your individual problem and situation; it is more real and not from some Washington Lobbyist. We need to invoke the Defense Production Act. Basically, this cuts through all the red tape and fear of lawsuits, and with this, the President can order the opening of the packing facilities in some way shape, or form. These letters below (click on each to open) can facilitate your talking points when you visit your representatives.
2020 COVID VP Letter
USDA Letter April 22