Pork Commentary, August 24th, 2020
Jim Long, President-CEO, Genesus Inc
NPIC Observations
The National Pork Industry Conference (NPIC) was held last week as a virtual event. Not an ideal way to do conferences as the huge benefit of personal interaction is missed. Fortunately, the NPIC organisation did a good job executing the conference under the circumstances that today’s reality forced them too.
Thanks for many of you who watched my talk on NPIC site and YouTube.
- Appears from a couple of the speakers they believe hogs are still backed up in the millions.
- Steve Meyer with the Brokerage Firm Kerns and Associates projects an increase in hog slaughter in 2021 vs. 2020. (2020 = 130,646 vs 2021 = 131,739)
- Steve Weiss one of the principles of NPIC (Century 21) and CEO Nutriquest indicates their data has breakeven top 25% producers 63-65¢ lb. lean (upper Midwest).
- Steve Meyer said that the extra sow slaughter this year of 220,000 more year to date, does not indicate significant sow herd reduction.
- Meyer’s spoke of Maxwell Foods 54,000 sows and Hitch Pork 15,000 sows being liquidated.
- Meyer’s explained CME average price for 2021 is currently 68.37. Kerns and Associates believe the average price in 2021 will be 56-59. Meyer recommended producers consider some hedging.
There were several other speakers with the NPIC conference. Next week we will discuss some of their thoughts.
Other Observations
Sow Mortality Analysis
We have looked at sow mortality and how it could affect the breeding herd inventory. We looked at Pig Champ data which is available on the Pig Champ website. Annual sow mean mortality in 2015 was 8.94%, in 2019 was 12.31% – an increase of 3.37%. If breeding herd is 6.3 million, the extra 3.37% equates to 212,310 sows a year or 4,000 extra dead sows a week. Kind of skews the analysis of historical sow liquidation to decide the current degree of herd liquidation.
Hog Slaughter
Hog slaughter this past week was 2,618,000 a year ago 2,531,000. Daily slaughter capacity is about 500,000 with some days now reaching 480,000 plus. Excellent Packer Gross Margin has been a great stimulus to get hogs killed. Now maybe with less lucrative unemployment benefits the labour force for all plants will move towards capacity helping production.
National Daily Base Hog Carcass Weights first 4 days last week averaged 206.80 lbs; the week before 208.01 lbs.; year before 208.48 lbs. If hogs backed up in millions as some claim it will be first time in history backed up hogs have lower slaughter weights.
Producing Better Pork
As an industry we are obsessed with costs, not necessarily a bad thing. What we see very rarely, if any talk, on how to grow our business by increasing per capita consumption, where chicken industy has relentlessly increased consumption and stayed mostly profitable, the pork industry profit seems to come only when we cut cost production. Every consumer survey ever done shows taste, flavour, and eating experience are the main driver of consumer satisfaction and repeat purchasing. Instead, we focused on the stupid White Meat Program that drove us to produce Pork that tasted like cardboard. Is it any wonder bellies, ribs, and shoulders (most fat) now dominate the cut-outs while loins and hams lag in value.
The solution is not using a so-called Duroc; it is using Durocs or whatever breed that has marbling-colour–PH that will deliver the best eating experience. Some so-called Durocs will never deliver the eating experience as they themselves have been bred to be really lean and have no better eating attributes then the synthetic breeds the other White Meat Program spawned.
We need to stop being farmers and become marketers, we need to produce a better eating product that will drive price and demand. Playing only the cost game is why per capita consumption for pork has flatlined for 25 years while total meat consumption has increased. We have lost market share. There is a calculation that if every American ate pork one more time a month that is equivalent to 7 million hogs per year. We as an industry pine for more exports maybe the answer is producing a better tasting product and growing our domestic market.
More hogs in 2021?
Projecting more hogs in 2021 than 2020 – interesting perspective. We don’t agree, liquidation is underway. Sow slaughter since first of year up 7,500 a week from a year ago. Sow herd on June 1st was down nearly 150,000 from Dec 1st. There has been continued liquidation since then, ie. Maxwell Foods and Hitch – they alone are 1% of the U.S. sow herd. We believe higher sow mortality due to the weaker genetics that has been introduced from Europe is also contributing to liquidation as gilt retention has declined. We believe without hesitation the U.S. will have fewer hogs in 2021 compared to 2020. How much less is too early to project as the sow herd continues to liquidate. Financial losses have been significant and continue.
Get acquainted with the Global Mega Producer
A program of recognition led by National Hog Farmer and sponsored by Genesus Inc.
Christensen Farms, USA
Christensen Farms has again been recognized as a Global Mega Producer for 2020. One of the largest family-owned pork producers in the United States, Christensen Farms, relies on the dedication of employees, contract farmers and producing partners.
Christensen has 142,500 sows in production in multiple states. The company will only add production if it fits into their integrated model. Dedicated to providing wholesome, safe, nutritious food around the world has made Christensen a world leader in pork production.
Christensen is part of the Triumph Foods Group.
The company continues to look for diversity that fits their goals and value system.
“I want to thank all our employees for their dedication to our industry”
– states Greg Howard, VP of Strategic Planning, Christensen Farms.
Let’s congratulate Christensen Farms for being a Global Mega Producer.
U.S. Hog Slaughter Numbers Remain Strong
Pork Commentary, August 31st, 2020
Jim Long, President-CEO, Genesus Inc.
The U.S. Packing Industry continues to ramp up slaughter numbers. Last week 2,664,000 up almost 200,000 head from the same week a year ago. We have to commend the Packers for adjusting to Coronavirus challenge and getting hog slaughter numbers up significantly.
One of the issues spoken more than once at National Pork Industry Conference (NPIC) was the pricing of market hogs in the future. Most if not all that spoke believed that current hog pricing programs need adjusting. Some touted the new plan to have pork cut-outs futures on the Chicago Board of Trade. This was mostly touted by the people selling futures.
Certainly, the push from NPIC speakers was that U.S. Pork cut-outs and a percentage of such would be a reasonable option for the future. One of the speakers said long term average of hog price to cut-outs was 88%. If we use that today and Friday’s cut-out-close of 71.39 the 88% hog price would be 62.82¢ lb. National 53-54% hogs 56.10¢ lb. Most of the time in the last months an 88% cut out to hog price spread has been lower and a detriment to producers.
For hog producers, whatever we are doing for hog pricing has not been working very well. From what we can see looking at hog prices throughout the world USA-Canada have the lowest global hog prices and worst financial situation. We as an industry must ask why? What needs to be changed? Is it just too many hogs? Coronavirus?
One Packer asked us in January “If the industry is hurting so bad, why is their expansion?” – good and fair question. Since then we believe expansion has stopped. There are next to no new sow units being built in the USA; there is liquidation of the sow herd – we believe at least 250,000 is gone and/or is ongoing. The marketplace is adjusting, but still, we ask why does USA-Canada have the lowest prices in the world?
NPIC
At NPIC Nick Giordano Vice President of the National Pork Producers Council (NPPC) spoke on current legislation for Gene-Editing (GMO).
As he explained current U.S. Gene-Editing (GMO) oversight is by the United States Food and Drug Administration (FDA). Mr. Giordano explained that currently Swine for Gene Editing is classified as “Living Animal Drug” and a Hog Farm using such would be considered a “drug manufacturing facility”.
The European Union (EU) has classified Gene-Editing as Genetic Modified Organism (GMO) and have effectively made it illegal.
Mr. Giordano didn’t mention the EU part but he said Argentina, Brazil and China were working on Gene Editing. Not sure where Argentina comes in re Gene Editing (GMO) as they have very few hogs and no swine genetic companies. Brazil? China probably as PIC has signed a cooperation agreement with a company there, after the EU ruling.
PIC has invested millions of dollars in trying to get a GMO pig to market. They probably don’t appreciate Mr. Giordano explaining that today it’s classified as a “Living Animal Drug”. What we can figure when they tout to customers the opportunity to being first in line to get PIC’s GMO pig they aren’t mentioning “Living Animal Drug” or your farm becoming “a drug manufacturing facility”, sounds like fun.
Wonder which Retail Chain and or Foodservice will want to be first to sell Living Animal Drug – GMO Pork. Animal Welfare Groups would make a fortune fundraising on this. Sounds like suicide consumer marketing for all Pork producers. We appreciate Mr. Giordano’s frank and legal description (he’s a lawyer) of the reality of the Gene Editing (GMO) as he recognised the challenge to “Consumer Acceptance”. It’s good to see the money invested in NPPC is pointing out the perils of technology that could damage our industry and crush Pork consumption.
The best option for our industry could be to embrace new vaccine technology, not GMO. Will not be negative to consumers, retailers, foodservice, and exports. We need to do everything to increase Pork demand we don’t need impediments in place that encumber this quest. We need to use smart options.
In Feedstuffs a report that University of Connecticut assistant professor of animal science Young Tan and professor of pathology and veterinary science have now identified compounds that successfully use a vaccine to block the PRRS Virus. You can read the entire article here https://www.feedstuffs.com/nutrition-health/compound-blocks-prrs-virus-identified
Get acquainted with the Global Mega Producer
A program of recognition led by National Hog Farmer and sponsored by Genesus Inc.
New Fashion Pork, USA
New Fashion Pork is once again part of the Global Mega Producers for 2020
From its beginning in 1998 a lot has changed for the company. Today operations extend from Wyoming to Indiana with International business diversity. Having a sustainable strategic plan, Land/Crops, Nutrient supply and Pigs, has always been a company goal.
Today 30% of the company needs are supplied within. Maintaining and achieving high health herds is also part of the plan.
“Our employees are the reason we have been successful. I cannot imagine another group that has preformed at their very best with all of todays happenings”
– states Brad Freking, Owner NFP.
Let us congratulate New Fashion Pork for being part of the Global Mega Producers.