Pork Commentary
Jim Long President – CEO Genesus Inc.
March 27, 2023
This past week was not great once again for hog producers. Cash hogs in the high 70’s means farrow to finish losses over $30 per head. We need a rally.
Observations
- Slaughter continues higher than a year ago with pork production 1% higher year to date. 1% doesn’t seem to be a good reason hogs are about $40 less than a year ago. Beef production down over 4% with total red meat supplies lower year over year.
- U.S. pork export sales from what we can observe are higher year to date. Exports themselves will catch up to sales soon. The huge price gap ($90+ per head) between Europe and USA-Canada will pull pork from USA-Canada to import markets. This will pull the USA-Canada hog prices higher.
- U.S pork cut-outs closed Friday at $81.05 lb. We need to see this to rise as an indicator of pork demand and supply. We don’t expect lean hog futures will lead a rally, it will follow the cut-outs and export reports.
- Chicken supply seems to be flattening out. Chicks placed running at year ago. Chicken currently $1.30 lb.
- The reality of low hog prices and low beef cut-outs relative to the hog price means integrated packers are being quite challenged. You can see it in the financial reports of packers and the moves of some to cut costs. There are next to no winners today in the U.S. hog industry.
- U.S. sow slaughter in the first two months of the year was 506,000, last year 492,000. Last year the U.S. reported a decline of 27,000 December to March. We expect the March sow herd this year will decline from December.
- There were reports this week that said reports of African Swine Fever in China is being overestimated. We don’t agree. Genesus has several people on the ground in China. We see almost daily reports of ASF devastating producers. The only truth will be the prices. As long as China keeps liquidating due to ASF the hog price will stay low. When it ends, we expect prices will explode. We expect this to be in July-August.
- A reflection of livestock and poultry production in China is soybean prices. We have read and heard reports of China backing off soybean purchases. A reflection of soybean meal demand is futures in China. At first of the year 4600 RMB tonne ($750), now 3500 RMB tonne ($571). We believe this is an indicator of fewer hogs due to ASF market expects to see.
- Spain and most other European countries set new record prices for market hogs last week. The price spread is now $100 U.S. per head. Nothing like fewer hogs to lift prices. This coming week we will be in Spain visiting customers and attending Spain’s largest pork industry congress in Zaragoza. We will report our observations.
- Yesterday in Madrid we went to one of many shops that the main business is selling pork. As you can see by the picture the price of cured hams – these are half Duroc and half Iberian. Many of these are sired by Genesus Jersey Red Durocs. The price is 24 Euros/kg or $11.80 lb. for the whole ham. If you have never eaten this excellent pork product you are missing a great experience. It reflects that consumers will pay more for taste. Someday our industry will realize taste is what can drive up prices and demand. U.S. pork cut-outs last week 81¢ lb. – beef cut-outs $2.80 lb. Maybe when we want to have an industry that does more then turn corn into a product that gets 81¢ lb. we will begin a revolution.
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