This week we spoke at the National Pork Industry Conference (NPIC) being held in Wisconsin. The talk was on a World Market update.

World Markets

•       Our Premise – The three major hog producing areas in the world USA, China, Europe are all cutting production at the same time. This has never happened before. 

Feed Prices

•       Feed Prices have pushed cost of production to record levels all over the world. Some relief in sight.

Contract HighsNow
CornDecember$7.66$6.07
WheatJuly$12.84$8.31
SoybeansSeptember$16.06$14.16

•       Spain 370 Euros/ton or over $10.40 a bushel, was $11.60 a bushel

•       China 3128 RMB = $12.50 a bushel, was $13.70 a bushel

Europe 

December 1
20202021# downPercentage
Breeding Pigs11,41511,004– 411– 3%
Total Pigs145,877141,516– 4,321– 3%

Europe Pork decline 5% Q1 – was 7% lower in March

Germany

•       1.48 million sows May 2022

•       Germany has declined 6.2% since December 1 (-100,000) down to 1.48 million. Down over 200,000 in the last 18 months.

•       High feed prices

•       Loss of exports due to ASF

•       New animal welfare regulations 

•       12% less pork in Q1 vs. a year ago

Spain

•       Largest producer in Europe

•       Business model – contracting unlike rest of Europe it has been the only country in Europe to expand in the past two years

•       Last ten weeks slaughter has declined year over year

•       Has the highest price on record – just over cost of production

Netherlands

•       Livestock industry under huge pressure for nitrogen pollution

•       $27 billion USD budgeted to radically reduce livestock production through farmer buyouts – voluntary to start with

Sow herd (1,000 head)
201420192021
1,1061,047910

•       Huge protests underway – some estimates sow herd will be cut by 30% -300,000 sows. Less hogs coming 

China 

•       Sow liquidation began last July – 10 months later is March-April.

China Average Hog Prices
Price per lb.35 lb. Feeder Pigs
Low was March 1885¢ lb.$59.60
Week of July 7$1.38 lb.$103.29

•       The only reason the price increased is because of less pigs. China just had its 1998.

June 1 USDA Hogs and Pigs Report
 (1,000 head)
 202020212022
Kept for Breeding6,2366,2206,168
Market71,03866,93366,356
Pigs per Litter Dec.-May11.0010.9510.97
Sows Farrowing Actual Dec-May6,3295,9645,904
June-November6,4256,0986,025

Why less Hogs?

•       Financial losses during Covid crisis

•       High feed costs

•       Difficulty to get labor 

•       High building costs – $4,000 sow farrow to wean

•       Breakeven?

•       Generational change 

USA – Demand 

•       Chicken production lower year over year with prices now $1.60 lb. a year ago $1.05 lb.

•       Beef cow liquidation and lack of Heifer retention at record combined levels. USDA projecting almost 2 billion lbs. less Beef in 2023 then 2022 (-7%). Equal to about 4 weeks of hog production.

•       Inflation – we don’t think it will cut U.S. Pork demand – consumers will cut out other items. Beef $2.60 cut-outs – Pork $1.08 cut-outs.

Fake Meat 

Beyond Meat stock (Nasdaq: BYND)

•     234.90 High in 2019

•     27.17 Last week

Market capitalization – down $15 billion from peak 

Down -$1.74 billion since January 1, 2022

Taste does matter

Gene-Edited Foods 

•       Survey by Iowa State of 2,000 U.S. residents 

•       Quote “Around 60% of the women in the survey said they would be unwilling to eat and purposely avoid gene-edited food.

Our Concern – Gene Edited Foods

•       We support technology but we need to have customers for our Pork. 

•       I.E Paylean legal product – one customer China says no. Now no Paylean. What happens when one customer says no to Gene-Edited?

Pork Exports 

•       Challenge of Euro to U.S. dollar

•       A year ago, 1.18 Euros to $1 USD – Now 1.03 Euros to $1

•       This makes U.S. pork less competitive in World Markets at an almost 15% change 

•       Year to date exports down -24%

•       Thank god for Mexico as its up 11% and the leading export country

•       China starts up most U.S. plants approved unlike Spain and Canada

Summary

•       Our premise is China, Europe and the USA the major hog producing areas with 75% of the world’s production all down at same time, probably first time in history.

•       U.S. hog prices in our opinion be at minimum the same as this past 12 months with significant upside as global pork supply craters.

Jim Long President & CEO of Genesus gives a presentation on World Markets
Spencer Long of Genesus gives a presentation on the Genesus Jersey Red Duroc
Genesus hosted reception at the 2022 NPIC
2022 NPIC opening night dinner
2022 NPIC 

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