Pork Commentary, June 14th, 2021
Jim Long, President-CEO, Genesus Inc.
Last week the World Pork Expo (WPX) was held in Des Moines, Iowa. The first time it was held in three years. Cancelled in 2019 due to fear of African Swine Fever. Cancelled in 2020 due to Covid pandemic. This year a successful event.
Attendance was solid but we expect lower than previous years. There were next to no international visitors due to Covid travel restrictions. The traditional Show Pig Event was moved to Indianapolis from WPX cutting attendance of WPX.
PRRS was a major topic as 1444 serotype appears to be currently having a devastating effect on production. The effect on breeding stock companies and their gilt supply has been significant. Fortunately, our company Genesus has been spared to date. We do remember, if you live in a glass house don’t throw stones.
Labor or lack of was discussed by both producers and packers. It appears the reality of labor shortage goes beyond the pork industry. Drive down a street in Des Moines, business after business has signs looking for employees, with most posting starting hourly wages from $11.50 to $16.50. We are in a world that will see advancing wages as employees cannibalize each other.
Packers tell us they can’t get enough people to do all needed to maximise carcass value. Producers tell us with the shortage of labor they can’t get enough in order to get all production routines done to maximum production. One large production system told us “Disease is hurting our productivity but the shortage of labor and quality labor in our farms is a bigger factor than disease holding down productivity.”
Prop 12 – California’s legislation to dictate swine production practises to other states was a serious discussion. Seems to us lots of confusion about what to do and if you do it what it’s worth. Seems to us many Packers looking at adjusting their internal production for Prop 12 compliance mainly because independent producers are unwilling to commit capital to do renovations to meet Prop 12 – 24 sq. feet per sow open housing.
Hog Market prices reaching over $1.20 lb. has many producers feeling good in the moment. Many wonder about the future. We would observe producers positive but not ecstatic. $7.00 corn is limiting profits and optimism.
It was nice the number of readers of the commentary who stopped at the Genesus Exhibit and pointed out the fact our prediction of markets last summer for the current year was much more accurate then “the Chicken Little Economists”. One producer said, “We should have followed your thoughts instead of the expensive experts that got it wrong.” Folks it wasn’t really hard to see what was going to happen. Last year Producers were losing mega money. There has never been and will never be more pigs in that scenario. Just like $7.00 bushel corn will not make more pigs.
Sow Unit construction is next to nothing. Building costs jumping up to 30% is increasing capital costs and ongoing breakevens. Sow Units are north of $3,000 a space. Finishers $400-425 a space. Lots of Sow Barns quoted but next to none are under construction. Throw in $7.00 bushel corn and the brakes are on for any significant construction. We expect some empty sow units will be the choice of many to grow production.
As Genesus is the leader in Pork Taste and Eating Experience we had many discussions about where our industry should be going. Many are frustrated by the lack of industry leadership to produce better pork that would drive domestic demand. Anyone who reads this commentary knows our constant banging of the dream for our industries opportunity to produce pork as “the other red meat”. Beef cut-out $3.35 lb, Pork $1.35 lb. Ribs – Belly, all products with taste due to marbling, are leading pork cut-outs and pulling up hog prices. We had Genesus Loins and Ribs at our tent, we appreciate the multiple positive comments about the superior taste.
Sow Mortality – we have written about the average of 13.9% in 2021 on PigCHAMP database. It was interesting the number of discussions we had about not only the mortality but Prolapses and Zero Value Culls. Prolapses are widespread in the industry from what we are told by customers of “Prolapse Is Coming” genetic company. 5-7% of herd is not uncommon. What we found interesting is producers telling us 25-30% of their cull sows are getting zero value. We never heard of this type of scale before. It also will be distorting the calculation of sow herd slaughter sows shot or zero value aren’t in sow slaughter. Amazes us producers can afford to tolerate such sow herd attrition and production value loss.
Labor, Feed Costs, Disease, Sow Attrition are all big factors that will limit hog supply for the next year. We see nothing that is increasing pig production. We have a growing U.S. economy; we expect to see continued strong hog prices through the summer of 2022.