Pork Commentary, April 26th, 2021
Jim Long, President-CEO, Genesus Inc.
Last week Lean Hogs increased from $103.0₵ / lb. to $106.5₵ / lb. There appears to be a relentless ongoing price increase driven by tight supplies and good demand.
Weekly slaughter last week was 2,473,000, a relatively low number for April. Packers are chasing hogs and pushing up prices.
U.S. Pork Cut-outs closed Friday at 111.54₵ / lb., with lean hogs 106.0₵ / lb., the spread of 5.5₵ lb. would indicate Gross Packer Margins have declined to a low level compared to recent months (years). We need Pork Cut-Outs to keep going up to sustain lean hog price gains.
Sow slaughter remains high with latest week 65,824. Our contention, anything over 61,000 a week indicates sow herd liquidation. 500-549 lb. sows average price last week was 76₵ / lb. A strong price indicating good demand. An excellent time to sell an old sow and buy a gilt.
Cash 40 lb. Feeder Pig averaged last week $99.70 – a year ago, $17.00. The high price of feeder pigs in our opinion is a reflection of empty barn spaces looking for pigs and the strong lean hog futures price. Finishers are now like Packers who are looking for pigs to fill shackles.
Choice Beef Cut-outs closed Friday $2.83 / lb. Pork Cut-outs $1.11/ lb. Pork is significantly cheaper than Beef. Whole Chickens last week $1.02 / lb. up from .86₵ / lb. in March. Last year same time 52.50₵ / lb. Higher priced Pork, Beef, and Chicken reflecting the bullish move in all meat sectors.
Pork is not a one-off and, in our opinion, indicates the sustainability of higher pork prices.
European Union Swine Inventory
2018 2019 2020 Breeding Sows 11,294 11,328 11,269 All Swine 143,519 143.146 146,074
- The latest European Swine Inventory at the end of 2020 indicates a steady sow inventory and a 2% increase in all pigs compared to December 2019.
- Germany’s Sow herd declined 94,000 in the time period (1806-1712) probably due to ASF issues and new environmental and animal welfare regulations.
- Netherlands declined 120,000 sows (1052-931)
- France was a gainer from (992-1060), +68,000
- Poland increased from (771-830) +60,000
- Spain, Europe’s largest producer, at 2,600,000 sows had no change. Current hog price in Spain is 80₵ lb. U.S. liveweight (€1.46 Euro/kg.).
Europe as a major pork producer (double the U.S.) is on track to hold production, remains a major factor in global export markets. High feed prices, ASF, new environmental and animal welfare regulations will stop any significant increase in swine production despite current strong prices.
China’s hog price has been in a free fall. On Jan 20th it was 36 RMB/kg. ($2.51 U.S. liveweight a lb.). A week ago 23.64 RMB/kg. ($1.63 U.S. liveweight a lb.). No doubt big decline in price, but still relative to the rest of the world, a high price.
In first quarter China produced 171.43 million live pigs. 40.15 million more than the first quarter the year before. Certainly more hogs. The billion-dollar question- how much of the first quarter numbers was because of the dumping of hogs at below slaughter weight due to ASF breaks and fear of ASF? Not sure anyone knows.
One indicator of supply-demand is 15 kg. (35 lb.) feeder pig prices in China. There is regional differences. The highest is 140 RMB/kg. ($320 per feeder pig). Most of the market is in the 90 to 100 RMB/kg. range ($230 per feeder pig), with corn $11.00 U.S. a bushel.
It’s not hard to figure $230 feeder pig plus $150 feed per head= $380 per head. A 260 lb. market hog breakeven is $1.46 U.S. liveweight pig plus feed. Some people are betting their money on strong prices for sure.
Good News from Fake Meat Companies
From Financial Post – Beyond Meat share value has dropped from $14 billion to $8.5 billion U.S. Beyond sales are just $407 million last year. Stock trades at 21 times sales per share. Kelloggs is 1.6 times, Kraft-Heinz 1.9 times. $407 million in sales. That’s equivalent to less than 2% of U.S. Hog sales. Maybe it will take off. Lots of smart money is chasing the dream.
So far Beyond Meat has flopped at McDonald’s. They were selling it and stopped. My 18-year-old son cooks at McDonald’s. He tells me when they were selling it, and with big promotion where we live, he was cooking 1-2 burgers out of 300. Any wonder McDonald’s’ stopped selling? No one wanted to buy. People want meat. Taste matters. People vote with their money.
All these promotions of fake meat that people don’t buy makes us wonder what the opportunity is in retail foodservice with Pork that tastes better. Redder more marbled pork that delivers a better eating experience should be a market mover. Some sharpies had $14 billion in at one point in Beyond Meat. Put Beyond Meat beside better Pork, we bet consumers will buy more and pay more for the better taste of Pork.