Pork Commentary, December 20th, 2021
Jim Long, President-CEO, Genesus Inc.
Last week’s U.S. slaughter was 2,645,000, a year ago 2.8 million. Down 5.8% in line with USDA projection of 6% fewer hogs.
|Iowa – Minnesota||Slaughter weight (lbs)|
Weights lower than a year ago. Weights declined 1.4 lbs from week before. This indicates to us market hog inventory is current to a year ago. The decline in hog slaughter year over year has nothing to do with backed-up hogs. The decrease in production is due to 300,000 fewer sows.
It’s just not lower sow numbers that are cutting pig production numbers:
- Historic high sow and wean to finish mortality is lowering pig numbers. Dead pigs don’t get to market.
- We expect the Prop 12 mandate of 24 sq. feet per sow will cut sow numbers in many units. This will lead to fewer hogs.
- We traveled in Indiana and Ohio this past week. Lots of stories of PRRS 144 and high mortality in some finishers. Some reaching over 30%.
Packers are being challenged by lack of labor. Generally, they can get all the hogs killed but the cutting–processing that creates added value is being shorted. Saw a billboard in Indiana where a Packer was offering $34.43 per hour for maintenance workers. All these labor issues will lead to more automation. The challenge, finding skilled people to maintain the automation.
The lack of labor to added value to pork filters down to producers. Generally, more Packers have the more can slide down to producers. The Bigger the Pie the better chance for a bigger slice.
China produced a record grain harvest this year 682.9 million metric tonnes (27 billion bushels approximately), up 13.4 million metric tonnes. If we and the USDA are correct, that China will be down in pig production (USDA 14%; us 20%) in 2022. You would wonder how much corn they will need imported with 100 million less hogs. You would think China will find its own grain before they import.
China planted 117.6 million hectares (258 million acres) of grain, up .7%. Corn production was 272.6 million metric tonnes (10.74 billion bushels). Domestic corn in China is running between $10.50 to $11.00 US a bushel (2650 RMB/tonne). This contributes to China’s high cost of production for swine.
The National Slaughter Price in China last week was 16.83 RMB/kg ($1.19 U.S. lb.). China breakeven is estimated to be 21 RMB/kg ($1.53 U.S. lb.). The difference of 5 RMB/kg is a loss of 30¢ U.S.per lb. or about $60 – 75 per head. Sow herd liquidation continues in China. There will always be liquidation when producers lose money.
U.S. Chicken prices are quite strong. A year ago, U.S. weekly composite price 81.78¢ lb. last week $1.24 lb. A huge jump. This with slaughter numbers similar to a year ago. Higher Chicken prices should support higher hog prices. Pilgrim Pride had two chicken hatcheries heavily damaged in the Kentucky Tornados. Pilgrims has over 37 hatcheries in USA.
We stay with our position that continual liquidation of the breeding herds in China and the European Union along with already lower U.S. hog numbers will lead to significantly less hogs produced in 2022 than 2021 in these three regions which account for over 75% of the world’s hog production. This will lead to hog prices higher in all global markets. We believe U.S. lean hogs will reach and surpass 2021 prices.
My Father used to say “Don’t worry, Christmas will be here on the same day.” Never was sure what he meant by that saying. He passed away 21 years ago but the saying still resonates.
But as he predicted, Christmas will be here again on December 25th. This time of year, it makes you pause and ponder different points of life. This past week Spencer (one of my sons) and I travelled the eastern corn belt. Our visits almost exclusively were with families who are in pork production.
Today’s families are the survivors of the massive consolidation we have seen in pork production where some counties had over 100 farm families producing pork and now might have three. Producer families have survived and most cases prospered because of work ethic, courage, to compete passion, adaptation of technology, and family belief and togetherness. Indeed, we are proud of this industry.
To all, we wish you a Merry Christmas.