Pork Commentary, May 10th , 2021
Jim Long, President-CEO, Genesus Inc.
March U.S. Pork Exports were record large at 294,724 metric tonnes (mt), up 1% from last year and set a new value record at $794.9 million (up 4%). A true reflection of the global demand for pork despite a pandemic ravaging many economies.
Mexico year to date has imported 193,028 mt, up 12% from a year ago. This despite the Covid crisis hammering the Mexico economy.
Mexico is the second largest U.S. pork market year to date at 14,000 mt less then China. Mexico’s hog market has been on fire. A week ago, the hog price was 42.62 pesos/kg or 95.33¢ U.S. liveweight a lb.
In our opinion the Mexican hog price that is reaching all-time highs and the large pork imports from USA despite the ravages of the pandemic is a reflection of the contraction in Mexican Pork Production. A year ago, Covid crashed the hog market in Mexico. There are few if any statistics to confirm this but we believe this led to a large decrease in Mexico’s sow herd. Now high feed prices will restrict any expansion just as it will in much of the world.
In the near future we expect Mexico’s hog price will be at least 10¢ U.S. lb. higher than the U.S. and large U.S. pork imports will continue to fill Mexico’s production shortfall.
China 15 kg feeder pig price is averaging $250 USD a reflection in our opinion of the rapid sow herd decrease December-March.
Last week we wondered re the world’s largest swine genetic company issues with sow prolapses. It was interesting the questioning we got from some of their customers from different countries. With most swine organisations being insular its eye opening when they hear of a widespread issue, this leads them to believe this is unique to them.
Gross Packer Margin
Last week we wrote about Gross Packer Margin being squeezed. We received the following from one of the owners of a top 25 U.S. producer.
“Please remind Jim that most Packers have a lot of additional margin in their business from the offal, value added and further processed pork that us Producers are selling them. Check out the attached EMI chart! Let’s be sure the Packers know that we Producers know they are not actually losing money even at today’s high hog prices!! We are currently simply sharing some of the overall value!”
This letter and information we believe is a reflection of many producers sentiment. There is certainly a degree of resentment that while Packers Gross Margin was upwards of $50-60 per head producers were losing at unprecedented levels in 2020. Most producers realize it was capitalism at work but it certainly didn’t create a sense of shared partnership or misery.
We expect the pendulum is swinging to the producers. Last week DTN calculated Gross Packer Margin just over $20 one of the lowest spreads in a long time. With $7.00 corn, cost of construction, and banker attitudes, we expect to see continued erosion in the sow base; coupled with strong pork demand (domestic-export) hog prices will stay strong. We believe lean hog futures in the fall and into 2022 are below what lean hogs will be bringing. Today we are breeding hogs to be marketed first quarter 2022 and nothing is happening to increase production in our opinion.
Picture and text below from article written in Pig World, illustrates the recent shipment of 1,030 Genesus pigs to China from the UK.
More than 1,000 breeding pigs from a Northamptonshire farm made the 7,000-mile journey to China last week.
The pigs from Bridge House Farm, 2020 National Pig Awards Indoor Producer of the Year, were transported on behalf of Canadian breeding company Genesus, the largest independent producer of purebred swine globally, with registered populations of Landrace, Yorkshire and Duroc pigs.
A total of 1,030 purebred breeding pigs made the journey from Stansted Airport (STN) to Chengdu Shuangliu International Airport (CTU) in a Boeing 747-8F aircraft on Tuesday, April 27.