Jim Long President – CEO Genesus Inc.
May 30, 2023
Every day we hear of different entities deciding to cut sow production. To say it’s major seems to us an understatement. The industry financial losses are significant. It’s not just what has happened the last few months but a continuation from the Covid price collapse, high feed prices and continued increase in other costs (labor, utilities) that has pounded the industry. You only need to look at financial results of public swine companies to see the reality of the economics.
Much of the sow liquidation information is anecdotal. The only public announcements of sow liquidation have come from Smithfield Foods and Olymel in Canada. The only definitive number are from Olymel announcing, who last week announced liquidation of 17,000 sows.
We are hearing daily of individuals or corporations cutting back. It is at a level as great or greater we have ever heard.
How great will be the sow liquidation has yet to be determined. The longer losses continue the greater the liquidation. We believe at this point at least 300,000 sows of liquidation have been put in motion in USA, Canada, Mexico combined. Every week losses continue at current levels; we expect to add 15 – 20,000 more sows a week to the 300,000.
As we go forward not only will there be empty sow units going forward but empty finishers. 300,000 sows gone means 3 million empty finishing spaces.
Will productivity gains make up the sow herd liquidation. PigCHAMP a major U.S. pig production database has data on that.
PigCHAMP Average Annual Summary Results 2018 2022 Pigs Weaned per Sow/Annual 24.11 23.98 Sow Mortality 11.68% 14.54%
Data shows no productivity gain per sow. At the same time U.S. wean to finish mortality continues to climb. Our calculation 300,000 sows will be roughly 5.5 – 6 million fewer market hogs per year. The 3% increase in sow mortality costs $1,000 sow loss opportunity per head is about $1.8 billion per year to industry vs. 2018. Real Money. Good idea to have sows that live.
- Prop 12 – recently talking to a group that just built a Prop 12 farm. They estimated farrow to wean cost vs. standard sow unit was $1,000 a sow more. Couple with lower farrowing rate and smaller litter size means. Certainly, magnified cost of production.
- The extra cost to renovate old facilities to meet Prop 12 or others will also lead to fewer sows. Many producers in their 60’s, many asking why to invest into a money losing industry. What’s the end game?
- Current Hog Price in Spain is 99¢ U.S. lb. liveweight. U.S. hog price is 61¢ lb. liveweight. 280 lb. lb. hog x 38¢ lb. difference = $106 per head. Big Money difference.
Little wonder U.S. pork exports to Asia are going up. Arbitrage.
The Spain (Europe) price is a result of huge liquidation in Europe of at least 1 million sows.
The liquidation in North America will result in higher prices in late 2023 into 2024 if not sooner.
- Reports from China continue to indicate major liquidation. One company capacity 100,000 sows now have 75,000. Another company now 250,000 sows capacity 400,000. Lots of empty barns and lower sow inventories in others. ASF and continued losses of $50-60 per head is cutting sow herd. When the dog hits the end of chain (we expect this summer) the China price will explode.
To use the cliché “The Elephant in the Room.” Lean Hog Futures continued to trend lower last week. May Cash hogs at least $15 per head now higher than June Futures. Not sure lean hog futures can be explained they are quite low. Let’s hope lean hog futures are totally wrong relative to market direction.