Wednesday, May 1, 2024

Pork producers support student success

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By Andrew Heck

Farming and family go hand-in-hand. But for young people from non-farm settings, breaking into the sector can seem daunting.

Farming is often a family affair. Across Canada, you can find generational family farms involved in any commodity dating back decades or centuries, depending on the region of the country. For many of these families, their legacies are an integral part of their identity, of which they are extremely proud.

While no-one would doubt the depth of this tradition, for others, agriculture is an industry entered from the periphery. With each passing year and each passing generation, Canada, like many parts of the world, becomes increasingly urbanized. Coming from an urban setting, it can be especially difficult to break into the industry directly, and often, a leg-up is needed on the side of education, as a starting point.

Getting a leg-up can prove challenging, depending on the field of interest, but for undergraduate students attending the University of Alberta, the course ‘AN SC 101 – Principles of Animal Agriculture’ is one unconventional avenue through which the Canadian agriculture sector is supported by individuals who may not seem to be a natural fit but grow an appreciation for the industry just the same.

Ag education helps inspire science students

‘The Game of Farm Life 2.0’ is the current project that virtually connects ‘Principles of Animal Agriculture’ students with Alberta farmers.

Frank Robinson, Professor, Poultry Production and Physiology, University of Alberta, takes to heart the mission of bringing agriculture to the young, wide-eyed masses. The university’s Winter 2021 semester for Principles of Animal Agriculture is the forty-fifth time Robinson has taught or co-taught the course over three decades, currently alongside Martin Zuidhof and Leanna Grenwich.

This year, the course features a group project component, ‘The Game of Farm Life 2.0,’ during which student cohorts must propose a hypothetical farm design, helping them gain knowledge of farm start-up requirements, practical application of animal husbandry, technologies, breeding, nutrition, housing, health and marketing.

To guide the students’ thinking, the course features a diverse group of producer representatives from pork, beef, dairy, poultry, eggs and other ruminant and farmed game commodities. This year’s roster, among other producers, included Alberta hog farmers Scott Hyshka of Sunterra Farms, near Acme; Laurie Fries of Sunhaven Farms, near Wainwright; Ken Hamoen of Sand Ridge Farm, near Barrhead; Martin Waldner of Hartland Colony, near Bashaw; Alastair Bratton of OlyPork, with farms in central Alberta; and Chris & Jessica Fasoli of The Bear and Flower Farm, near Irricana. Each producer offers a glimpse into different angles of the Canadian pork sector, from independents and integrators to contracted pig production and farmgate sales.

On eight consecutive weeks throughout the semester, each student cohort was assigned at least one producer representative per commodity, with whom the cohort met virtually.

“In the past, I would connect students with two or three producers, and we would bring the entire class to those farms to learn about their operations,” said Robinson. “While COVID-19 has created a lot of challenges in academia, for this course, we have the benefit of now connecting to dozens of producers and individualizing interactions, which is something we weren’t able to do before.”

On-farm visits come with a host of logistical challenges, including travel time and costs, aligning schedules and enforcing biosecurity, but the virtual format has the benefit of negating those considerations, in addition to creating digital copies of presentations and conversations, which are recorded using videoconferencing software.

Today’s students, tomorrow’s leaders

From the outside looking in, many animal science students have hopes of eventually becoming companion animal veterinarians, but Robinson’s course helps expose these students to other potential lines of work in livestock.

“A lot of these students come from the city, and they want to work with dogs and cats,” said Robinson. “Some of them have never even thought about agriculture, but when they experience what’s out there, some of them realize this is a lot more interesting and practical.”

One of Sunterra Farms’ barns in central Alberta. Manager Scott Hyshka was one of the producer mentors involved in this year’s project.

Scott Hyshka is the manager of two Sunterra Farms barns near Acme – 100 kilometres northeast of Calgary. Sunterra’s farrow-to-finish barns supply pigs for Sunterra Meats, a slaughter facility in nearby Trochu that sells much of its products through Sunterra Market locations in Edmonton, Calgary and, most recently, Red Deer. Sunterra’s farrow-to-wean and nursery barns sell live pigs into the U.S., while Sunterra also exports some pork primals and high-end finished products to select Asian markets.

Amanda Hardman is a first-year Bachelor of Science student majoring in Sustainable Agriculture Systems. Her cohort was assigned to work with Hyshka and other producers to help design their fictional farm.

“Scott has been absolutely amazing,” said Hardman. “I’ve been involved with 4-H, so I have some familiarity with livestock, but no-one in my group grew up on a farm, and none of us knew anything about pigs.”

Hardman grew up on an acreage in Parkland County, west of Edmonton. Her mother worked with Alberta’s agriculture ministries for three decades, and some of her father’s family is still involved in beef cattle, but a love for agriculture and desire to pursue a career in the field has driven Hardman despite a lack of much first-hand experience.

“This project has been an absolute blast. It’s the best class I’ve ever taken,” she added. “The instructors still push you academically, but they want you to have a good time. And the producers have all been very helpful and open to all of our questions.”

Some of those questions for Hyshka centred around pig breeds, equipment, nutrition, manure management and other topics necessary to consider for the sake of the project. Hardman’s team is all ears, as Hyshka is more than willing to speak to his expertise.

“Frank did a great job of breaking down these course learnings into modules that the students can work through,” said Hyshka. “Real-life advice can be hard to come by without having the right connections, and I am glad to have been able to assist in the mentoring process.”

Laurie Fries is a regular contributor to initiatives supported by Alberta Pork. Her leadership includes an eagerness to mentor students.

Laurie Fries is a barn manager with Sunhaven Farms, near Wainwright – 200 kilometres southeast of Edmonton. Sunhaven supplies pork for Federated Co-op grocery stores across the prairies and for Thrifty Foods, a B.C.-based subsidiary of Sobeys. The organization belongs to a larger producer group with barns across east-central Alberta.

Fries served as a mentor for Cory Commandeur’s group. Commandeur is a is a first-year Bachelor of Science student majoring in Animal Science. While more than half of his classmates are not from agricultural backgrounds, Commandeur grew up on a third-generation beef farm near Mayerthorpe – 150 kilometres northwest of Edmonton.

“A lot of classes have hundreds of students following virtual lectures, but in this class, having one-on-one time with producers has been very helpful,” said Commandeur. “Our group has done a lot of independent research, and we were able to follow up with Laurie on some specifics related to pig production, to ensure the theoretical aspects of our project were also practical.”

For her part, Fries takes an enthusiastic approach whenever she has the opportunity to become involved with learning.

“I believe these sorts of projects are important for the ag industry as a whole, as it gives the students real-life connections and first-hand information from the farmers and ranchers that do this every day,” Fries said. “As a pork producer, it was a valuable experience, because people don’t often get to see what we do, and it was exciting to give a virtual tour. It also helps these students connect to the farm faces that actually produce the food that they see in the grocery store.”

Industry benefits from sharing knowledge

Aside from the obvious student impact, the Canadian pork sector too benefits from internship arrangements and other educational pursuits. Pork producer organizations across Canada have a mandate not only to serve the financial interests of the producers they represent but also to give back to the institutions that keep the industry fed with talent and support.

“I used to struggle with connecting to pig producers, as I didn’t have very many connections that way,” said Robinson. “Alberta Pork was instrumental in making that part of this program a success. Without their insight, we wouldn’t have had the involvement of such a great group of producers, which speaks to the critical role of producer organizations in this process.”

For years, Alberta Pork has invested itself in outreach programs, most notably through its partnerships with the University of Alberta’s Department of Agricultural, Food and Nutritional Science, but also with the University of Calgary’s Faculty of Veterinary Medicine, in addition to animal husbandry programs at other post-secondary institutions in smaller population centres across the province.

Ag education inspires the young and the young-at-heart, including the Alberta Pork Board of Directors, who toured the newly renovated Pig Science Centre at the University of Alberta, in April 2020.

The University of Alberta’s farm campus in south Edmonton features the Swine Research and Technology Centre, attached to the recently renovated Pig Science Centre, which was opened in 2003 and routinely hosts tours for students in Kindergarten through Grade 6, in alignment with the Alberta Education science curriculum.

In addition to the Pig Science Centre, for several years, Alberta Pork has supported University of Alberta students completing their capstone projects – arrangements between the producer organization and university with a focus on experiential learning and skill development for students that is geared toward real-life problem-solving. Students design projects with direction from Alberta Pork, helping the students build their portfolios while also helping Alberta Pork generate information for producers. In at least one case, a capstone student has gone on to work a paid position with the organization.

With visits to locations like the Pig Science Centre, grade-school children grow into young adults ready to study animals in-depth, and with capstone projects helping round out post-secondary learning, there is a very real possibility of translating that learning into long-term career options that make up the broader Canadian agriculture industry. Not only in Alberta, but across the country, the value of such partnerships is being realized.

The future of ag education in Canada

While student-farmer internships have a direct benefit for students exploring the possibility of working on-farm, the agriculture sector reaches far beyond the barn. This matters not only in the conventional value chain capacities of production, processing, transportation and retail, but also in support services such as research, administration, communication and education – all of which are vital components to industry sustainability.

Much is made about sustainability in agriculture. For the Canadian pork sector, that often refers to environmental or economic sustainability. But the human resources angle, perhaps, is even more important to long-term success. For the future, it seems certain the industry must continue making concerted efforts to attract talent from non-traditional backgrounds. Education and outreach will be a crucial part of that recruitment initiative.

U.S. Slaughter Weights Continue to Decrease

Pork Commentary, May 17th , 2021
Jim Long, President-CEO, Genesus Inc.

U.S. slaughter weights continue to decrease. A week ago Iowa/South Minnesota live weight market hogs were 283.9 lbs., down 2.5 lbs. from two weeks before. A year ago, during pandemic, backed up hogs averaged 295.1 lbs. Year over year same week 11.2 lbs. lower.

U.S. Hog slaughter year to date as of last Saturday 48,851,000; a year ago 47,995,000. Year to date plus 856,000 (1.8%)

When we do farmer arithmetic what current weights and number of hogs slaughter means this is our calculation:

  • 11.2 lbs. year over year weight difference ÷ 2.2 lb. a day estimated gain = 5.1 days of gain.
  • last week slaughter 2,395,000 ÷ 7 days = 342,142 hogs per day.
  • 342,142 hogs per day x 5.1 days = 1,744,928 hogs (our estimate of what 11.2 lbs. difference is in total hogs)

Farmer Arithmetic:

1,744,928
– 856,000
________________
808,928 (hogs)

We estimate, when calculated weight difference, are at about 808,928 fewer hogs to be slaughtered at this time when we factor 11.2 lbs. lighter hogs then a year ago. Two further points:

  • A year ago some rations were in place to slow hog growth no such thing this year.
  • Also there has been no hot weather to slow growth year to date.

Other Observations

We sold hogs Friday for $115.60 base. U.S. Pork cut-outs closed at $115.70. Not much spread is it?

Had some Packers point out to us last week on producer comment that Packers had margins in processing beyond cut-out calculation. Their point was this extra margin opportunity is being limited by lack of labor to get the processing done. We were told by four different Packers they each were short hundreds of employees.

The U.S. government policy to pay people to stay at home during the pandemic is certainly being blamed for this labor shortfall. This is not only bad for Packers but also Producers, as more money in a short for hogs market is being limited by the labor shortage.


U.S. Pork cut-outs at $115.70 lb. pale compared to Choice Beef cut-outs $316.14 lb. We still find it amazing that our industry fails to comprehend the benefits of better tasting pork. Look at the Beef price. Why do consumers pay more for Beef? Taste.

Friday May 14th U.S. Pork Cut-outs

 Per lb.
Primal Rib 275.08
Primal Belly 165.04
Primal Butt 139.22
Primal Loin 112.99
Primal Ham 81.42

Loin and Hams are about 50% of carcass. The destruction of taste by making pork too lean can be seen in lower price for these two products. Consumers vote with their money – Ribs, Bellies and Butt all with more marbling lead the cut-out prices. Consumers pay for taste. The foolishness of the Other White Meat program that encouraged producers to make pork like Chicken can be seen in consumer preference.

Sow Mortalities

A funny reader last week commenting on high sow mortalities and epidemic of sow prolapses came up with name for the phenomenon – Prolapses Is Coming (PIC)

Out of China

Confusing info. Some official reports have no decrease in production. On the ground reports indicate a 20-50% decrease from second wave of ASF. We expect the on the ground reports to be the direction.

Hog Prices in China have continually decreased over the last few weeks. We expect this is from liquidation of hogs triggered due to ASF. Scenario – kill them at whatever weight before they die.

On January 13th China’s hog price was $2.52 U.S. liveweight a lb. On May 5th the price was $1.54 U.S. liveweight a lb. A drop of almost $1.00 a lb. or $250 on a 250 lb. hog.

To keep in perspective $1.54 U.S. lb. is still a very good price but a $250 per head decrease is huge on a country wide hog inventory reported to be around 415 million head. It’s over $100 billion U.S. dollars decrease in hog market value.

When you look at publicly listed swine companies in China the debt load undertaken over the last two years is massive. Most if not all have added billions of U.S. dollars in debt. The huge drop in inventory value, high cost of production ($1.25 U.S. lb. or more), dead pigs from ASF, and debt load could lead to some scenarios similar to the U.S. in 1998, when several debt loaded fast expanding companies ended up with new ownership.

We are a history major. We believe history repeats. There will be like USA 1998, winners and losers.

U.S. Pork Exports Record High

Pork Commentary, May 10th , 2021
Jim Long, President-CEO, Genesus Inc.

Jim Long's Pork Commentary

March U.S. Pork Exports were record large at 294,724 metric tonnes (mt), up 1% from last year and set a new value record at $794.9 million (up 4%). A true reflection of the global demand for pork despite a pandemic ravaging many economies.

Mexico year to date has imported 193,028 mt, up 12% from a year ago. This despite the Covid crisis hammering the Mexico economy.

Mexico is the second largest U.S. pork market year to date at 14,000 mt less then China. Mexico’s hog market has been on fire. A week ago, the hog price was 42.62 pesos/kg or 95.33¢ U.S. liveweight a lb.

In our opinion the Mexican hog price that is reaching all-time highs and the large pork imports from USA despite the ravages of the pandemic is a reflection of the contraction in Mexican Pork Production. A year ago, Covid crashed the hog market in Mexico. There are few if any statistics to confirm this but we believe this led to a large decrease in Mexico’s sow herd. Now high feed prices will restrict any expansion just as it will in much of the world.

In the near future we expect Mexico’s hog price will be at least 10¢ U.S. lb. higher than the U.S. and large U.S. pork imports will continue to fill Mexico’s production shortfall.

Other Observations

China

China 15 kg feeder pig price is averaging $250 USD a reflection in our opinion of the rapid sow herd decrease December-March.

Sow Prolapses

Last week we wondered re the world’s largest swine genetic company issues with sow prolapses. It was interesting the questioning we got from some of their customers from different countries. With most swine organisations being insular its eye opening when they hear of a widespread issue, this leads them to believe this is unique to them.

Gross Packer Margin

Last week we wrote about Gross Packer Margin being squeezed. We received the following from one of the owners of a top 25 U.S. producer.

“Please remind Jim that most Packers have a lot of additional margin in their business from the offal, value added and further processed pork that us Producers are selling them. Check out the attached EMI chart! Let’s be sure the Packers know that we Producers know they are not actually losing money even at today’s high hog prices!! We are currently simply sharing some of the overall value!”

This letter and information we believe is a reflection of many producers sentiment. There is certainly a degree of resentment that while Packers Gross Margin was upwards of $50-60 per head producers were losing at unprecedented levels in 2020. Most producers realize it was capitalism at work but it certainly didn’t create a sense of shared partnership or misery.

We expect the pendulum is swinging to the producers. Last week DTN calculated Gross Packer Margin just over $20 one of the lowest spreads in a long time. With $7.00 corn, cost of construction, and banker attitudes, we expect to see continued erosion in the sow base; coupled with strong pork demand (domestic-export) hog prices will stay strong. We believe lean hog futures in the fall and into 2022 are below what lean hogs will be bringing. Today we are breeding hogs to be marketed first quarter 2022 and nothing is happening to increase production in our opinion.

More than 1,000 UK breeding pigs flown to China

Picture and text below from article written in Pig World, illustrates the recent shipment of 1,030 Genesus pigs to China from the UK.


More than 1,000 breeding pigs from a Northamptonshire farm made the 7,000-mile journey to China last week.

The pigs from Bridge House Farm, 2020 National Pig Awards Indoor Producer of the Year, were transported on behalf of Canadian breeding company Genesus, the largest independent producer of purebred swine globally, with registered populations of Landrace, Yorkshire and Duroc pigs.

A total of 1,030 purebred breeding pigs made the journey from Stansted Airport (STN) to Chengdu Shuangliu International Airport (CTU) in a Boeing 747-8F aircraft on Tuesday, April 27.

Ups and downs of Quebec pig pricing

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By Bijon Brown

Editor’s note: Bijon Brown is the Production Economist for Alberta Pork. He is currently collecting and analyzing cost and pricing data to improve producer success. He can be contacted at bijon.brown@albertapork.com.

When the Régie des marchés agricoles et alimentaires du Québec – the body that oversees hog pricing in Quebec – renewed the hog marketing agreement between Les Éleveurs de porcs du Québec (Quebec Pork) and the province’s packers in April 2019, the decision to include whole carcass values, cutout values and other premiums into the final price was heralded as a positive step toward producer-packer equity.

Over the course of the next two years, pig prices in Quebec have been observed with a great deal of interest by producers in other provinces, namely western Canada. When the marketing agreement was most recently renewed, many producers on the prairies were being paid decade-low prices for their hogs, so they began to ask, ‘Why not here too?’

Understanding how the Quebec pig price is broken down and how it compares to western Canadian contracts is key to determining its hypothetical effectiveness for producers outside of Quebec, using recent market data to demonstrate its application.

Breaking down the Quebec price

Although the Quebec price is not available to western Canadian producers, there is value in knowing how this price is determined and how it measures up to prices in western Canada.

The centralized marketing system in Quebec allows for a global price to be computed, and this is the price all packers in that province apply to their gird adjustments. This global price, like in the OlyWest 2021 contract, is a blend of the U.S. Department of Agriculture’s (USDA) national price, using the whole carcass report (LM_HG201) and the pork cutout value report (LM_PK602). From these reports, a U.S. window price is created, from which a Canadian window price is derived. Specifically, the U.S. window price is computed from a series of conditions:

  • If the ratio of the national price (LM_HG201) to the pork cutout value (LM_PK602) is less than 65 per cent, then the ratio is kept at 65 per cent, which means that U.S. window price is 1.38 times the national price (0.90/0.65 multiplied by the national price).
  • If the value of the national price (LM_HG201) is less than 90 per cent of the pork cutout value (LM_PK602) but greater than 65 per cent, then the U.S. window price is 90 per cent of the pork cutout value.
  • If the value of the weighted national price (LM_HG201 plus adjustments) is between 90 per cent and 100 per cent of the pork cutout value (LM_PK602), then the U.S. window price is the national price.
  • If the value of the weighted national price (LM_HG201 plus adjustments) exceeds the pork cutout value (LM_PK602), then the price used is the pork cutout value.

To establish a Canadian window price, the U.S. window price in U.S. dollars (USD) is adjusted by the exchange rate, U.S. and Canadian carcass yields and pound-to-kilogram conversion, which results in a price reported in Canadian dollars (CAD) per 100 kilograms (cKg). A CAD $2/cKg premium is added to arrive at the Quebec global price.

Table 1 shows an example of how hogs are priced in Quebec. Two of the most significant drivers of hog pricing variations across Canada are the dates and contents of the reports used in the pricing formulas. In the Quebec price example, reports dated March 15, 2021 will generate the price for March 17, 2021, while western Canadian contracts may be based on average prices of the previous week (Monday to Friday, or Friday to Thursday).

Table 1

Even though some major Canadian contracts use the USDA’s whole carcass report (LM_HG201) for the U.S. national price, those packers use different components of that report in their computations. The Quebec formula uses the weighted average of the negotiated price and the ‘Swine’ and ‘Pork Market’ formula categories in the report. While certain packers may weight the price on the head count of the different categories, the Quebec price is weighted on the total carcass weight (head count multiplied by the average carcass weight).

The cutout value is the pork carcass price reported on March 15, 2021: USD $102.44/100 lbs. The ratio of the national price to the cutout value (88 per cent) determines the U.S. window price. Since the ratio falls between 65 and 90 per cent, the U.S. window price is 90 per cent of the cutout value: USD $92.20/100 lbs.

The next step is to convert the U.S. price to a Canadian price. Adjusting for the relative U.S.-Canadian yield, imperial-metric conversions (from 100 lbs. to cKg) and the USD-CAD exchange rate, the Canadian window price of CAD $234.65/cKg is computed. The quality premium of CAD $2/cKg is then added to arrive at the Quebec global price of CAD $236.65/cKg for March 17, 2021.

The reported final Quebec global price is not necessarily the price paid to producers, as this price is initially discounted and reimbursed depending on the quality of the pig.

In Table 2, the Olymel Plus 13-week average index of 111.7 is used. In Table 3, assume the producer is on the 261 Quebec Quality Grid. If the producer’s hog optimally fits the grid, an index of up to 115 can be recouped for yields between 59.6 per cent and 61.79 per cent, and weights between 87.5 kg and 119.9 kg. This means the perfect hog carcass would receive a price of almost CAD $244 (CAD $211.86 multiplied by the 115 index). However, any hog that weighs above 120 kg or below 87.5 kg, or yields less than 59.59 per cent of meat, will be significantly discounted from the Quebec global price.

Table 2
Table 3

Comparing the Quebec price to western Canadian prices

Quebec Pork publishes the daily global price on its website, allowing web visitors to see the posted price of all the packers in the province, including all grids and 13-week average indexes. Quebec Pork’s website is not only a hub for current data but historical data too. Data for the week of March 15 to 19, 2021 is shown in Table 4. The global price trended upward slightly over the week and averaged around $232.

Table 4

OlyWest prices for this week under review were calculated based on reports from the previous week (March 7 to 13, 2021). The average price was just under $240 and $227 per hog for the OlyWest 2020 and 2021 contracts, respectively. For the Maple Leaf Foods Signature 4 contract, the review week starts on Friday, March 12 as opposed to Monday, March 15 for the Olymel contracts. Therefore, Friday, March 19 begins a new week under the Signature 4 contract. For Monday to Thursday during the week of March 15 to 19, 2021, the price was $221.04, while Friday’s price jumped to $226.26, with the start of the new contract week. The average across Monday through Friday was $222.08.

In western Canada, the index value used to adjust prices falls within lower ranges, from 107.5 to 114.89. In Quebec, this value varies for each plant as well. For illustration purposes, compare this to the Olymel Plus price in Quebec. The 13-week average index was 111.7. Therefore, a hog with a lower index will receive less than the global price. In this example, however, it is assumed that the representative hog on the Quebec grid receives the average index.

Producers on the OlyWest 2020 contract would have done much better in the week of March 14 to 20, 2021 compared to having the Quebec price. The revised OlyWest 2021 contract sits around $6 less per hog than the Quebec price and more than $12 less per hog than the OlyWest 2020 contact. The Maple Leaf Foods Signature 4 contact sits at approximately $17 less per hog than the OlyWest 2020 contract, $9.50 less per hog than the Quebec price and $4.50 less per hog than the revised OlyWest 2021 contract.

However, the revised OlyWest 2021 contract has something that the Quebec price, OlyWest 2020 and the Maple Leaf Foods Signature 4 contracts do not: a (quasi) floor base price set at $160/cKg. Barring a significant drop in the cutout price, a hog receiving the average grid grade would not fall below $177 (with bonuses) on OlyWest 2021.

Quebec price includes no premiums or freight coverage

An obvious disadvantage to the Quebec price over western Canadian contracts is that no additional premiums are available, other than the $2 premium that was built into the global price calculation. There is also no compensation for transportation costs.

For producers whose transportation costs were more than $6 per hog, even on the OlyWest 2021 contract, they would have done better in the week of March 14 to 20, 2021 than Olymel Plus producers in Quebec, who would have still paid their $6 for trucking. Based on estimated calculations, the average price differential (the difference between the prices, also known as the ‘price spread’) would have been $5.96 between the Quebec price and the average OlyWest contract (using a simple average of OlyWest 2020 and 2021) between 2016 and 2021. This is shown in Figure 1 using the average compensation for transportation under the OlyWest contracts.

Figure 1

In addition, the spread between the Quebec price and Maple Leaf Foods Signature 4 contract is even more pronounced. Again, transportation would need to be deducted from the Signature 4 contract for an ideal comparison. This would increase the average spread from more than $12 to more than $18 between 2016 and 2021.

As a result of having a strong association with the pork cutout value (LM_PK602), the Quebec price has had the most appeal. However, if cash prices fall sufficiently, the producer could still face significant losses. The combination of the pork cutout value and a floor price within the OlyWest 2021 contract could be more appealing to the producer with a lower risk appetite, as much of the volatility is taken out of the price.

Figure 2

Pricing benefits come down to location, options

Benefits of the Quebec price versus western Canadian prices might be largely based on individual producers’ preferences and circumstances. No two producers are exactly alike, and it is important to consider the range of factors that could affect whether one price is more lucrative than other.

While some western Canadian formulas have evolved to incorporate cutout values, others are lagging behind. Producers in western Canada should rightly continue exploring their options and advocate for pricing that more equitably distributes the value of hogs between producers and packers.

Supply chain disruptions provide important lessons

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By Andrew Heck

Processing plant shutdowns have created hog backlogs on-farm in nearly every province since the start of COVID-19.

It has been a little more than a year since the entire world began to face the massive and unanticipated consequences of COVID-19. By now, grudgingly, we are all too familiar with the pandemic song and dance, and it is looking like we may still be in for the long haul.

Despite the grim past and lukewarm outlook, Canada’s meat industry has adapted remarkably well in the face of challenge and criticism. For packers, it has meant ongoing threats to labour stability, processing capacity and, ultimately, social licence to operate. For producers, the meatpacking response has largely inspired decisions made at the farm level over time to adjust pig production, either by conscious choice or necessity, when various plants have been slowed or shut down.

From one situation to the next, Canada’s COVID response in the meat industry is providing us with lessons not only for handling this disease into the future, but also examples of how producer-packer relations have improved in some cases and deteriorated in others. It also gives us a glimpse into hypothetical outcomes for foreign animal disease response, most notably African Swine Fever (ASF), and its potential impacts not only to production and processing, but also trade.

Olymel faces full brunt of COVID catastophe

Between early February and March 2021, three workers at Olymel’s Red Deer plant, halfway between Edmonton and Calgary, were reported to have died of COVID-19, following a resurgence of the disease in the community. The plant had previously experienced a notable outbreak in August 2020.

In response to high rates of worker absenteeism, as the COVID case count in the community climbed, the decision was made to reduce daily slaughter volume by 40 per cent. At this point, Olymel issued a notice to its independent producer-suppliers notifying them that their hogs would be given priority for processing, with the company opting to send its own hogs to U.S. packers and holding others where possible, in a bid to ease the burden on those independent producers.

Shortly following the reduction, after the first worker death was announced, Olymel shifted its decision and voluntarily shut down the plant for nearly three weeks, working to minimize impacts to worker health and safety. Following the shutdown, the plant was re-opened gradually, but not before creating an estimated backlog of 100,000 hogs on-farm in Alberta and Saskatchewan.

Producers adapted to the unexpected conditions by adjusting feed levels to slow their animals’ growth, while seeking processing capacity at facilities across western Canada and the U.S., as options for moving market-ready hogs. The decision to hold hogs longer than desired was made especially difficult on account of high feed costs. Some producers opted to move younger pigs to empty barns in the U.S. to free up space for larger pigs at home.

An outbreak of COVID-19 in Red Deer, Alberta prompted the closure of Olymel’s plant in that city in February 2021. Holt Colony near Irma, Alberta was one of many impacted farms.

“The shutdown had potential to devastate a lot of producers,” said David Tschetter, hog barn manager for Holt Colony near Irma, Alberta – 250 kilometres northeast of Red Deer. Tschetter ships hogs to Olymel weekly and was forced to make adjustments during the shutdown. “The company did the right thing for its workers, but we can’t forget about producers either. We were forced to make alternative marketing arrangements, which adds to costs. Thankfully, the provincial government stepped in to provide a bit of relief, but it’s inevitable that some costs will never be recovered in situations like these.”

As a result of the backlog, Alberta Pork appealed to the Government of Alberta and Government of Canada to launch producer financial support through the federal-provincial AgriRecovery program, similar to the support offered as part of a set-aside program for Alberta cattle producers a year earlier, when two major beef plants in the province were closed. For hog farmers, the program paid impacted producers $0.95 per head per day to cover the costs of keeping market-ready hogs on maintenance rations between the beginning of February and end of March 2021.

Starting in late October 2020, Olymel backlogs also followed in Quebec with reduced capacity at the company’s Vallée-Jonction plant, southeast of Quebec City, after a worker died of COVID-19. Non-lethal outbreaks have also been reported over the past year at the company’s Yamachiche and Princeville plants, near Trois-Rivières, and at the Saint-Esprit plant, north of Montreal.

As a result of labour issues challenging processing ability, with the additional COVID burden, by mid-March 2021, anywhere between 80,000 and 90,000 hogs were backlogged in Quebec, with average live weights around 120 kilograms, thankfully trending downward from weeks earlier. At the height of backlogs, Olymel increased its diversion of hogs from Ontario to the U.S. to help manage the situation.

Olymel continues to work with public health officials across the country to better protect workers by implementing new protective equipment requirements, creating physical distance with plexiglass barriers, staggering shifts and regularly sanitizing common areas. Working closely with union officials and producer groups, the company is making efforts to sustain its business while keeping workers safe and being mindful of producer concerns.

Elsewhere in Canada, in April 2020, a one-week shutdown of the producer-owned Conestoga facility at Breslau, Ontario, northeast of Kitchener, created a substantial interruption. That shutdown, coinciding with the Olymel Yamachiche shutdown, resulted in a backlog of 90,000 hogs at the time.

Other packers fortunate to escape COVID wrath

Maple Leaf Foods’ plant in Brandon, Manitoba accepted a small number of backlogged hogs from Alberta as a result of the Olymel shutdown, but those that were accepted were penalized. The company continues to regularly accept hogs from Ontario.

While Olymel’s struggles with COVID are well-documented, two of western Canada’s other largest packers – Maple Leaf Foods and Donald’s Fine Foods – have luckily remained mostly unscathed.

No COVID cases have been reported among Donald’s workers, but 80 cases were reported at Maple Leaf’s Brandon, Manitoba plant, with another dozen at the company’s Lethbridge, Alberta plant, in August 2020. As in the case of Olymel’s outbreaks, public health officials determined that transmission outside of the workplace was likely responsible for the growth in cases, not the workplaces themselves. Fortunately, in the case of Maple Leaf’s outbreaks, both plants were able to remain open.

However, at that time, as the case numbers continued to grow for Maple Leaf, the company suspended meat exports to China, in response to import controls introduced by the Chinese government. While neither the Brandon nor the Lethbridge plant was ever closed, producers shipping to Brandon were met with complications, on account of reduced processing, as the company eliminated an entire shift. As COVID cases declined eventually to zero, exports to China were resumed, and the backlog dissipated.

Despite the recovery to normal levels by September 2020, the Brandon plant still routinely operates below capacity – somewhere in the neighbourhood of 75 per cent. The plant is capable of slaughtering 90,000 hogs weekly, but regular volumes hover in the 70,000-hog range. This includes between 3,000 and 4,000 shipped every week from southern Ontario – nearly 2,000 kilometres away and nearly 1,000 kilometres farther than any commercial farms on the prairies.

Maple Leaf Brandon’s shipments from Ontario have been a source of contention among some western Canadian producers, who were disappointed that so few hogs were accepted at that plant – western Canada’s largest – while Olymel Red Deer was closed. This resulted in hogs being shipped during the shutdown from Alberta to plants as far away as California and Iowa – approximately the same distance as southern Ontario to Brandon.

While a small number of backlogged hogs made it into the Brandon plant while the Red Deer plant was closed, Olymel readily accepted many backlogged hogs from Maple Leaf producers while the Brandon plant had slowed down. In addition, those hogs were paid consistently with Olymel’s contracted producers, including a standard proximity bonus, whereas the relatively small number of hogs shipped to Brandon from Alberta were docked $10 per head, with no freight compensation.

Though shared value discussions have been taking place between western Canadian pork producer organizations and western Canadian packers for nearly a year, Maple Leaf has not yet made any adjustments to its base pricing or bonuses, with the exception of a short-term pricing floor introduced last summer when hog prices were nearly $50 below the cost of production. This lack of action is contrasted by the efforts of Olymel, and even earlier, HyLife in Neepawa, Manitoba – the first western Canadian packer committed to using cutout values.

Donald’s Fine Foods, which pays producers according to the Maple Leaf Signature 4 formula and covers the cost of freight to its Britco plant in Langley, B.C., accepted some backlogged hogs from Olymel Red Deer producers at its Thunder Creek plant in Moose Jaw, Saskatchewan. Thunder Creek reduced processing speed in response to a small outbreak experienced in November 2020. During that incident, hogs were diverted to the company’s own Langley plant and Olymel Red Deer.

COVID backlogs may simulate an ASF dry run

Eurasian wild boar root on a beach in Berlin, Germany, in August 2020. Just one month later, ASF would arrive in the country’s boar population from neighbouring Poland.

While COVID-19 does not affect pig health, and ASF does not affect human health, there are parallels between these diseases when considering the management of potential backlogs and the resiliency of the entire Canadian meat industry.

In the case that ASF should arrive in Canada, severe hog backlogs could be expected, with the closure of international borders to Canadian pigs and pork. However, critical zoning agreements with major trading partners are providing some confidence for the Canadian industry, which is observing the conditions in Germany with great intrigue. The German pork industry has also suffered from processing shutdowns and public backlash due to COVID-19 worker infections.

Since September 2020, Germany has reported more than 1,000 cases of ASF in wild boar, mostly contained within the eastern state of Brandenburg, along the country’s border with Poland, from where the disease arrived. Shortly after the initial ASF confirmation, China, Japan, South Korea and the Philippines banned pork imports from Germany. Despite being an ASF-positive country itself, China regularly imposes import bans on pork from other ASF-positive regions, causing major turmoil for export-dependent nations. Over time, as those affected regions suffer financially, the Chinese government returns to the bargaining table to negotiate access to its coveted market. This was the case in late April, as Germany’s federal agriculture minister, Julia Klöckner, met virtually with Chinese authorities to plead her country’s case for halting the spread of ASF within Germany’s borders, in a bid to resume normal trade relations.

With ASF cases beginning to pile up, and with most Asian trade routes blocked, the German industry responded immediately by diverting hogs to other plants in the E.U., in countries where ASF is not present, allowing for the continued albeit inconvenient flow of pigs and pork. In Canada, such options would be untenable, thanks to our geography and existing trade agreements, which would not allow for such flexibility. More recently, confidence in the German industry’s efforts to control ASF in wild boar has resulted in the re-opening of some markets, including Vietnam. By the end of April, permanent fencing was being actively erected along hot spots at the border with Poland, further demonstrating the German industry’s fastidious approach to addressing the problem, with ample government support.

As in Germany, getting a handle on the spread of wild pigs in Canada will be key to assuring partners that the Canadian industry is serious about securing its zones. If wild pigs cannot be completely eliminated, a next-best option may be strict containment. Such an accomplishment will be important before any hypothetical arrival of ASF. Unlike in Germany, wild pigs are not native to North America. Despite this reality, some animal activist groups in Canada have petitioned to preserve this invasive species – much to the contrary of ecological experts and common sense.

Around the same time restrictions on German exporters had begun to ease, in March 2021, the Canadian Food Inspection Agency (CFIA) and U.S. Department of Agriculture (USDA) agreed on an approach to guide bilateral trade if ASF is detected in wild pigs in either country. As in Germany, where no ASF cases have been found in domestic pigs, limiting the disease spread within the wild pig population may be a limp the Canadian industry can learn to accept, even if it is far less than ideal.

“We are pleased to announce another milestone in our Canada-U.S. collaboration on prevention and preparedness related to ASF,” said Jaspinder Komal, Canada’s Chief Veterinary Officer (CVO). “This first-of-its-kind protocol will use a science-based approach to minimize trade impacts while protecting the swine populations in both countries.”

On the commercial side, conversations between officials in Canada and Japan have been ongoing related to the issue. Perhaps even more importantly than certain agreements with the U.S., a Canada-Japan zoning framework could be the top priority for the Canadian industry. On volume, Canadian pork traded with the U.S., China and Japan has been fairly consistent over the past decade, while dollar value compared to volume undoubtedly favours the Japanese market.

But for trade to continue in the case that ASF should enter Canada for any reason, Japan wants proof of effective zoning, which is where PigTRACE – a component of the Canadian Pork Excellence (CPE) program – comes into play. PigTRACE is an industry-led, live animal traceability initiative designed to ensure protection, prosperity and peace of mind for the Canadian pork industry and its customers. In the event of a food safety issue or foreign animal disease outbreak, traceability gives government and industry officials the tools to manage the situation.

In Japan, pork of Canadian origin commands an observable premium over and above similar products of U.S. origin, according to the Canadian Pork Council’s (CPC) Made-in-Canada Hog Pricing Report, released in November 2019. CPE is the on-farm program that creates the foundation for the Verified Canadian Pork (VCP) brand. For packers selling product at the retail level in Asia, the VCP logo is an important visual identifier for consumers. A Canada-Japan zoning framework will be important for preserving this valuable outlet for Canadian pork exports.

Animal ag’s newest, biggest threat

When a large container ship became wedged in the Suez Canal for a full week in late March, it caused massive disruptions to supply chains impacted by the delay. For the Canadian pork industry, human or animal disease could be the wedge that jeopardizes business.

Agriculture especially in North America has long been regarded as a pioneering field. From the days of homesteading and breaking land in the 19th and early 20th centuries, to the emergence of largely export-based commodity sectors in the mid- to late-20th century, the 21st century’s greatest new farming frontier, especially for livestock sectors, may well be the management of disease – whether in animals or humans.

For the Canadian pork industry, it is immaterial whether the supply chain breaks as a result of processing issues connected to COVID-19 or trade issues connected to ASF; all stakeholders must stay limber and focused on mitigation strategies and response plans, while ensuring the entire value chain is functioning cooperatively, should the inevitable happen.

Spring 2021 – Editorial

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The Spring 2021 edition of the Canadian Hog Journal is here!

Find out how COVID-19 hog backlogs could have implications for foreign animal disease planning, and discover what sets the Quebec pig price apart from formulas in western Canada.

Springtime is symbolic of renewal, hope and growth. Inherent to personal growth is education, and education in the pork industry takes many forms. This edition does the long division on several parts to that equation.

Looking back, visionaries George Visser and David Price helped revolutionize western Canadian hog production in years gone by, and their work is now being celebrated in a very permanent sense. Looking forward, producers are collaborating with post-secondary animal science students to virtually share their lived experiences. Find coverage of both in this edition, along with a thought-provoking piece on mentorship from a conservation pig breeder.

My grandmother passed away relatively suddenly in late February in Provost, Alberta, 300 kilometres southeast of Edmonton. In her lifetime, she was a farmer, teacher, wife and mother-of-nine who was no stranger to the kitchen. Her homemade potato noodles with my family’s traditional farmer sausage will always be a favourite meal of mine. She helped encourage my own love of cooking, and a program in Ontario, ‘Six by Sixteen,’ aims to transmit critical culinary skills to Ontario teens. You can read about that program in this edition as well.

On the research side, learn about the potential for using alternative feed ingredients to save costs, and find out about a recent $1 million grant to continue studying disease resilience, with the goal of creating healthier pigs. Both projects represent efforts to help producers protect their bottom lines.

My wife and I welcomed our second child, another daughter, at the end of January, which is a source of great fulfillment for us. Rather fortunately, despite the circumstances, my late grandmother was able to hold our newest daughter in-person shortly before her passing, when we made the snap decision to travel out-of-town to visit her one final time.

Once I catch up on some sleep, I may feel renewed, but for now, my hope is that your businesses and our industry can continue to grow, just as my family has! I await your good news, excited to broadcast it. And even if the news is not always good – an inevitably of life – we can be content knowing that the eternal balance between success and failure, joy and pain, and triumph and tragedy are what create the character-building moments essential to enhancing ourselves, our families and our work.

As we head toward summer and BBQ season, hog prices have sprouted to multi-year highs – a ray of sunshine in a year that has been mostly dim. What’s blooming in your world these days? Let’s plant the seeds of inspiration in each other by sharing ideas! Let your thoughts take root in a ‘Letter to the editor’ by emailing andrew.heck@albertapork.com.

Production Reality

Pork Commentary, May 3rd , 2021
Jim Long, President-CEO, Genesus Inc.

Harsh reality or the inconvenient truth is a factor in many of our lives. In the swine industry we have the stories of productivity. Seems no one has less than 25 pigs per sow per year, but few show the results in any detail.

We thought it interesting to do some figuring:

  • 2020 U.S. Hog Slaughter = 131.5 million.
  • Pigs imported from Canada to the U.S.A.= 5.3 million.
  • September 2019 U.S. Breeding Herd = 6.431 million.

Farmer Arithmetic:

  • 131.5 million less 5.3 million = 126.2 million
  • 126.2 million ÷ 6.431 million = U.S.A. 19.62 hogs per breeding animal in 2020.

19.62 is a far way from 25. It is a simple calculation, but it gives a reasonable indication of real productivity. 19.62 is average – means half of production is below that.

One of the huge impediments to the productivity is the grim reality of sow mortality. Dead sows don’t produce pigs. The hard facts of increased sow mortality can be seen below from U.S. Pig Champ Data.

 20092015201820202009-2020
Sow Death Rate7.98%8.94%11.68%13.68%+5.7%

It’s obvious to see the steady increase in sow mortality. The cost of the death loss is significant whether it be loss of sow salvage, less pigs to sell, employee morale, animal welfare issues etc.

Another factor contributing is the increase of prolapses in the genetics from the company that “never stops improving.”If prolapses are a form of improvement; that is an interesting concept.

Packer Gross Margin

Packers no doubt had a historical run of profitability. Over the last few years some of the best margins ever. At times around $70 per hog but many weeks in the $50 range. It was a good time to be a packer.

We have never subscribed to the view that the good margins would last forever. We subscribed to the life thought: “What goes up goes down”. Put it another way “Everyone has a turn in the wheel barrow.”

Some Farmer Arithmetic:

  • Last Friday U.S. Pork-Cut-outs = $110.46
  • Last Friday National Weighted Hog Average = $112.49

Of course there are different hog prices but we think National Average is a reasonable one to use.

The jyst is the hog price is higher than the Pork Cut-out price. That would mean packer buys hogs for $112.49, kill them, cut them and sell pork for $110.46. Packers get to do everything and lose money. Now they are like producers who have produced hogs for a loss for too many times over the last 5 years.

Of note; last week some packers were paying up to $120 for spot hogs to fill shackles.

In our opinion the sales departments are dominant in packing organizations. The drive to have product to fill retail orders (maintain shelf space- food service- export orders) is a dominant driver in most if not all packers.

Packers we believe have been caught flat-footed in regards to 2021 pork supply. U.S.D.A until last month predicted more pork in 2021 then 2020. Then of course there were the Chicken Littles. Below from September 2020 Iowa Pork Producer Magazine:

Chicken Little 2
“It’s the shackle space that will dictate pig prices moving into the future, not the pig supply. With that, he said it will likely be 8-10 quarter before the profit picture looks much better.”

Chicken Little 3
“While he also thinks the pork industry doesn’t see a full recovery until at least 2022.”

We all want to hear what we want to. U.S.D.A. says more pork in 2021 then 2020 (hog prices in 2020 were terrible). The Chicken Littles – no recovery until 2022 or beyond.

No wonder when producers are looking for renewed contracts there was a resistance. Packers were led to believe by a collection of “experts” that hogs would keep coming despite producers losing hundreds of millions of dollars. Packers heard what they wanted to.

We are now selling hogs probably bred last July. Since then the U.S. sow herd has continued to decline, meaning even fewer hogs on the horizon. There is next to no new sow units being built. It’s a level lower than we ever seen in the industry. $7.00 corn is not going to stimulate expansion. We believe we are at point weekly hog numbers are going to plummet further. Hog weights are dropping fast now to sustain weekly kills; weights will continue to drop.

We suspect the packers with large number of their own hogs will be the most aggressive chasing hogs in the near future. They will probably use the base to punish and try to grab market share from some of the competitors.This activity would push hog prices to Cut-out levels for a significant time. The Golden Age of Big Gross Packer Margins we suspect will be gone for significant time.


It’s the producers turn in the wheel barrow.

Hog Price Moves Relentlessly Higher!

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Pork Commentary, April 26th, 2021
Jim Long, President-CEO, Genesus Inc.

Last week Lean Hogs increased from $103.0₵ / lb. to $106.5₵ / lb. There appears to be a relentless ongoing price increase driven by tight supplies and good demand.

Our Observations

Weekly slaughter last week was 2,473,000, a relatively low number for April. Packers are chasing hogs and pushing up prices.


U.S. Pork Cut-outs closed Friday at 111.54₵ / lb., with lean hogs 106.0₵ / lb., the spread of 5.5₵ lb. would indicate Gross Packer Margins have declined to a low level compared to recent months (years). We need Pork Cut-Outs to keep going up to sustain lean hog price gains.


Sow slaughter remains high with latest week 65,824. Our contention, anything over 61,000 a week indicates sow herd liquidation. 500-549 lb. sows average price last week was 76₵ / lb. A strong price indicating good demand. An excellent time to sell an old sow and buy a gilt.


Cash 40 lb. Feeder Pig averaged last week $99.70 – a year ago, $17.00. The high price of feeder pigs in our opinion is a reflection of empty barn spaces looking for pigs and the strong lean hog futures price. Finishers are now like Packers who are looking for pigs to fill shackles.

Choice Beef Cut-outs closed Friday $2.83 / lb. Pork Cut-outs $1.11/ lb. Pork is significantly cheaper than Beef. Whole Chickens last week $1.02 / lb. up from .86₵ / lb. in March. Last year same time 52.50₵ / lb. Higher priced Pork, Beef, and Chicken reflecting the bullish move in all meat sectors.

Pork is not a one-off and, in our opinion, indicates the sustainability of higher pork prices.

European Union Swine Inventory
(x1,000 head)

201820192020
Breeding Sows 11,29411,32811,269
All Swine143,519143.146146,074
  • The latest European Swine Inventory at the end of 2020 indicates a steady sow inventory and a 2% increase in all pigs compared to December 2019.
  • Germany’s Sow herd declined 94,000 in the time period (1806-1712) probably due to ASF issues and new environmental and animal welfare regulations.
  • Netherlands declined 120,000 sows (1052-931)
  • France was a gainer from (992-1060), +68,000
  • Poland increased from (771-830) +60,000
  • Spain, Europe’s largest producer, at 2,600,000 sows had no change. Current hog price in Spain is 80₵ lb. U.S. liveweight (€1.46 Euro/kg.).

Europe as a major pork producer (double the U.S.) is on track to hold production, remains a major factor in global export markets. High feed prices, ASF, new environmental and animal welfare regulations will stop any significant increase in swine production despite current strong prices.

China 

China’s hog price has been in a free fall. On Jan 20th it was 36 RMB/kg. ($2.51 U.S. liveweight a lb.). A week ago 23.64 RMB/kg. ($1.63 U.S. liveweight a lb.). No doubt big decline in price, but still relative to the rest of the world, a high price.


In first quarter China produced 171.43 million live pigs. 40.15 million more than the first quarter the year before. Certainly more hogs. The billion-dollar question- how much of the first quarter numbers was because of the dumping of hogs at below slaughter weight due to ASF breaks and fear of ASF? Not sure anyone knows.


One indicator of supply-demand is 15 kg. (35 lb.) feeder pig prices in China. There is regional differences. The highest is 140 RMB/kg. ($320 per feeder pig). Most of the market is in the 90 to 100 RMB/kg. range ($230 per feeder pig), with corn $11.00 U.S. a bushel.


It’s not hard to figure $230 feeder pig plus $150 feed per head= $380 per head. A 260 lb. market hog breakeven is $1.46 U.S. liveweight pig plus feed. Some people are betting their money on strong prices for sure.

Good News from Fake Meat Companies

From Financial Post – Beyond Meat share value has dropped from $14 billion to $8.5 billion U.S. Beyond sales are just $407 million last year. Stock trades at 21 times sales per share. Kelloggs is 1.6 times, Kraft-Heinz 1.9 times. $407 million in sales. That’s equivalent to less than 2% of U.S. Hog sales. Maybe it will take off. Lots of smart money is chasing the dream.

So far Beyond Meat has flopped at McDonald’s. They were selling it and stopped. My 18-year-old son cooks at McDonald’s. He tells me when they were selling it, and with big promotion where we live, he was cooking 1-2 burgers out of 300. Any wonder McDonald’s’ stopped selling? No one wanted to buy. People want meat. Taste matters. People vote with their money.

All these promotions of fake meat that people don’t buy makes us wonder what the opportunity is in retail foodservice with Pork that tastes better. Redder more marbled pork that delivers a better eating experience should be a market mover. Some sharpies had $14 billion in at one point in Beyond Meat. Put Beyond Meat beside better Pork, we bet consumers will buy more and pay more for the better taste of Pork.

Lean Hog Futures Tumble!

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Pork Commentary, April 19th, 2021
Jim Long, President-CEO, Genesus Inc

This past week we saw a major adjustment down on the Lean Hog Futures Market. Summer futures declined about $7.00. A drop of about $14.00 per head.

Our Observations

  • Cash lean hogs gained about $3 on the week with Iowa – S. Minnesota averaging $105.84 last Friday. A reflection of continued good demand relative to supply.
  • U.S.D.A. Pork Cut-outs stayed strong closing Friday at $112.09. A reflection of continued good demand relative to supply.
  • U.S.D.A. cash 40 lb. feeder pigs averaged $101.31 last week. A year ago they were $15 each. No one pays more than they have to.
  • Then we get to Lean Hog Futures. If you like Las Vegas with no rules, you should like Lean Hog Futures.

Let’s consider the insanity of July Lean Hogs, they closed at $99.70 Friday. Last week Friday hog’s Iowa – S. Minnesota were $105.84 lb. So are we to believe July hogs are going to be $6 lower ($12 per head) than April?

Not sure anytime in the history of U.S. hog markets April was higher than July, let alone $6 lower.
Hog supply will be less in July than now, it’s seasonal. Lean Hogs will not be lower priced in July than they are now.

Pork Demand is affected by other options i.e. Beef and Chicken.

  • Last Friday choice Beef Cut-outs closed at $276.05 (up from $225 a couple months ago), over $150 higher than Pork.
  • Last week the National Composite Chicken Price was $99.95- In March it averaged $86.68 and a year ago it was $50.
  • Prices have increased significantly for not only Pork, but Chicken and Beef.

Strong Demand for all indicates it’s not a Pork one-off. This is a real bull market in meat and poultry.

U.S.D.A has been chasing its tail on Projected Pork Production for months. Like the Chicken Littles, they were predicting more Pork in 2021 than 2020. As if? Now Abracadabra, U.S.D.A. has revised 2021 Pork Production down 400 million lbs. from March in their April guess for 2021. Now prediction has Pork production lower in 2021 than 2020. U.S.D.A- welcome to the Party. Better late than never!

Hog Supply 

There is in our opinion next to no new sow units under construction.
We have been in the business for a long time. We sell swine Genetics and have several salespeople spread across the USA, their job – to sell gilts. We need to pay attention where there are new sow units. Our observation- never seen such a low level of sow barn construction. This in itself will limit more pigs in the future.

Why no sow barns? Our Thoughts?

  • The Industry hasn’t had any real significant profits for 6 years. Then we had last year which was train wreck.
  • Banks not really interested and some looking for 45% equity to finance. Question; if you were to invest $10 million in new sow barn, would you put $4.5 million in as equity? The answer is out there, not anything happening.
  • Other points limiting new sow barns- high feed prices, labour issues, many families next generation are having a hard time seeing a future when there has been little swine profits. Nicer to drive a fancy tractor and work hard 16 weeks a year versus the 365 days a year obligation of a sow farm.
Primal Rib 218.57
Primal Belly194.45
Primal Butt109.98
Primal Loin94.92
Primal Ham91.46

It doesn’t take an Ag-Economist to recognise the highest valued products have the most fat or marbling. Consumers vote with their money and it’s driven by taste. 20 plus years ago Loins and Hams were of higher value than Ribs and Bellies. Then we decided on “The Other White Meat” program that pushed to leanness and we destroyed the taste and flavor in both loins and hams.

It should be studied in a Case Study at Harvard on how stupid a plan it was, branding to a cheaper product, Chicken, and then destroying the value of half the pigs’ carcass.

We live for the day that we as an industry realize the missed opportunity. Produce Pork that tastes better, chase Beef not Chicken. It’s obvious in the Pork Cut-outs there is enhanced value that will increase our industries profitability. We need to think more like marketers than farmers

Product

A friend of mine for several decades, Jeff Luckman, is a partner in the Company Atmosphere. Their product, Ag Forte Pro, is an excellent product for disinfection. Something to consider and try to see if it works for you. Click below for more details:

A Year Later 
How much has changed!

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Pork Commentary, April 12th, 2021
Jim Long, President-CEO, Genesus Inc.

Last year at this time we were at the start of the Covid crisis in our industry. A year ago Lean Hogs were 39₵ lb. Last week they were $1.01 lb. on a 215 lb. carcass an increase of $133 per head. We certainly noticed our cheques are bigger, as we expect you have to. “Surest cure to low prices is low prices.”

Other Observations

Last Friday U.S. Pork Cut-outs closed at $1.13 lb. A sign of real demand. Unlike lean hog futures which have a lot of speculation in their pricing, the Pork Cut-out is a true reflection of Right Now Supply-Demand. How high can it go? $1.30-$1.40-$1.50? Whatever, it will pull cash hogs towards it. The higher it goes, the Packer Gross Margin will continue to shrink.

Choice Beef Cut-outs closed Friday at $2.72 lb., up 50₵ lb. from where it had been. High Beef Cut-outs support Pork Cut-out prices. Pork Cut-outs are about $1.50 lb. less than beef. Why is Beef so much higher than Pork?

We believe Demand and Taste. Makes us shake our head the total inability of our industry to realize that Taste is the main driver of meat demand. Better tasting Pork would increase demand and Cut-out pricing = higher hog prices.

The chase to produce the “Other White Meat” was a total failure as we lost market share and capped pricing. We destroyed the taste of Loins and Hams chasing the ever-ever leaner pig. Now some think synthetic Durocs are the answer but most have no more marbling than the Pietrain derived crap that led to destroying Pork Demand and our Prices.

Producers and Packers have a vested interest to increase demand. A concerted effort to produce a better product is only good business. We are happy Pork Cut-outs are $1.13 lb. but when we see Beef Cut-outs $1.50 lb. higher we realize the missed opportunity that better tasting Pork would realize.

Other Observations

  • Despite predictions by the Chicken Littles that there would be more hogs in 2021 than 2020, year-to-date slaughter is down 4.1%
  • Last week Summer Lean Hog Futures pushed to new contract highs.
  • U.S. sow slaughter the latest week was 65,127- a liquidation level.
  • Reports continue to come to us from China of over 30% of sow herd knocked out by second wave of ASF.

China hog prices pushed down by rapid liquidation (sell before they die) putting more pork on market for now. $275 U.S. small pigs in China are a real indication of where their pork supply will be real soon. China will continue to import more pork. 200 million less pigs over the next year will mean less corn-soybeans needed.

In the coming weeks we expect fewer hogs to market in the United States. Why?

We are currently selling hogs bred last May-June. We have seen a smaller sow herd each month since that time, which means fewer hogs coming. Throw in the dynamics record sow mortality, PRRS and PED. Abracadabra fewer hogs for the summer and the fall.

This past week a producer asked us if $1.40 lean hogs would be seen this summer. That’s a reach but with the huge demand for meat protein domestically and throughout the world we would not be surprised.

Our industry has a huge equity hole to fill created by not only the pandemic months but several years prior of marginal returns for too many producers.

Summary

2021 is obviously shaping up well for pork producers. We believe it will last at a minimum until mid-2022. Supply-Demand will ensure that reality.