Pork Commentary, January 11th, 2021
Jim Long, President-CEO, Genesus Inc.
Holidays are over, packers got working to get hogs killed. Last week, 2,849,000. We aren’t sure but we believe the largest weekly kill in a long time. Despite this big slaughter week U.S. pork cut-outs were 81₵ lb. friday close, up from the low 70’s a couple weeks ago. For hog prices to push higher we need cut-outs to continue to move up. Current packer gross margins are at levels that encourage continual aggressive hog slaughter.
- U.S. chicken egg sets, chicks placed, and slaughtered numbers are running slightly lower than a year ago. The chicken price is 91₵ versus 81₵ a year ago.
- Feed prices have jumped significantly. Tells us don’t expect more chicken meat or feed usage anytime soon.
- U.S. Cattle on feed numbers December were even with a year ago. Means no more beef or feed usage.
- Less hogs re U.S.D.A. Dec 1 inventory, also smaller breeding herd. Doesn’t lead to more feed usage. Fewer hogs leads to higher hog prices.
- Ethanol – good thing it is mandated. $5.00 corn and under $50 barrel oil, and less driving. All factors limiting demand of corn usage.
Our point – seems to us for corn price to stay high will need exports.
Lots of betting on China. Certainly been supportive until now. The challenge with China is no one is sure what real usage might be. There are two Swine China Inventory Reports – MOA and NBS – there are times they have a difference of 6 million sows in the same time reports – 6 million is the size of the U.S. sow herd.
Hog price in China now $2.45 U.S. lb. liveweight. Not exactly a sign of abundant pork supply or production. China corn is about $11.00 U.S. a bushel, but lots of the time China corn is $9 bushel. They are used to high corn prices.
Last week, Mexico announced they were going to ban GMO corn imports by January 2024. The U.S. exported to Mexico $2.7 billion of corn in 2019. We find this interesting as recently the NPPC was celebrating the possibility of the USDA taking over from the FDA oversight of GMO-Gene Editing, oversight and regulatory in livestock (swine) etc. Makes you wonder what part of marketing 101 NPPC missed.
The Obvious – our largest pork importer MEXICO has just banned GMO corn but are we so blind we believe GMO-Gene Edited Pork will be accepted? Doesn’t matter if technology works (i.e. paylean) when customers refuse to buy.
The NPPC is always doing calculations on what export are worth in value of hog. Take out Mexico’s imports and see where it is at. We suspect Mexico Hog producers would agree strongly to keep out GMO Pork as a non-tariff barrier to support their market. Indeed, what government could ban GMO corn and then allow GMO pork?
Our NPPC leadership and lobbying is being influenced by Big Tech Corporations that want to use GMO technology to corner a monopoly with high margins. Producers will make no more money. The cost of technology and loss of markets will take away perceived advantages. We have to ask; do the lobbyists of the NPPC work for the producers?
As the Vice President of McDonald’s said 3 years ago at the NPPC Conference in Wisconsin. We paraphrase“Don’t expect us to explain Gene Editing-GMO”.To us, nothing represents average U.S. consumers more than McDonald’s customers.
To be clear; we aren’t against technology, Genesus is a technology company. Indeed a global technology company. What we are against is using technology that could destroy pork demand. All our money is invested in the pork business. When we speak it is because of a vested interest in our industry.
Lobbyists, pick up a paycheck. They don’t have an interest in the business. If this lobbyist job doesn’t work out they get another one. There are lots of opportunities for lobbyists in Washington. Washington is a long way from any farm. This distance can distort what is important to the people who pay the bills.
Over the last twenty-plus years, U.S. per capita consumption has flatlined. We have failed to grow our domestic market. Indeed we lost market share as total meat consumption increased. Chasing GMO technology as the solution is dangerous. Mexico’s ban on GMO corn could lead to ban on GMO pork (U.S. largest pork export market).
What happens if one major player like Walmart, McDonald’s, etc. says they won’t use GMO-Gene Edited pork? How fast would all the others fall over themselves proclaiming the same? We should stop going down this foolish path of GMO-Gene Edited Pork before it’s too late.
Demand drives price – can we afford to take the risk?