Pork Commentary, February 8th, 2021
Jim Long, President-CEO, Genesus Inc.
Last Friday July Lean Hog Futures reached 90₵. This is a new high for July 2021 – a long way from mid-August last summer when July was 75₵. An increase of over $30 per head. Good progress and we expect summer hog prices still have upside.
Don’t forget about the Chicken Little Economists stating in August lean hog prices 2021 had next to no upside. Good they knew nothing.
High Feed Prices
We all know feed prices have increased dramatically. This will affect global meat production, Poultry, Beef, and Swine. The high prices will curtail production as it increases break-evens. Curtailed production we expect will be due to lower number of units produced and reduced weights of these units.
Some things to watch
- Hog slaughter weights. Will they go below year over year in next few weeks? Cutting pork tonnage. We would not be surprised.
- Current U.S. chicken productio. Weekly egg sets, chick placed, slaughter down 2%. Up to 5 million less chickens per week. Chicken prices now 83₵ lb, a year ago 86₵ lb with feed prices up 40% year over year.
- January 1st – February 5th U.S. Beef and Pork. Meat production down 2.7%.
- Sow Slaughter. Our calculation is that 60,500 sows to market a week is approximate U.S. herd equilibrium. First 3 weeks 2021, the number over equilibrium is plus 20,000. Appears to us this means sow herd is contracting still.
- Other global swine and meat production countries. High feed prices and ASF issues have squeezed margins in EU. We expect to see lower production, with some predicting Germany; the world’s fourth hog producer to be down 10% in 2021.
- China. High feed prices with high hog prices. (Corn $11.00 a bushel). Expansion is under way. No one knows what production will be in future. ASF still a factor. Current China hog price is over $2.40 U.S. liveweight a lb. Hog price is the truth in supply (and demand).
Many of you have read over the last few weeks the detailed cost analysis of recommended feed rations of PIC and Genesus. You have read the huge difference of a cost of a ton of feed Genesus compared to PIC (55 lb-290 lbs). A huge $17.35 Genesus competitive cost per ton advantage.
This tells us our dedication as a company to produce genetics that make our customers more profitable is getting to the market place. Making your customers more money should be the number 1 goal of any business.
We, like you, probably don’t follow the London Stock Exchange closely. Last week though, we were told how Genus – (PIC-ABS) stock has increased significantly on the London Stock Exchange.
Date Share Price February 22, 2019 2,280 March 20, 2020 2,694 February 5, 2021 5,30
As you can see Genus (owners of PIC) stock value has increased by double in a year. It is in a stratified area with Stock Price to Earning (P.E.) ratio of 85.62. A market capitalization of 3.46 billion pounds (U.S. dollars- 4.74 billion). A gain of about 2 billion U.S. this past year. Phenomenal share value growth.
The stock price to earning ratio (P.E.) of 85.62 is huge. For example, Apple’s P.E ratio is currently 37.21. Obviously the market has great faith in the future of Genus-PIC, and indirectly what genetics- technology and the pork future value is in the world. One of Genus (PIC) largest investors is BlackRock; from what we understand, the world’s largest investment fund.
Genus (PIC) is by far the largest swine genetic company in the world, but the swine genetic industry is still fragmented with using PIC’s market share claim. We estimate if it is correct, somewhere less than 15% of the world’s genetic supply.
Have to say seeing Genus (PIC) current capitalization value is a real head-turner for the President-CEO-Shareholder of Genesus.
Genesus is not owned by big investors like BlackRock. Genesus is owned by Pig Guys who understand technology and work every day knowing the day to day challenges of the owners of pig barns and production.
Maybe that’s why we believe that when you look at the real tangibles – pig numbers, growth, mortality, feed costs, taste – we welcome head to head comparisons with PIC.
There was a legacy company – IBM. Then came the disrupter – APPLE. Better with a focused purpose is always a good plan to bring value to customers.