Pork Commentary, December 13th, 2021
Jim Long, President-CEO, Genesus Inc.
The USDA reported 6% less pigs in U.S. inventory under 120 lbs. on September 1st count. Those are the pigs that are going to market now 100 days later. Last week the U.S. marketed 2,601,000 hogs; a year ago 2,755,000; down 5.6%. Seems USDA report of significantly fewer hogs is accurate. Week upon week of around 6% fewer hogs will be supportive to hog market as total pork tonnage decreases into a strong domestic market and record exports to Mexico.
The U.S. sow herd declined around 300,000 sows in the Covid debacle of 2020. Now there are less hogs and it doesn’t take an ag economist to calculate the reason. Less sows, less pigs.
In our opinion, there is little activity to grow the current sow herd. If anything, it’s some existing sow units that are empty and now being restarted. There is very minimal new sow barn construction. We don’t believe there has ever been much sow herd expansion during what would be termed high feed prices such as we have now. All of this compounded by the added fact, at current feed prices and current hog prices many are losing money, trading dollars at best.
Lean Hog Futures
The Chicago Lean Hog Futures Casino was in full evidence the past week. I.E. June Lean Hog Futures December 2nd $97.050, December 8th $92.950, December 10th $97.175. Up and down like a toilet seat. Not sure what made all the gyration other than money in and money out. Our thoughts, less hogs are here and will be in 2022. If we had $1.20 in 2021, not really hard for us to believe that we’ll be reached or surpassed in 2022 with even fewer hogs.
2022 – Sow Liquidation Convergent
We are staying with our premise that the three largest production areas in the world: North America, China, and the European Union with over 75% of the world’s pigs will be down in production in 2022.
There is liquidation in China. Latest official report from China was sow herd reduction of 1.2 million sows in the month of October. That’s Canada’s sow herd gone in 30 days. China’s hog prices have rebounded nicely from early October lows (11.5 RMB to 18.2 RMB kg). A jump of over $100 per head reflecting already lower hog numbers. China will be down 15-20% in pork production in 2022 vs 2021. Equivalent to over 100 million fewer market hogs.
European Union liquidation continues and official count December to June was near 250,000 fewer sows. Since June liquidation has accelerated as market prices went down and feed prices went up.
All in all, if correct this convergence of lower numbers could push hog prices to record highs.
CFAP 1 Top Up
Some members of Congress are fighting for pork producers to get the payments promised by the Secretary of Agriculture, Vilsack. Below is a recent letter sent by Vicky Hartzler, Member of Congress from Missouri to Secretary Vilsack.Thanks to a Missouri reader of our commentary for reaching out with this.
December 6, 2021
The Honorable Tom Vilsack
U.S. Department of Agriculture
1400 Independence Avenue SW
Washington, DC 20250
Dear Secretary Vilsack,
I commend the United States Department of Agriculture (USDA) for their recent
announcement issuing $270 million to eligible livestock contract growers who applied for pandemic assistance through the Coronavirus Food Assistance Program (CFAP 2) payments.
Despite this critical investment, I am concerned that United States pork producers, who are not contract growers, are continuing to experience ongoing financial burdens as a result of COVID-19 market disruptions. As you know, on January 15, 2021, USDA announced that eligible swine producers would receive additional assistance through a “top up” payment of $17 per head, increasing the total CFAP 1 inventory payment to $34 per head. However, since then, USDA has given no indication of when and how they will distribute the “top up” payment saying they want to “re-evaluate the program.” On July 13, 2021, USDA announced that up to $50 million in pandemic assistance funds would be provided to small hog producers who use the spot market or negotiated price. We have yet to see how these funds will be distributed as well. Pork producers are still feeling the economic hardships of the pandemic and look forward to USDA carrying out these programs.
On October 7, 2021, you testified before the House Agriculture Committee on the state of the livestock industry. In response, I submitted the following question for the record on October 15, 2021:
“Secretary Vilsack, for several months now USDA has held pork producers in the balance as they await a formerly promised “top-up” payment of $17 per head. Members and staff have requested additional information several times and to my knowledge, not received a clear answer. Can you please provide a specific update as to the status of these payments and details as to when U.S. swine producers will receive formal notice regarding this payment?”
As of December 2, 2021, this question for the record has still not been answered. With this in mind, I respectfully request answers to the following questions:
- When will USDA release guidance on how U.S. hog farmers can receive their promised “top up” payment of $17 per head as well as the $50 million for small hog producers?
- What modifications is USDA making to the “top-up” program as announced by the Trump Administration and what are these changes designed to accomplish?
- Hog farmers often cap out of the $250,000 payment limit quickly due to their higher volume of livestock. Will a new payment limit be issued for swine producers to better ensure producers receive adequate financial assistance?
I encourage USDA to support our hardworking farmers and provide them with the much-needed financial relief that was promised. I thank you for your timely consideration of this matter and look forward to working with you on this important issue.
Vicky HartzlerMember of Congress
Now we have new NPPC CEO Osborne, let’s hope we see coordinated effort to get what is promised by Secretary Vilsack. Dairy, Beef, Corn, Soybeans etc. have gotten billions in CFAP 1 top up. Why hasn’t hogs promise been met? We implore the NPPC to fight for the 60,000 American hog producers they represent. Why are we being treated as second class farmers by the USDA administration? If you want CFAP 1 top up as producers, continue to contact your Senators, Congress, NPPC etc. It’s been promised. Hog farmers were hit hard by Covid just like other ag commodities, they were paid the CFAP 1 top up. A promise made should be a promise kept