Jim Long President-CEO Genesus Inc.
This past week Lean Hog futures, pork cut-outs, and hog prices declined while corn and soybeans jumped higher. There is certainly not a week for joy in Hogville. Our observations:
- We aren’t smart enough to understand the sudden decline in hog pricing factors. The pork cut-outs and hog prices dropped but there were no more hogs to slaughter than the week before. Beef cut-outs didn’t move.
- Corn and soybean prices jumped on reports of an expected smaller U.S. crop. Keep in mind Brazil, Russia, and Western Canada all have or expect excellent crop production, and all are major exporters of grains and oilseeds. The strong U.S. dollar will encourage global buyers to look at these countries as sources.
- Ukraine, a major global exporter appears to be back in the game. After no ships moving for 6 months. As of last week, over 44-grain ships have left, 70 pending. More grain into world markets.
- China has relisted approval of several of Canada’s hog packing plants. They did this on their own accord. We speculate China realizes they will need to import pork and want as many options as possible to source pork for competitive reasons. Pork moving to China is supportive for all Global Pork Exporters.
- The Canadian government estimates that total Grain and Oilseed production will increase this year to 87,297 (K+) from 65,039 (K+) last year. A huge increase and recovery from the drought of last year.
- Germany’s hog slaughter has been running between 700 – 750,000 a week in the last while. A couple of years ago it was around 1 million. No wonder Europe’s hog prices are near record levels as the massive liquidation of sows is being felt in lower supply.
- European hog prices are at record levels – China’s hog price has almost doubled since the first of April. We are currently marketing hogs bred in October – November last year. Our observation is the sow herds of Europe – China both saw major liquidation since October. They both had huge financial losses until late spring. In our opinion the supply of hogs in both areas is going to see even greater year-over-year production declines in the coming months. Year over year global pork supply is declining. How do you ration less supply? Higher prices.
- U.S. hog supply. Farmer Arithmetic – Smithfield Foods has announced the decrease of their sow herd in Utah tied to the closing of the Los Angeles slaughter plant. Our opinion is the Utah decline means the net U.S. sow herd is not expanding.
- U.S. sow slaughter in July this year was 237,000 a year ago 246,000. There was one less workday in July this year. Year to date U.S. sow slaughter 2.5% of total slaughter the same as a year ago less sows have been slaughtered but the sow herd is smaller. In July though less sows were slaughtered than a year ago the percentage of slaughter was 2.6% higher than last year’s 2.5%. This tells us net U.S. sow herd not moving much one way or another.
- It’s been really uplifting for us to see the reaction in the marketplace with the Genesus – Jersey Red Duroc. We continue to win taste tests domestically and globally. For more than two decades we have believed that taste trumps all with consumers. As my father used to say, “It’s like pushing a chain uphill” and that’s how it has felt. Genesus has been the lone and lonely genetic company that has believed the key to increasing per capita consumption is a better eating experience. Don’t we sell pork to compete with beef? Beef gets more money because consumers will pay more, they vote with their money. Those who say consumers won’t pay more miss the point. They will but they want to get a good predictable eating experience, not disappointment from too many marble-devoid loins.
Genesus is the Number #1 genetics imported to South Korea and has been for several years. It’s a market where consumers demand high marbling to get a better taste but producers need feed costs and disease challenge resistance at a competitive cost of production. Our Korean dealer summed up why Genesus is Number #1: