Pork Commentary, August 30th, 2021
Jim Long, President-CEO, Genesus Inc.
Our Observations:
U.S. hog slaughter last week 2,444,000 – a year ago 2,653,000. Down 8% year-over-year. USDA projected 2% year-over-year decline in June 1st USDA Hogs and Pigs Report. U.S. slaughter since the first of July down over 8%.
U.S. hog slaughter down year-over-year as well as slaughter weights; i.e. Iowa – S Minnesota averaging 276.9 lbs. – a year ago 279 lbs. Certainly appears hogs are not backed up. We don’t believe anyone is hanging onto hogs going into the fall with traditionally lower prices.
USDA carcass cut-out closed Friday at $116.59 reflecting continued strong pork demand. Lean Hog Prices National Base Lean Hogs 53-54% $103.47.
Appears to us slaughter hog numbers will continue to be significantly below 2020 for the rest of the year. Even lean hog futures traders have got October hogs over 90¢. The combination of the crush financial debacle of 2020 and PRRS 144 is cutting hog numbers.
We also are wondering if hog numbers are being affected significantly by sow mortality of 17% plus in many large production systems. With mortality at that level, we see a decreased voluntary culling of sows. Sows that in the past would have been culled are kept in production in an attempt to maintain sow inventory. We also expect high sow mortality and involuntary culling is leading to sow herd inventories lower than the target, leading to fewer pigs being produced than you would expect from many sow units.
The lower numbers of slaughter are also being caused by labor issues. Many farms are understaffed which affects productivity. Some farms are half staffed. No way that leads to more hogs. It also discourages expansion. We expect labor issues in sow units are cutting production by 2-5%.
China
Below, from a reader in China (we took out company names but all with several 100,000 sows)
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- Company X is in very dire financial and legal status and not expected to survive.
- Company Y cannot pay its bills and borrowing from its suppliers. The suppliers tells us that they themselves can’t stand much more of it.
- Some large outfits have recently changed leadership as the CEO and CFO etc. are resigning.
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China’s Hog Industry currently is losing big money with prices below cost of production and continued issues with African Swine Fever. The price of corn last week was $9.75 U.S. bushel, the lowest this year. China has forward bought little corn from USA since May. We expect China’s swine industry losing minimum $400-500 million U.S. a week at current price levels is causing significant liquidation. Don’t need corn to feed pigs that don’t exist.
