Jim Long President – CEO Genesus Inc.
March 6, 2023
Last week Spain the largest swine producer in Europe set a new record price for market hogs at 1.932 Euros/kg (93¢ U.S. lb. liveweight). Many other countries are also setting price records in Europe – i.e., France, Germany, Italy, Netherlands, Poland, etc. It happens when you liquidate 1 million sows and have 12 million pigs less in inventory.
- Liquidation was triggered by financial losses from ASF in Germany – Poland. Rest of Europe high feed prices relative to hog prices.
- New environmental and animal welfare rules leading to producers leaving industry.
- We wrote a couple weeks ago about Spain’s national production record system indicating wean to finish mortality average has gone in the last two years from 9% to 14% a 5% increase – much of the increase is due to removal of copper sulphate and antibiotics. These rules are now implemented throughout the European Union. We expect this will lead to higher mortality. The EU produces about 240 million market hogs per year. Every 1% change in mortality is 2.4 million pigs. If all of EU goes up 5% like Spain it would be 12 million fewer pigs to market a year. Having fewer pigs always leads to higher prices i.e., Record Hog Prices.
Below is a map from China indicating when recent African Swine Fever breaks are occurring. Our observation in 2022 there was ASF in China, but it was not severe. From reports we are hearing it has ramped up again. In the map the darker the area the more severe the break. The darkest area is the provinces of Liaoning, Hebei, Shandong, Shanxi. The most recent reported swine inventory in their four provinces is over 100 million (context U.S. inventory is 73 million). We estimate there could have been about 9 million sows in the four provinces combined. Reports we are hearing (no real facts) if ASF is leading to rapid sow mortality and liquidation. Some reporting 20% to a wild number of 80%. One person said they weren’t sure what number is but more empty barns every day.
When ASF hit China in August 2018 it took to July 2019 before hog prices took off. The main reason in China when herds break with ASF the pigs die from ASF or go to slaughter (at whatever weight). Their liquidation pushes pork supply up in short-term holding prices down.
Last year we wrote continually that China sow herd liquidation that began in July 2021 due to losses of $80 per head for several months was leading to sow liquidation on a grand scale. What we saw was rapid price increase of hogs from 13 RMB/kg April 2022 to over 25 RMB/kg by the fall – almost double or over $200 U.S. a head more. On December 1 China hog price 23.65 RMB/kg. The country than opened up and Covid surged. Hundreds of millions of people didn’t feel well and we expect it cut pork demand (when you’re sick how hungry are you?). The hog price went from 23.65 RMB/kg to 15.12 RMB/kg – a drop of almost $150 per head.
We expect when Covid hit not only did pork demand slow but as hog prices declined producers pushed hogs to market. We understand market hog weights declined dramatically after December 1. Less Demand – More Supply = Lower Price.
What we struggled with is with major Covid breaks now over in China why hasn’t the hog price rebounded. The liquidation of the sow herd that we saw in the high prices in the fall didn’t reverse. It doesn’t happen that fast. We now wonder without facts is the new ASF breaks that seem serious pushing up supply from liquidation of pigs? If so, it could even get more interesting as the earlier liquidation from the financial losses will be augmented by major ASF liquidation leading to even fewer hogs?
- USDA has projected lower Red Meat Production in USA in 2023 compared to 2022. The first such year since 2014 the U.S. has had year over year decline (2014 was great year for pig prices). So far in 2023 (March 3) year over year U.S. red meat production down 1.8% (Beef -4.5%, Pork +0.9%). We expect to see a larger percentage year over year decline in the coming months which will be supportive for the hog price.
PigCHAMP is a major record keeping system. Below is the median data USA – 260 farms plus.
USA PigCHAMP DataMedian Average Year Born Alive/Litter Pigs Weaned Mated Female Year Sow Mortality 2022 13.88 25.12 14.54% 2018 12.90 25.28 11.68% 2014 12.29 24.38 8.81%
Certainly, you can see Born Alive has jumped up significantly. Pigs Weaned Mated Female Year up some. Sow Mortality a significant increase up almost 6% from 2014. SMS – MetaFarms record system estimates a minimum loss of $1,000 a sow when one dies. Some Farmer Arithmetic a 6% increase on 6 million sows = 360,000 dead sows/year x $1,000 = $360 million. Real Money.
We all know the major reason of the sow mortality increase. Too many genetic companies selling gilts that prolapse, cripple, can’t recover from lactation, need hoof trimming a reflection of poor phenotypes, vulva biting, can’t adapt to pen gestation… etc.
If you like hauling out dead sows keep doing what you are doing. If not maybe time to look around to see if there are options. Gene Editing won’t fix prolapses, phenotypes and dead sow syndrome.
Kalmbach Feeds Agribusiness Conference 2023
This week we will attend and speak at the Kalmbach Feeds Agribusiness Conference in Columbus, Ohio. Last year’s conference was one of the best conferences with some of the best speakers we have ever heard.