This past week we saw continued lackluster movement in Cash Hogs and Pork Cut-Outs.
Observations
Packers buying hogs are losing money. This is tempering their desire to be further aggressors for slaughter numbers.
We understand pork demand is historically soft just before Easter. Easter is over in a week.
We had a bullish March Hogs and Pigs Report confirming there are less hogs year over year in the foreseeable future. Despite this verification, Lean Hog Futures declined in the $5 range. Go figure, Chicago = Las Vegas with no rules. Same sharpies had June Lean Hogs in the 80’s last fall. We expect Lean Hogs to rebound into the 120s, every packer is short hogs going forward. We will see plants with dark days. No point running shackles with no hogs in them.
In the recent April USDA Supply and Use Report the USDA is projecting 2022 Pork Production.
Year
Million lbs.
2022 (projected)
27.090
2021 (actual)
27.668
2020 (actual)
28.318
A drop in U.S. production of 1.2 million lbs. from 2020. No wonder the hog price is going to be higher.
April USDA projected Red Meat (Beef-Pork) plus Poultry for 2022
Year
Million lbs.
2022 (projected)
105.783
2021 (actual)
106.410
2020 (actual)
106.172
No doubt less Protein for an ever-increasing domestic and global market.
Like all projections, things can be fast-changing, the USDA is projecting this past week eggs at $1.57/dozen for 2022. Large eggs have gone from $1.40/dozen to $2.60 in a week as millions of birds have been exterminated for Avian Flu.
As of this past Saturday, 24 million chickens and turkeys have been lost to Avian Flu. If it ever gets into the breeder flocks, already high chicken, turkey, and egg prices will explode higher. In the U.S. producers who get Avian Flu receive financial compensation when the birds are eradicated.
As we wrote earlier, bullish Hogs and Pigs Report and Lean Hog Futures decline. The USDA came out with what is termed a bearish Corn Report and futures went higher! We understand the issue of Ukraine’s limited ability to export and plant questions. What we wonder is where is the corn demand coming from, certainly not from increased global poultry and livestock production. Everywhere we look whether it be Europe, North America, or Asia we see less production either here now or on the horizon.
In China, the preliminary first-quarter financial results are coming out for the publicly traded swine companies. It appears billions of dollars further losses in the first quarter of 2022. The losses China’s producers are having are leading to sow herd liquidation. We expect not if but when China’s hog prices takeoff when the results of the liquidation lead to significantly smaller hog numbers. This will lead to China looking for pork imports but less imports of corn-soybeans. You don’t feed what you don’t have.
Sow Mortality
PigCHAMP is a Globally recognized swine database system based in the USA. This database reflects the issue of sow mortality in our industry. Let’s look at the trend for 2021 PigCHAMP Average of 292 farms.
USASow Mortality Mean
CanadaSow Mortality Mean
2021
14.86%
9.61%
2018
11.68%
9.87%
2015
8.94%
7.11%
It’s not hard to see the big jump in sow mortality in the U.S. over the last few years. The prolapse problems of the leading supplier of Genetics in the U.S. cannot be underestimated in the mortality increase. In Canada, mortality is significantly lower. The major genetic supplier in the USA has a much smaller percentage of sales in Canada. Genesus is based in Canada.
What is the cost of a dead sow? A few months ago, the SMS part of MetaFarms put out their calculation of loss per sow as you can see below. We thought it is interesting to update to current market conditions.
SMS Calculation from a few months ago
New Calculation for current market conditions
Big money at $1,500 per dead sow. On a 2500 sow unit a 1% change in annual mortality is 25 x $1,500 = $37,500, 5% is $187,500. It’s Simple Farmer Arithmetic but it is real money. With the U.S. average at 14.86% sow mortality, means half is over that. We have seen no results from the main genetic supplier that they have many herds under 15%. How long will producers tolerate the financial burden of dead sows? Business is about choices. Dead Sows Cost Real Money.
Jim Long, President-CEO, Genesus inc. April 4th, 2022
he relentless decline of the U.S. breeding herd continues. It peaked on December 1st, 2019 at 6.471 million. The breeding herd this March 1 the USDA reports is 6.098 million a decline of 373,000. It’s no wonder the supply of market hogs has declined.
Having less sows has led to fewer market hogs. On March 1st 2020, the USDA reported 71.254 million in inventory, this March 1st, 2022 down to 66.111 million – a decline of 5.143 million hogs. No wonder hog prices are higher and hundreds of thousands of finisher spaces sit empty.
If you are a regular reader of this commentary you know we have continually written that due to high feed costs, labor shortage, disease issues, increased building costs, generational change, old sow barns, etc. we did not see any reason the sow herd is getting bigger. The USDA report which shows a decline from March 1st last year by 117,000, and from December 1st 27,000 confirms our opinion.
Last week prior to the report, one of the Chicken Little Economists predicted the sow herd on March 1st will be 0.2% higher than a year before. They overestimated the breeding sow herd by about 130,000! Enough said.
In our opinion, the breeding herd has little indication of expansion for all the reasons we listed earlier. So, we expect less hogs over the next 12 months compared to the previous.
We expect strong hog prices for the foreseeable future, other factors contributing to this optimism:
Current U.S. Chicken Price $159.81, a Year Ago $92.36. Higher chicken price makes pork more competitive.
U.S. Beef Carcass Cut-out Price $2.67, Pork Cut-out $1.03. Unfortunately, pork lags behind beef price, but the high beef price makes pork more attractive to the consumer. We all know consumers pay more for beef because it tastes better. Having better-tasting pork could be constructive for pork demand and price.
More Beef Processed. The U.S. has processed 27% more beef cattleso far this year to date compared to the five-year average. Drought, high feed costs are cutting the beef herd. Not if but when the U.S. beef supply declines – supportive for pork.
Avian Flu has hit Turkey, with both chicken broiler, and egg production affected. Less supply of poultry products could push already high poultry prices even higher.
European Hog Prices Have Jumped Significantly in the Last Few Weeks. German hog price was 1.20 Euros/kg on February 9th; last week 1.95 Euros/kg. The increase of 0.75 Euros/kg is 38¢ lb. carcass or over $80 per market hog. The price increase has to be attributed to less hogs available due to the massive sow herd liquidation that Germany and Europe have experienced due to the financial losses of close to $50 per head for many months. Higher hog prices in Europe mean not only there is less European Pork to export but the price will be higher for Global Markets – supportive to U.S. Pork.
Prop 12
Last week the U.S. Supreme Court agreed to review the Prop 12 law in California. A law that bans fresh pork, other than from sows in gestation pens with a minimum of 24 sq. feet, to be sold in California. We commend the NPPC for continuing the fight to stop this legislation. Their diligence on this matter is in the best interest of swine producers. It will be interesting if the Supreme Court agrees that one state can dictate the business practices of 49 other states. Where does that end?
Many of you over the years have read about the travels I have made with my son Spencer. Below is an interview Spencer had with Jim Eadie of Swineweb.
California’s Proposition 12 legislates changes to sow housing. The decision will impact most pork sold in the state, which comes from pigs raised in other parts of the U.S. While essentially damaging for both producers and consumers (who voted for it), it is a sign of the times.
Understanding the many perspectives that shape public trust in animal agriculture relies on a great deal of speculation, largely based on word-of-mouth, opinion polls, social media and purchasing trends exhibited by consumers. But connecting those perspectives back to the experience on-farm, for producers, can be less tangible.
The search for truth while finding common ground with the ‘other side’ can often end in a toxic stalemate when producers and consumers butt heads. Industry representatives make tireless efforts to ‘educate’ the masses, while many urbanites – largely disconnected from the intricacies of food supply chains – often resort to unreliable sources to find answers to their burning questions. The list of questions, and the need for answers, grows constantly.
Three sessions at the 2022 Banff Pork Seminar either directly or indirectly addressed the challenge of reinforcing public trust, exploring themes related to hog sector issues that continue to cause consternation for producers and consumers alike.
Clapping back at critics
For Patrick Moore, climate change concerns are a lot more smoke than fire. Activist hostility drove him away from Greenpeace, which he helped found.
In animal agriculture, emissions of carbon dioxide and methane are often cited as drivers of climate change – a widely held assumption by some consumers, even though certain academic thought leaders suggest the scenario is not as bad as it looks. Other figures, like Patrick Moore of Greenspirit Consulting, take that line of thinking a step further, which may or may not be entirely helpful for the hog sector.
Moore delivered a presentation during the second plenary session of the 2022 Banff Pork Seminar. A native of Winter Harbour, B.C., Moore grew up around the commercial logging industry, in a remote inlet at the far north end of Vancouver Island. He still lives on the island today. For a decade and a half, Moore was a founding and widely photographed member of Greenpeace Canada, until an ideological rift emerged between him and others in the group.
“We cared about people. That is the ‘peace’ in ‘Greenpeace,’” said Moore. “As time went on, Greenpeace drifted into the idea that humans are the enemy of the Earth, as opposed to part of nature.”
Moore’s early work gained international renown starting in the early 1970s, when he and other avant-garde activists decided to protest certain activities in the Pacific Ocean, including the escalation of Cold War-era tensions.
“I became a born-again environmentalist and sailed on a boat with a group of activists to stop U.S. hydrogen bomb testing in Alaska,” said Moore. “We sailed in the late fall in the stormy seas to the Aleutian Islands and got on Walter Cronkite’s Evening News and really changed the whole course of the nuclear arms race.”
Starting in the late 1980s, Moore began to draw the ire of his former peers and modern-day eco-warriors for his involvement with the ‘CO2 Coalition’ – a group dedicated to defending atmospheric carbon dioxide – and ‘Allow Golden Rice Now!’ – advocating for the production and consumption of a yellow-coloured, genetically modified strain of rice designed to biosynthesize beta-carotene, a precursor of Vitamin A. Given his history with Greenpeace, some accuse Moore of forfeiting his earlier beliefs to become a paid lobbyist. Moore, however, remains unfazed.
“The truth of the matter is that every single scare story today is either about things that are invisible – like CO2, radiation and whatever’s in GMOs that’s supposed to be bad – or so remote – like coral reefs and polar bears – that no-one can observe for themselves whether the claims being made are true or not,” he said.
It may be difficult for some people inside and outside of agriculture to reconcile with Moore’s views. Certainly, he possesses the relevant education and experience to articulate his positions in a way that resonates with receptive audiences. ‘The facts’ may be black-and-white, but individual interpretation always leaves a grey area. Our emotional brain, as humans – whether hog farmers or food consumers – thrives in those murky waters, where our feelings have the power to blind us to reality, reinforcing our convictions and clouding our better judgment.
For producers, it would be wise to exercise caution around dismissing certain topics like environmental impacts and other concerns, such as animal handling and housing practices, that may be perceived as less ‘humane’ than desired by consumers.
Balancing the conversation is key
According to Vincent ter Beek, the rural-urban divide is real, and growing, but it is up to the industry to bridge this gap by demonstrating socially acceptable forms of change.
Vincent ter Beek is an ‘agricultural immigrant,’ having come to the industry with a background in history and journalism, not farming. As an admitted outsider, Ter Beek today sits at the helm of Pig Progress, recognized as a true global authority on pigs and pork, but, unlike Moore, he seeks a sense of balance as it relates to industry issues. Ter Beek delivered a presentation during the closing plenary session of the 2022 Banff Pork Seminar.
“My Twitter timeline is a curious amalgam of people living in cities and working in journalism – often left-wing and sometimes vocal vegans – and people working in agriculture – complaining that many people in cities have lost touch with reality,” said Ter Beek. “I listen, will treat everyone with respect, but it’s in my best interest not to choose sides.”
For the hog industry, Ter Beek’s insights may be cumbersome or even outright frustrating. In fact, Ter Beek is not a moral judge of the sector, but instead a conscientious ally, offering praise alongside constructive criticism. A noteworthy takeaway message from Ter Beek is that the temporary discomfort associated with adapting to public pressures may be one way to secure industry success, going forward.
“City people have lost touch with agriculture, I often hear. They’ve lived away from agricultural reality for too long. They don’t realize that, for a pork chop, sausage or spare ribs to be created, a living creature has to be grown and slaughtered,” said Ter Beek. “For opening up to the outside world and becoming more understood, it is also important to ask the question: does the swine business want to show everything that is happening in the farm?”
On the flip side, producers should not necessarily rush to make rash decisions, simply out of fear. Consumers hold a lot of power, collectively, but the loudest opponents of animal agriculture are an extreme, small minority of critics, and while their sway should not be ignored, sensible interaction between the industry and animal welfare groups often excludes these voices for a reason.
Many animal activists have few boundaries when it comes to attacking the hog sector, often very unfairly, but Ter Beek uses an analogy, ‘the Instagram test,’ to demonstrate how words and images matter. A lack of transparency around certain hog production practices can generate suspicion, and that suspicion is exactly what activists use to strengthen their arguments.
“We all know that, by 2050, there will be more than nine billion mouths to feed,” said Ter Beek. “They may not all be eating meat, but if everyone at least has some money to spend, the demand for meat will only grow. And where will these extra people of the future live? Most likely, the vast majority will live in cities.”
Tail docking and castrating piglets, and the use of gestation crates for sows, are arguably the most contentious pig handling practices still used today in North America. In Europe, the top-down parliamentary approach of enacting legislation has forced hog farmers to change the way they work, or to go out of business. Like it or not, it was inevitable there, and the writing may be on the wall here as well.
Ter Beek’s pointed reflections on the hog sector are not only timely but critical for the industry to address, sooner than later.
Animal welfare cannot be taken lightly
Converting to group sow housing is costly, but it has become a societal expectation. Fortunately, open systems have production benefits on top of improving the hog sector’s image.
Ter Beek’s views as an overseas magazine editor seemed to hit the mark even with some Canadian producers who are ahead of the curve when it comes to animal care, such as the panelists who took part in the ‘Welfare’ breakout session at the 2022 Banff Pork Seminar.
Last year, the National Farm Animal Care Council (NFACC) made the decision to delay the implementation of an earlier amendment to the group’s Code of Practice for the Care and Handling of Pigs, requiring all compliant hog barns to be converted to group sow housing. The initial deadline was 2024, which has since been pushed to 2029. All new barns constructed since 2014 have had this requirement, but whether building a new barn or converting an existing one, large capital costs can discourage producers from taking the next step, even with a looming moratorium inching closer.
When Daryl Possberg of Polar Pork set out to make the transition, in 2016, he began by retrofitting one-third of his sow space. After a successful pilot to evaluate how the new system might work, he took a phased approach by safely moving animals to an off-site farm while construction was underway, over a series of weeks. All things considered, he estimates the cost to be around $100 per sow.
“This is money well-spent,” said Possberg. “There’s value in getting this done in a tight timeline.”
A lack of profitability in the past half-decade is usually mentioned as a reason that conversion is not feasible, at present. Fears of compromising biosecurity, losing productivity or needing additional space are other hurdles. These are valid concerns, but as the clock continues to tick, it is incumbent upon producers and packers to find solutions.
Indeed, Maple Leaf Agri-Farms – supporting production for Canada’s highest-capacity hog slaughter facility in Brandon, Manitoba – has already fully converted to group sow housing. The transition was completed only a few months ago, and it would be hard for anyone to argue it is a bad look for the company. Rather, the opposite.
“There’s very little metal in the system. There’s great view lines – great to observe the sows and wonderful for visitors, who really enjoy seeing that sort of thing,” said Neil Booth, Production Manager, Maple Leaf Agri-Farms. “It’s great for those sows to come say ‘hi’ every day. You feel as though they appreciate you and want you to be around.”
Maple Leaf began planning its group housing conversion more than a decade ago, well before NFACC amended the pig code. While NFACC’s codes are voluntary, not legally binding – a popular talking point among animal activists – the code is a stipulation of commercial hog production under the Canadian Quality Assurance (CQA) and Animal Care Assessment (ACA) programs, and the incoming Canadian Pork Excellence (CPE) program.
Without certification and validation under quality assurance programs, producers are unable to market hogs through meat packers who are overseen by the Canadian Food Inspection Agency (CFIA). The federally inspected system represents practically all commercially raised pork in Canada, most of which is exported. By removing a farmer’s ability to participate in the federal value chain, his or her operation would be effectively ended overnight – not a particularly attractive outcome for producers, who are heavily invested in their businesses. Critics, however, almost never have a financial stake in the matter – just an opinion about it. Despite the industry’s and government’s due diligence, backlash still abounds, in some cases.
Yolande Seddon, a researcher with the University of Saskatchewan, is a recognized expert in sow welfare, and, like Ter Beek, brings a thoughtful perspective that is unclouded by personal gain.
“In other areas of the world where hard deadlines have been set, there is evidence to suggest that has only resulted in a contraction of the industry,” said Seddon. “It seems a lot more mediated if we can support producers to have a reasonable extension.”
Does a contraction of the industry matter to those outside the industry? That depends on the level of comfort consumers have with relying on imports to fill potential voids. Canadian retailers have no obligation to source Canadian pork, but for as long as pork demand exists, meat coolers will continue to be filled with product that may or may not be Canadian. Cost-competitiveness helps ensure Canadian pork ends up with Canadian retailers, rather than meat coming from the U.S., Mexico, Brazil or other suppliers who are always looking for greater global market share.
“It is worth noting that supporting an industry to continue making progress on conversion will lead to improved animal welfare in the long run,” said Seddon. “If we encourage a contraction of the industry, that production is always absorbed elsewhere in the world, typically where cost of production and animal welfare standards are lower.”
While it is helpful when consumers understand this dilemma, it is no guarantee of sympathy for producers who are struggling to make the conversion. Moreover, convincing an increasingly skeptical public that the industry is committed to positive change has become a significant obstacle.
The Canadian Pork Council (CPC) predicts that half of all commercial barns in Canada will be converted to group sow housing by year’s end, but approaching a very high degree of compliance remains a lofty target. If the target is not met within the next six years, producers will undoubtedly be forced out of the industry, which will result in pork’s loss and other proteins’ gain, whether animal- or plant-based. The slippery slope is likely not worth testing out, even for the sure-footed.
Self-preservation requires self-sacrifice
If the hog sector remains stubborn on certain issues, rather than flexible, the industry’s reputation and business altogether could worsen with time. At present, time may not favour the industry.
‘The customer is always right.’ Well, not always, especially when it comes to the nitty gritty, technical aspects of a business, including pig and pork production. But even if the customer is not ‘right,’ he or she stands between the farmer, packer, retailer and his or her hard-earned dollar. It is the same dollar that we all cherish, regardless of our beliefs.
Every farmer raises animals with the best of intentions in mind, and despite the noise made by activists, an extensive and complex network of people, policies and other practices act as effective checks and balances. Raising animals for food, this is a condition the industry has grown to live with.
At the end of the day, financial pressures on producers are inhibiting change, but for most consumers, only the pork price tag matters. Whether the Canadian pork industry sinks or swims does not specifically affect most people, much as we would like them to identify with our plight. For long-term sector sustainability to be realized, the industry would do well to shift its perspective, in some cases, to align with ever-changing consumer perceptions more closely. Foolish pride cannot be the weight that holds us back beyond profits.
Is that easy? No. Does it always make sense? No. Is it affordable? Not yet. Is it helpful? Probably. Should the industry be confident that it is entirely possible? That is hard to say. But one thing that is clear, is that the answer might be looking back at us in the mirror.
Canada’s African Swine Fever (ASF) Executive Management Board (EMB) is a large patchwork of national stakeholders aiming to defend the country from a disease incursion. For farmers, more localized, individual planning is necessary.
As everyone in the industry is well aware, activities to prevent African Swine Fever’s (ASF) entry into North America are currently heightened due to ASF detection in Haiti and its continuing spread in Thailand, Europe and elsewhere.
Should ASF be detected in North America, it is critical that Canadian hog farmers actively continue using the latest protocols to prevent the spread but also to prepare for what to do should ASF reach Canada, in terms of handling ‘stop movement’ orders and more.
Before we look at these protocols and what should be in every farmer’s ASF preparation plan, let us quickly look at the big picture. Christa Arsenault delivered a presentation during the second plenary session of the 2022 Banff Pork Seminar. She is the national ASF project manager with Animal Health Canada (AHC), formerly the National Farmed Animal Health and Welfare (NFAHW) Council and the acting chair of Canada’s ASF Executive Management Board (EMB).
“EMB came to be in 2019 as a pilot project, and it has received funding from industry and government on an ongoing basis,” said Arsenault. “Its first task was to create the Pan-Canadian ASF Action Plan, which encompasses many working groups and initiatives, both national and provincial. Many lessons learned and honing of strategies has occurred through operation of the EMB, including the importance of improved coordination between all the pillars, working groups and sub-working groups.”
Activities related to ASF prevention and preparedness on Canada’s hog farms fall under all of the four pillars of the action plan. Pillar 1 is ‘Enhanced Biosecurity and Prevention’; Pillar 2 is ‘Preparedness and Planning’; Pillar 3 is ‘Ensuring Business Continuity’; and Pillar 4 is ‘Coordinated Risk Communication.’
The four pillars of the ASF EMB
Pillar 1 includes the ‘Biosecurity Working Group,’ which is developing a voluntary biosecurity standard and benchmarking tool for farmers. It should be ready later this year and will be available through the Canadian Pork Council (CPC). The standard’s co-creator, Egan Brockhoff, veterinary counselor for CPC, provided a preview of what producers can expect.
“There are four levels, and producers should examine each level to see which makes sense for their farms and surrounding circumstances,” said Brockhoff. “For many farms, Level 1 or 2 of the tool will be sufficient. Farms in an area with a lot of PRRS [porcine reproductive and respiratory syndrome] should meet Level 3 standards, for example. Meeting Level 4 will allow you to protect against highly infectious, aerosolized, multi-species diseases with many contamination pathways. We are piloting the tool right now, and we are also updating the on-farm National Biosecurity Standard for swine.”
The National Biosecurity Standard for swine was developed in 2010 with the authority of the Canadian Food Inspection Agency (CFIA), one of the ASF EMB’s core partners. CFIA develops national biosecurity standards, protocols and strategies designed to protect farm animals, in collaboration with producer organizations, provincial governments and academia.
How do biosecurity standards currently factor into ASF planning at the farm level? Producer training and resources provide the answer.
Emergency preparedness on-farm
The Animal Health Emergency Management (AHEM) project hosts producer workshops, such as this one, during the 2020 Banff Pork Seminar. More recently, workshops have been held virtually.
Among other resources available from AHC is the ‘Animal Health Emergency Management Producer Handbook,’ an easy-to-navigate document developed as part of a suite of disease-related resources. This tool helps producers prepare for disease outbreaks, including ASF, and provides customized support for various stages of an outbreak. Mikki Shatosky, project operations manager with the Animal Health Emergency Management (AHEM) project, explained further.
“The resources in the handbook have been designed to help producers understand, prepare and respond to a disease emergency,” said Shatosky. “Our goal was to create a comprehensive support tool that would not only shed light on what can be expected during an outbreak but also guide producers as they develop and implement emergency management plans, policies and procedures.”
Shatosky noted that every producer’s situation is different and that many aspects of an incident response will vary from province to province and region to region. Circumstances also change over time, so it is important for all producers to regularly review and update their emergency plans.
“Prior to the [COVID-19] pandemic, we were in a steady rhythm of hosting workshops across Alberta to help pork producers prepare for an emergency, and our goal was to roll this out in other provinces,” said Shatosky. “Like so many others, we’ve now pivoted to offering virtual workshops that have been extremely well-received. In fact, since March 2020, we have held more than 25 online emergency preparedness webinars for various livestock commodity groups.”
The workshops help familiarize participants with available resources, while covering important topics such as biosecurity measures and ‘stop movement orders.’ Producers also benefit from a practical component that tests readiness with realistic scenario-based exercises.
The AHEM project is eager to eventually return to the in-person workshop experience, but in the meantime, the team is continuing to offer engaging up-skilling alternatives.
Plan not required, but recommended
The Canadian Pork Council (CPC) website includes ASF planning and preparedness resources for producers.
Hog farmers in Canada are not required at this time to have an emergency preparedness plan that addresses ASF or farm biosecurity in general. However, it is obviously strongly recommended.
“It would be great to have [a mandatory plan requirement], helpful for everyone, not just the farms, but today there is no program or legislative requirements,” said Gabriela Guigou, manager of the National Swine Health Initiative for CPC. “We are taking the lead to update the biosecurity standards and provide a benchmarking tool, and for the emergency preparedness plans, the provincial members are taking the lead.”
Producers are encouraged to contact their provincial pork boards for help creating emergency plans. You can get started by checking out the resources, including training videos, available on the CPC website and on the website of your respective provincial board.
As ASF emergency planning and preparedness continue to evolve, and as the threat of ASF grows stronger, producers must be proactive in taking care of their own operations, with support from their provincial and national boards, veterinarians and other experts. The time to protect your herd is now or never.
Last Friday U.S. Lean Hog Futures reached new contract highs from May to May. A sign that future traders have now realized the huge decrease in pork production is a reality.
June 2022 Lean Futures
October 28, 2021
88.35
March 25, 2022
125.85
The relentless increase of June Lean Hog Futures of 38¢ lb. ($80 per head) is fascinating since all the pigs that will go to market in June were already born by the end of October. The so-called “smart money” didn’t do the Farmer Arithmetic that there were less hogs (year to date -7%). We believe October-December lean hog futures have significant upside with the supply-demand scenario shaping up.
Other Observations
U.S. Cull Sow Prices have jumped over 40¢ lb. in the last few weeks. Last week 500-549 sows were averaging 94.19¢ lb. (75.00-100.49). A 525 lb. sow @ 94.19¢ lb. = $494. Certainly, you can buy a gilt for replacement!
Official U.S. February sow slaughter was 239,200; February a year ago 241,200. Not much change. The latest weekly sow slaughter was 61,929. A relatively high number considering size of breeding herd and continued high sow mortality. We see these numbers as an indication that the U.S. breeding herd inventory is not expanding.
We have seen the U.S. lean hog futures gain $80 per head. A similar path is being followed in Europe. The German Hog Price on February 9th was 1.20 Euro/kg (60¢ lb.). Last week, 1.92 Euro/kg (96¢ lb.).A gain of 0 .72 Euro/kg or 35¢ U.S. lb. Very similar to the U.S. June Lean Hog Future gain of 38¢ lb.
Europe has over 10 million sows, Germany is the second-largest hog producer. Germany is going to pull hog prices higher in all of Europe.
Why is the price jumping? Europe lost significant money per hog for many months. A combination of low hog prices and high feed costs. The one fact of our industry: producers lose money, you end up with less hogs.We expect Europe’s hog slaughter will continue to decrease over the coming months as the sow herd liquidation cuts numbers further.
Europe’s lower pork production and higher hog prices will lead to less pork for Europe to export. This will be supportive of North American hog prices.
Chicken
We all know the price of Beef in stores is extraordinary. Chicken has also seen a big jump.
U.S. Young Chickens
Last week
$155.73
Week ago
$148.92
Year ago
$86.95
February 2022 Avg.
$125.79
Obviously, the Chicken price is significantly higher than a year ago and a month ago.
Weekly Chicken Slaughter
Last week
163.622 million
Week ago
164.363 million
Year ago
166.471 million
Certainly supportive of Pork that Chicken prices are showing significant strength.
Pork
We believe as an industry we continue to miss the opportunity that better tasting Hams and Loins could do for the value of the Pork Cut-out.
Last Week
U.S. Pork Cut-out
109.90
Primal-Belly
198.83
Rib
177.25
Butt
120.40
Loin
100.11
Ham
86.67
About half of the carcass is Loin and Ham. Look at their prices vs. Belly, Ribs, and Butts. It’s shameful that we haven’t seen the reality that pork with better taste due to marbling is what the consumer wants. Put 20¢ lb. on Loins and Hams and we add 10¢ lb. on Cut-outs or $20.00 per carcass. How many of us when we are in a restaurant see a Pork Chop on the menu and wonder how, if we order it, we will be disappointed? Do you think it’s only you? There is a solution to drive demand (per capita pork consumption) that has flatlined for 20+ years. Produce Loins and Hams that taste better. We need to think like marketers.
Pork Commentary, March 21st, 2022 Jim Long, President-CEO, Genesus Inc.
We have been commenting for several months about European record low sow cull prices, low feeder pig prices, and low slaughter hog prices. All leading to massive losses throughout when coupled with high feed prices. We expected a large sow herd liquidation was underway. There is no doubt now there are fewer market hogs in Europe. The one truth on supply-demand and market sentiment is hog prices. The graph below from pig333 shows Germany’s rise.
Summary:
February 9, 2022 – Carcass 1.20 Euro/kg (60¢ U.S. lb.) March 16, 2022 – Carcass 1.85 Euro/kg (93¢ U.S. lb.)
Germany’s market gained 33¢ lb. since February 9th, on a 215 lb. carcass, this is equal to $70 per head increase in 5 weeks. An explosion in prices, and hasn’t stopped yet!
Spain – Europe’s largest producer has seen increases. The graph below from pig333 shows the Spanish Mercolleida pricing.
Summary: February 10, 2022 – Carcass 1.088 Euro/kg (55¢ U.S. lb.) March 16, 2022 – Carcass 1.352 Euro/kg (68¢ U.S. lb.)
A 13¢ U.S. lb. liveweight increase on a 280 lb. pig makes $36 U.S. per head. The Mercolleida pricing system limits weekly price movements up or down. Germany has no such limits. We expect Spain’s price to continually rise.
Why does the European market matter to North America? Europe has over 10 million sows that produce pork that goes into the global pork market. If Europe has less pork and higher prices it will enhance competitiveness of US-Canada-Mexico exports.
Some other market indicators reflecting the explosiveness of the European market:
Germany’s feeder pig prices.2022 • Week 7: 25 kg feeder pigs – 23 Euros ($25.50 U.S.) • Week 12: 25 kg feeder pigs – 58 Euros ($64.50 U.S.) In 5 weeks, feeder pigs more than doubled. No one pays more than they have to.
Germany’s Cull Sow Prices 2022 For 18 weeks consecutive in Germany, cull price was at a historic low of 0.50 Euro/kg. • Week 8: 0.50 Euro/kg – 56¢ U.S. lb. • Week 12: 1.10 Euro/kg – $1.20 U.S. lb. Sow prices more than doubled in 4 weeks. This tells us there was massive sow liquidation and now it has certainly slowed down.
Euro prices tell us lots. Market hogs, sows, and feeder pigs are all jumping higher. The liquidation caused by massive financial losses has cut production and we will see even lower as the liquidation cuts pig numbers further. We expect European prices will surpass record levels.
USA
We do not believe the Lean Hog Futures have any premium in them related to Europe’s massive pork supply decline and hog price increase. It is beyond the vision of most commodity traders.
A week ago, U.S. pork export sales were 38,300 metric tonnes, up 51% from previous week and up 36% above the four-week average. We expect to see US-Canada pork exports to gain strength as Europe’s pork, which was cheaper than US-Canada pork, rises to match or surpass US-Canada price points. Indeed, over the last few months, US-Canada pork exporters have struggled to keep markets.
Summary
Europe’s price increase is certainly a welcome reprieve for producers there. It also will be supportive to US-Canada producers as it will enhance exports from both countries.
We have written for months about our expectation in 2022 that the Three Pillars of the world’s hog production China-Europe-North America will have major production declines in 2022 and that will lead to record high prices. So far:
North America – less hogs/ higher prices
Europe – less hogs/ higher prices
China – waiting for the dog to hit the end of the chain. Can’t have massive financial losses and not less pigs. Producers lose money, you have less hogs. Always have, always will. We expect Quarter 2 we will see a market jump as Europe has experienced. It will happen when few expect, just like US and Europe.
The original Banff Springs Hotel looks majestic on this postcard, circa 1910. The building was destroyed by fire, in 1926, rebuilt, in 1928, and designated a National Historic Site of Canada, in 1988.
Many roads (and rails) lead to Banff (and the Banff Pork Seminar), when it comes to transport corridors, frontier settlement and agriculture industry development.
As the Canadian Pacific Railway (CPR) reached the Bow Valley of the Rocky Mountains, in 1883, workers discovered natural hot springs on the side of Sulphur Mountain. The next year, CPR president George Stephen named the stop on the rail line ‘Banff,’ after his birthplace in Scotland. Rather quickly, CPR executives had a lightbulb moment and saw a bold vision for the entire area.
From the very beginning, the railway and Banff have been intimately connected. Not long after the station was built, CPR took the opportunity to commission the construction of the original Banff Springs Hotel, in 1888, and the site quickly grew into Canada’s best-known mountain destination, bringing in guests from across the country and around the world.
There is no denying that Banff is an exceptional tourist destination, but Canadian transportation history is even more important for Canadian agriculture. Tourism across Canada today generates approximately $40 billion in annual federal revenue, while agriculture comes in at a whopping $140 billion, for comparison. This is thanks mainly to farmers from coast-to-coast who produce crop and livestock commodities, many of which eventually make their way to the Port of Vancouver to be shipped across the Pacific Ocean to Asian marketplaces.
But before they get there, these high-value goods must traverse a forbidding alpine landscape, whether by truck or train. The paths carved through the wilderness over the years cost many millions of dollars but also thousands of lives. It is a legacy of triumph and tragedy that we would do well to remember, for both the good and the bad.
The industry begins its ascent
‘Olds’ Pork Seminar? The very first installment of the Banff Pork Seminar was held in a different location, at a different time of the year, as noted in this announcement published in the April 1972 edition of the ‘Alberta’ Hog Journal, precursor to the ‘Western’ and ‘Canadian’ Hog Journal.
Fast forward to 1972. The Banff Pork Seminar’s roots were laid in Olds, Alberta, northwest of Calgary, where Olds College – a respected agricultural technical institute since 1913 – hosted the first version of the event, with the cooperation of Alberta Pork, the Government of Alberta and the University of Alberta. These long-time partners are still intimately involved today. This year, the Banff Pork Seminar officially reached its half-century milestone, inspiring the advisory committee to settle on the theme, ’50 Years of Knowledge and Sharing.’
Since making the move to Banff, in 1973, the seminar has been held at different venues, but the Banff Springs Hotel, shown here in the Western Hog Journal Spring 1989 edition, has always been a preferred spot.
Normally, the seminar attracts upwards of 800 guests, but this year, only about 200 individuals were welcomed in-person and 400 virtually. Not bad, considering that the spread of the COVID-19 Omicron variant seriously jeopardized the event’s status right up until two weeks before a final commitment was made to move forward with the in-person and virtual hybrid concept. It is the first major pork conference to take place this way in Canada since the start of the pandemic.
Research has always been the driving force behind the seminar. In 1988, a now-legendary man named George Foxcroft was sponsored by Alberta Pork to move to Canada from the U.K. as a research chair at the University of Alberta. He led the Swine Reproduction-Development Program there until his retirement, in 2012, when he became a professor emeritus.
World-renowned swine researcher George Foxcroft was honoured at the 2022 Banff Pork Seminar. He passed away in December 2021.
“George was a global leader in the field of regulating ovarian function and early pregnancy loss, and he was the Canadian authority in understanding reproductive physiology of the pig,” said Ruurd Zijlstra, a researcher at the University of Alberta who has long been involved with the seminar. “Throughout his research career, George focused on maintaining a two-way dialogue with the industry to understand their problems and success. His goal was always to ‘bring research to reality.’”
Each year, Foxcroft’s legacy is honoured during the Banff Pork Seminar with the ‘George R. Foxcroft Lectureship in Swine Production.’ This year was the first time the lectureship was awarded by someone other than Foxcroft himself, after he unexpectedly passed away just over a month before the seminar. The lectureship was established in 2013 to recognize outstanding international pork industry representatives and cover their costs to attend and present at the event. Foxcroft will be truly missed, but his legacy as a leader in the Canadian pork industry will endure.
Canadian pig science and pork trade emerge
Now, flash way back to the early 17th century. According to Trevor Sears, President & CEO, Canada Pork, who presented during the first plenary session of the 2022 Banff Pork Seminar, pigs first arrived in New France (today’s province of Nova Scotia) with settlers who brought the animals to be raised and consumed as a convenient source of sustenance. It took 200 more years, until the mid-19th century, when Canadian domestic pork trade finally took off.
Eastern Canada was already thoroughly inhabited by this time, and to satisfy a growing demand for meat not only in Canada but also in Britain and the U.S., pork packing plants began popping up in the cities surrounding the Great Lakes and St. Lawrence River, earning Toronto the nickname ‘Hogtown.’ This period of time marks the beginning of Canadian international pork trade.
At the same time, settlement in western Canada was actively starting to take place, largely aided by railway expansion. The same infrastructure development that brought people westward would become responsible for enabling a large part of the export system that exists today, with 70 per cent of Canadian pigs and pork ending up in foreign countries. As with many other agricultural commodities in Canada, this globalized reality is the backbone of our commercial industry.
The Lacombe breed was an important Canadian innovation, in 1947, championed by Howard Fredeen. By 2020, the breed had nearly vanished from Canadian farms. Halbern Farms near Lacombe, Alberta, shown here, is one of the few still raising the animals. Fredeen passed away in December 2021 not long after his 100th birthday.
In 1947, the first-ever Canadian-developed hog, the Lacombe breed, was registered as a cross between Landrace, Berkshire and Chester White varieties, treasured for its suitability to the Canadian climate. The breed was created at Agriculture and Agri-Food Canada’s (AAFC) Lacombe Research and Development Centre in Alberta, southeast of Edmonton. The breed’s development was spearheaded by Howard Fredeen – another industry titan who sadly passed away in the week leading up to this year’s Banff Pork Seminar. Like Foxcroft, Fredeen is lost but will not be forgotten.
Domestic and international markets continued to grow throughout the 1960s and 1970s, and by the 1980s, hog farming reached its peak across Canada. Starting in the 2000s, the number of hog farms started to decline dramatically, but production steadily increased. It is a common trend throughout the world of commercial livestock, and it defines our sector today.
Two Banffs but only one Banff Pork Seminar
The Canadian Hog Journal has published a special Banff Pork Seminar edition annually since 2008. This year’s edition will be our 15th.
When CPR president George Stephen decided to name his new western Canadian train stop after his Scottish hometown, it is hard to say whether he knew the settlement would one day eclipse its namesake in terms of recognition and importance to commerce.
Less than a century later, the Banff Pork Seminar would leverage that reputation and blossom into Canada’s best-known pork conference, having carved-in-stone a significant chronological milestone of its own. History has an interesting way of playing out.
Other jurisdictions all over the world raise pigs, process pork and perform important research and extension activities that benefit the global swine sector. Many of these jurisdictions are more populous, more productive by total volume and just as proud of their accomplishments as we are of ours. But the fact remains: there may be two Banffs, but there is only one Banff Pork Seminar.
Eduardo Beltranena presented on feed research, during a breakout session at the 2022 Banff Pork Seminar.
Feed cost is very high now for many Canadian hog producers, in large part due to the 2021 drought across the prairie provinces. This was explained by Eduardo Beltranena of the University of Alberta during the ‘Feeding’ breakout session at the 2022 Banff Pork Seminar. Beltranena conducts research on reducing feed costs for hogs with colleagues Malachy Young and José Landero at Gowans Feed Consulting and Miranda Smit, formerly with Alberta Agriculture, Forestry and Rural Economic Development.
“Feed is 65 to 75 per cent of total production cost and hogs consume 85 per cent of it,” said Beltranena. “Among the most important things you can do are reduce feed energy, include soy or canola expellers instead of liquid oil, immuno-castration, reducing vitamins and trace mineral supplementation, and feed alternative ingredients such as hybrid rye, fava bean and canola coproducts. Savings from implementing these strategies can add up to $22 per pig.”
There are other strategies that reduce feed cost, but they have less of an impact, he suggested. They include feeding phytase instead of mono- or di-calcium phosphate, shipping gilts heavier than barrows, reducing feed particle size, making feeder adjustments to reduce feed wastage and timely removal of suboptimal pigs not to overcrowd hogs prior to first pull, as they near market weight. Together, these actions can typically provide additional savings of $8 per pig.
Increasing feed intake by reducing feed energy
By subtracting feed cost from income per hog, Beltranena’s team found that feed cost per hog is less when feeding a diet representing 2.1 versus 2.4 million calories per kilogram.
With colleagues, Beltranena has conducted several commercial trials reducing the energy density of western Canadian pig diets – diets that are cheaper. They found that by reducing net energy level from 2.4 to 2.1 million calories per kilogram, pigs consumed more feed to maintain caloric intake but weight gain was similar. So, while feed efficiency was lower as a result of feeding reduced net energy diets, overall profit was $10 higher per hog eating cheaper diets.
In terms of feed components, starch propels hogs to grow, and in western Canadian diets, starch comes mostly from cereals. Beltranena explained that with the very high prices right now for barley, wheat and oats, growers have turned to corn from eastern Canada.
“Luckily, there was a bumper corn crop in Quebec and Ontario,” he said. “This has really saved the western Canadian pig industry.”
However, he urged pig producers to consider feeding alternative, locally grown feedstuffs and industrial co-products. New European rye hybrids yield about 30 per cent more than conventional rye and 20 to 40 per cent higher than Western spring wheat. Fusarium and ergot disease are lower in these fall-planted hybrids, because they produce vast amounts of pollen and flower earlier. They are, therefore, not challenged by lack of summer rainfall, making it more difficult for fungal spores to enter the stigma and affect grain formation when crops are stressed.
Beltranena and his colleagues have done a trial with hog diets, replacing one-third, two-thirds or all the wheat with hybrid rye grain. There was no effect on feed cost per hog or feed cost per kilogram gain, nor was there a reduction in dressing percentage, because rye has fermentable soluble fibre instead of woody-type, insoluble hull fibre.
“Rye can completely replace wheat in hog diets, but we recommend including an enzyme mix if rye replaces more than 50 per cent of wheat in diets,” he said. “In our trials, we added an enzyme cocktail to all diets and canola oil to increase the energy level of the rye diets. That increased diet cost, but even so, profit per hog was higher at the high rye inclusion level with the enzyme cocktail.”
Regarding sources of feed protein, Beltranena noted that canola and soybean meal costs are high, but pulses – particularly yellow peas and fava bean – remain important alternative protein sources for western Canadian hog producers. Pulses contribute about twice as much starch as protein, so they price into diets effectively. He added that dried distillers’ grains with solubles (DDGS) from both wheat and corn also provide more available phosphorus than intact grain. Also, camelina and hemp cake may represent economical protein and fat sources in the future.
Beltranena also indicated that, while the cost of the immuno-castration vaccine Improvest is equal – providing a feed saving of around 15 kilograms per male pig – there are additional benefits to producers. These are four to eight per cent faster gain to market weight, no cryptochirids, greater pig livability, lower dressing percentage because of the testes remaining intact, but greater carcass weight. Shoulder, loin and ham weight increase, reducing backfat and belly fat. He pointed out that the treatment of gilts with Improvest is new, allowing them to grow more like barrows after the second injection, eating more but getting to market weight sooner.
Other actions to reduce costs
Beltranena was recognized during the second plenary session of the Banff Pork Seminar as this year’s recipient of the George R. Foxcroft Lectureship in Swine Production. Foxcroft passed away in December 2021. During his own presentation, Beltranena honoured Foxcroft, his long-time mentor and friend.
Among other more minor feed cost reduction strategies, Beltranena indicated producers could regularly check if feeders need adjustment.
“Feed wastage of two per cent equals 15 tonnes of feed falling through slats into slurry pits for 1,000-head barns per year,” he said. “Reducing particle size by 100 microns improves feed conversion by more than one per cent. That’s $1 feed saving per hog. Try a screen hole that’s down a size to what you’re currently using. Watch for feed bridging as it may occur in bins and feeders, or flex augers may have difficulty handling slightly more powdery mash.”
Pork Commentary, March 7th 2022 Jim Long, President-CEO, Genesus Inc.
Markets were rocked by Geopolitical issues this past week. Lean Hog Futures declined. Corn – Soybeans jumped. Oil – Gas jumped. Stock markets fell.
Our Observations
Despite Lean Hog Futures falling near $5, Friday the Iowa – S. Minnesota Cash Lean Hog price jumped $8.95 to $105.37. Talk about prices going separate ways. Future fantasy market down almost $5 – real market of actual hogs up $9.
Feed prices are increasing significantly. Talk about inflation. Both Ukraine and Russia are large grain exporting countries. Can grain move? Will crops in Ukraine get planted? Things moving fast and no one knows.
U.S. market hog numbers continue to run below year ago with 7.8% less year to date. Hog weights 0.5 lb. heavier. Hogs not backed up.
U.S. Pork Exports are down 21% year to date. Mexico exports have increased 43%, the only country year to date not a negative. Mexico has imported almost 50% of U.S. Pork Exports, 102,000 MT of 206,000 MT total. With lower U.S. lean hogs going to market it is expected there to be less pork to export. U.S. consumer buying power is greater than all.
With U.S. Pork Cut-outs Friday $1.03 and Lean Hog prices near that number, Packer Gross margin doesn’t look good. We expect Pork Cut-outs will need to increase for Lean Hog prices to go higher.
Europe
European Commission last week released data indicating the European sow herd has declined 4% (-400,000) to 10.8 million head. This is from December 2020 to December 2021 – a reflection of the financial losses incurred. The biggest losers are Poland -20%, Germany -7%, Denmark -3%, France -4%. We expect the financial losses since December 1st have decreased further the Europe sow herd with another 150-200,000 as losses continued from $20-50 per head until now. We also expect that the sow losses are underestimated as inventory reports always seem to miss fast inventory change either expanding or contracting. Recently USDA missed the sow inventory decline in the USA for more than one quarter.
A sign of European Commission overstating inventory is the rapid price increase of slaughter hogs in the last few weeks. For example, on January 27th Spain’s market was 1.03 Euro/kg, March 3rd 1.23 Euro/kg. At 1.03 losing $30-40 per head. The March 3rd price will decrease losses to $10-20 per head. Spain feed prices, like the USA, jumped last two weeks.
To us, the only reason hog prices have jumped is Europe’s supply is down, a reflection of sow liquidation. We understand Gross Packer margins are not good, a sign of Packers chasing a lower number of hogs.
Markets
We have written several times that in our opinion the three major swine production blocks in the world: North America, Europe, and China have production declines at the same time creating an unprecedented supply decline which will lead to very strong prices.
So far North America already seeing production declines and higher prices. Out of nowhere, Europe prices jump 20% in a month. We expect the front end of even lower production. China prices are still dismal with losses continuing at $50 per head. We expect all of a sudden in the second quarter China prices will jump as supply of hogs decline from liquidation. At that point over 75% of the world’s production will be lower. We expect strong prices for a sustained period.
This coming week we will be speaking to swine producers at the annual Kalmbach Feeds Agribusiness Conference in Columbus, Ohio. We will report our observations next week.
Last week we attended the Illinois Pork Expo held in Springfield, Illinois. Our observations.
Illinois is the third-largest U.S. state with sows of 590,000. Iowa and North Carolina are first and second in sow herd numbers.
The Expo had meetings beginning in the morning then the trade show started at noon. This was followed by a reception buffet held in the middle of the trade show area. The concept worked well as everyone stays and socialize in one area. We believe it is really important that the social aspect of our industry is encouraged. As an industry, we have less people selling to less people, with the venues to meet others in our industry getting more limited. Pork shows are one of the last venues to get that done. Illinois Expo format goes a long way to help facilitate the challenge. We want to recognize and thank The Parks Companies for sponsoring the evening reception.
Illinois has two major hog-producing groups that make up the 590,000 sows: Carthage Veterinary Service and The Maschoffs. They are both World Mega Producers.
Illinois Expo continued to reaffirm our observation, there are next to little new sow barns being built.
PRRS and PED are active in Illinois. Lots of empty finishers. There are a lot fewer hogs than last year.
We appreciate some of our readers who stopped by our booth to discuss our commentary. Some quite passionate. When you are being compared to the late Rush Limbaugh and his say as it is approach, the bar has been raised.
Labor issues for producers and packers are real with most looking for more people to reach proper staffing levels. The lack of labor is hurting productivity levels for producers and packers. This is a reality not only in Illinois but all over the USA – Canada.
Prolapses, Dead Sows, High Wean to Finish Mortality are all issues facing Illinois producers like everywhere else. All factors cut productivity and numbers of hogs to market.
Other Observations
The Lean Hog Futures dropped from contract highs as the Ukraine – Russia conflict rocked the market.
The real market end of the week had National Daily Base 53-54% 98.56 lb. and USDA Pork cut-outs 113.32. Both holding strong – a reflection of supply-demand.
Two integrators announced in the last couple of weeks their exit from producing their own genetics. The Maschoffs and Olymel, a major packer in Canada, both have announced they are ending their independent genetic production. What this confirms to us is that if you are not a dedicated global genetic company you don’t have enough critical mass and technology to make it a worthwhile venture. At Genesus we only do swine genetics, we are not a packer, feed company, chicken breeder, cattle breeder. We are all in on swine genetics. Everyday make a better pig and get it sold. Our risk mitigation is doing business in 38 countries and genetic production in 11.
10 – 15 years ago at the Illinois Pork Expo there probably were 15 swine breeding stock exhibitors. This past week there was five that matter. The same five that are in most of the world today. It’s been a war of attrition, continually get better or die.
Summary
Illinois Pork Expo dialogue reaffirms our belief in the lack of hogs going forward. The multiple effects of high feed prices, labor issues, disease, smaller sow herd, prolapses, generational change, lack of new sow barns, are all adding up to less hogs. Prices will stay strong relative to history for at least a year.
Hog Markets Go Sideway 
This past week we saw continued lackluster movement in Cash Hogs and Pork Cut-Outs.
Observations
Packers buying hogs are losing money. This is tempering their desire to be further aggressors for slaughter numbers.
We understand pork demand is historically soft just before Easter. Easter is over in a week.
We had a bullish March Hogs and Pigs Report confirming there are less hogs year over year in the foreseeable future. Despite this verification, Lean Hog Futures declined in the $5 range. Go figure, Chicago = Las Vegas with no rules. Same sharpies had June Lean Hogs in the 80’s last fall. We expect Lean Hogs to rebound into the 120s, every packer is short hogs going forward. We will see plants with dark days. No point running shackles with no hogs in them.
In the recent April USDA Supply and Use Report the USDA is projecting 2022 Pork Production.
A drop in U.S. production of 1.2 million lbs. from 2020. No wonder the hog price is going to be higher.
April USDA projected Red Meat (Beef-Pork) plus Poultry for 2022
No doubt less Protein for an ever-increasing domestic and global market.
Like all projections, things can be fast-changing, the USDA is projecting this past week eggs at $1.57/dozen for 2022. Large eggs have gone from $1.40/dozen to $2.60 in a week as millions of birds have been exterminated for Avian Flu.
As of this past Saturday, 24 million chickens and turkeys have been lost to Avian Flu. If it ever gets into the breeder flocks, already high chicken, turkey, and egg prices will explode higher. In the U.S. producers who get Avian Flu receive financial compensation when the birds are eradicated.
As we wrote earlier, bullish Hogs and Pigs Report and Lean Hog Futures decline. The USDA came out with what is termed a bearish Corn Report and futures went higher! We understand the issue of Ukraine’s limited ability to export and plant questions. What we wonder is where is the corn demand coming from, certainly not from increased global poultry and livestock production. Everywhere we look whether it be Europe, North America, or Asia we see less production either here now or on the horizon.
In China, the preliminary first-quarter financial results are coming out for the publicly traded swine companies. It appears billions of dollars further losses in the first quarter of 2022. The losses China’s producers are having are leading to sow herd liquidation. We expect not if but when China’s hog prices takeoff when the results of the liquidation lead to significantly smaller hog numbers. This will lead to China looking for pork imports but less imports of corn-soybeans. You don’t feed what you don’t have.
Sow Mortality
PigCHAMP is a Globally recognized swine database system based in the USA. This database reflects the issue of sow mortality in our industry. Let’s look at the trend for 2021 PigCHAMP Average of 292 farms.
It’s not hard to see the big jump in sow mortality in the U.S. over the last few years. The prolapse problems of the leading supplier of Genetics in the U.S. cannot be underestimated in the mortality increase. In Canada, mortality is significantly lower. The major genetic supplier in the USA has a much smaller percentage of sales in Canada. Genesus is based in Canada.
What is the cost of a dead sow? A few months ago, the SMS part of MetaFarms put out their calculation of loss per sow as you can see below. We thought it is interesting to update to current market conditions.
SMS Calculation from a few months ago
New Calculation for current market conditions
Big money at $1,500 per dead sow. On a 2500 sow unit a 1% change in annual mortality is 25 x $1,500 = $37,500, 5% is $187,500. It’s Simple Farmer Arithmetic but it is real money. With the U.S. average at 14.86% sow mortality, means half is over that. We have seen no results from the main genetic supplier that they have many herds under 15%. How long will producers tolerate the financial burden of dead sows? Business is about choices. Dead Sows Cost Real Money.