Editor’s note: Bijon Brown is the Production Economist for Alberta Pork. He is currently working on a cost of production study for producers, to use as a benchmark for comparing profits across the value chain. He can be contacted at bijon.brown@albertapork.com.
Hog production differs regionally not only by the feed inputs used but also by the pork markets served. Looking at the current trends in the Alberta pork export market, we can examine the difference between Alberta exports and exports from the rest the country. By acknowledging those differences, we can begin to understand where Alberta producers sit relative to producers in other key provinces.
U.S. share of Canadian pork export market on the decline
U.S. share of western Canadian and all Canadian exports. Source: Statistics Canada, Prepared by AAFC/MISB/AID/Market Information Section
Although the Canadian export market is largely dominated by shipments destined for the U.S., its relative share of the Canadian export market has declined over the past five years. From January to November 2019, roughly a quarter of all Canadian pork exports went to the U.S., down from about to 40 per cent in 2015. Meanwhile, the share of exports destined for Asia trended up to 21 per cent from 18.5 percent in 2015. The largest export market for central Canada continues to be the U.S., but Japan is the largest export market for western Canada.
From January to November 2019, western Canadian pork export volumes were about 440,000 tonnes, close to 2015 levels, but about 14 per cent below the five-year peak in 2017. Manitoba and Alberta accounted for most of the pork exports. Alberta exported more than 110,000 tonnes of pork products, down roughly 10 per cent from the corresponding period in 2018. This largely reflected a 29 per cent drop in exports to the U.S. and was partially offset by increased exports to Japan and Mexico. The decline in pork exports to the U.S. has resulted in the share of total Alberta pork exports dipping from 25 per cent in 2015 to 20 per cent in 2019. In the meantime, the Japanese share of the export market rose from 35 per cent in 2015 to 42 per cent in 2019.
Alberta exports fetch a premium in Asian markets
Canadian and Albertan pork export price to select destinations. Source: Statistics Canada, Prepared by AAFC/MISB/AID/Market Information Section
The shift towards Asian markets and away from the U.S. market has been mainly driven by economic incentives. Over the past five years, Canadian exports to Japan have attracted a premium over U.S. exports, averaging almost $1.20 per kilogram, with the Alberta export price premium averaging $1.80 per kilogram. Over the past two years, Alberta export prices for shipments to the U.S. dipped below $3.10 per kilogram from a five-year high in 2017 of around $3.50 per kilogram. Meanwhile, the average export price at the national level was $0.40 per kilogram higher, indicating that Alberta pork is being discounted in the U.S. market relative to pork shipped from other provinces. In contrast, Alberta pork shipments to Asia received a higher price than pork shipped from other provinces.
Alberta producers paid less for hogs
Monthly hog base prices in select provinces. Source: Statistics Canada-Table: 32-10-0077-01.
Despite the shift to higher valued export markets, the value of Alberta pork exports eased 13 per cent over the past five years, largely reflecting a 24 per cent decline in overall exports. In a region that exports over 40 per cent of its pork to markets paying a premium, it appears the price signals to Alberta producers have become distorted.
While Alberta pork attracts a premium, Alberta producers have seen base prices that were $0.08-0.20 less per kilogram for their hogs compared to producers in Ontario and Quebec. Currently, producers are paid a price that is derived from U.S. markets, which represents less than 20 per cent of wholesale export value. The economic realities in the U.S. market are no longer consistent with a significant portion of western Canadian wholesale pricing; it ignores the preferential premiums accessed in Asian markets.
Accordingly, farmers face lower prices, and these lower prices disincentivize investment and production. Lower prices signal that Alberta producers should reduce pork supply, which would reduce pork processed, marketed and, ultimately, exported. All this, even though there is increased demand through higher price signals coming from Asian trading partners. Prices to producers must more accurately depict prices earned downstream in the value chain. Otherwise, the inability to clearly send price signals through the value chain will leave money on the table for the entire industry, not just producers.
Pork Commentary, May 25th, 2020 Jim Long, President-CEO, Genesus Inc
About a month ago President Trump and Ag Secretary Perdue announced the Coronavirus Food Assistant Program (CFAP). At the end of last week some more details were announced re hogs.
Hogs Eligible
Unit of Measure
ACT 1 Payment
Act 2 Payment
Pigs < 120 lbs.
Head
$28.00
$17.00
Hogs > 120 lbs.
Head
$18.00
$17.00
Producers must provide the following information for CFAP:
Total sales of eligible livestock, between January 15 to April 15, 2020, of owned inventory as of January 15, 2020, including any offspring from the inventory (Act 1);
Highest inventory of eligible livestock, by species and class, between April 16, 2020, and May 14, 2020 (Act 2).
A single payment for livestock will be calculated the sum of the producer’s number of livestock sold between January 15 and April 15, 2020, multiplied by the payment rates per head, and the highest inventory number of livestock between April 16 and May 14, 2020, multiplied by the payment rate per head.
CFAP payments are subject to a per person and legal entity payment limitation of $250,000. This limitation applies to the total amount of CFAP payments made with respect to all eligible commodities.
Participants that are corporations, limited liability companies, and limited partnerships these corporate entities may receive up to $750,000 based upon the number of shareholders who contribute at least 400 hours of active person management or personal active labour.
Observation
U.S. hog producers have been hit hard by Coronavirus implications. It is good the U.S. government is providing significant money to fill back some of the losses. It will not make most producers whole but it will help.
Sow Slaughter
The latest sow slaughter data for the week ending May 9 was just over 70,000. The largest we can remember in a long time. In 2020 the average weekly sow slaughter was 57,500. There is no doubt the U.S. sow herd is rapidly declining.
This is Interesting
The general premise in the industry is that hogs are backed up due to lack of harvesting related to Coronavirus issues. Below is some data that baffles us.
The week of May 15 the average carcass weight on the National Daily Base Slaughter Data was 220.17 lbs. avg carcass data. Last week the average weight in same database was from Monday-Thursday 217.5 lbs. (Same week a year ago 214.19)
That’s a drop of 2.6 lbs last week from the week before. How can we explain weight dropping so significantly when hogs are supposed to be backed up? It hasn’t been hot? Harvest numbers are still below a year ago? Has euthanasia been that large? Have feed adjustments pulled down weights? Have open plants have producers pushing hogs in? Are meat lockers and on-farm selling? We are baffled! It will be interesting to see what weights do this week. Could this be a factual signal hogs are not backed up as most believe? Crazy business.
Other Markets
We know the U.S. hog market has been miserable for most. It appears also some other countries have seen decline with most attributing to Coronavirus issues including decrease demand from lower incomes due to unemployment, restaurant usage decline, currency fluctuation and lower economic robustness.
March 26
May 20
China
2.32
1.92
Russia
54.23
55.58
Spain
75.51
62.91
Brazil
50.17
35.46
Mexico
53.68
34.41
Every country is down significantly except Russia which has an internal market without significant imports or exports. The other countries have seen declines between $30 to $100 per head in the last two months. Not a positive picture of demand as we know supply has not changed significantly.
Pork Commentary, May 19th, 2020 Jim Long, President-CEO, Genesus Inc.
Last week U.S. Pork Packers started to recover some production capacity lost to Coronavirus plant issues.
Weekly Harvests totals:
Week of May 1st – 1.553 million
Week of May 8th – 1.775 million
Week of May 15th – 2.103 million
Last Year May 15th – 2.352 million
It’s good to see a 500,000 head improvement in the last two weeks.
Observations
Packers have worked to get Plants operational and to greater capacity. Great efforts have been made to put in place enhanced employee safety measures to protect workers from Coronavirus.
With U.S. pork cut-outs Friday closing $1.10 lb. the Gross Packer margin for Packers reaching over $100 per head. This in itself is a huge incentive to harvest as many hogs as possible. From what we know the current gross packer margins are at record levels. For Plants not at capacity, it is a lost opportunity in these highly profitable times. There must be big pressure to get fully operational.
There is no doubt market hogs are backed up. We have read reports that some claim up to 10 million. We expect it’s currently give or take 2 million. It’s a lot and a big challenge to get current. We hope this next week increased packer capacity might get us to the same weekly harvest as a year ago.
There are efforts to get compensation for market hogs being euthanized. As far as we know that hasn’t happened. Some market hogs are getting euthanized how many is mostly a guess. No one wants to publicize this grim reality. In the meantime, sow herd liquidation is ongoing. It’s across the specter of the industry with some Pork Powerhouses being involved.
The USDA announced April 17th a Coronavirus compensation program for ag and hog production. No real details have been released; it is supposed to be soon. There is no doubt hog producers have suffered due to Coronavirus. Dirt cheap pigs and hogs have been crushing to most swine producers.
Summary
We need to keep seeing increased hog harvesting. Up 500,000 head a week in last two weeks is right direction. Packers have huge financial incentive to get hogs through their plants with record Gross Packer Margins. We hope and are optimistic that harvesting numbers will continue to increase.
Register today for the Global Hog Industry Virtual Conference
What pork companies made the 2020 Global Mega Producer list? National Hog Farmer Content Director, Ann Hess, unveils this year’s top companies. Plus, Jim Long of Genesus, along with Tom Stein of Maximus Systems/Maximus Ag Technologies, provide insight as to the market trends shaping the global hog industry in 2020.
Speakers:
Max Amstrong, This Week in Agribusiness host (moderator) Ann Hess, Editor, National Hog Farmer Jim Long, President and CEO, Genesus Tom Stein, Senior Strategic Adviser, Maximus Systems/ Maximum Ag Technologies
Biosecurity protocols, including signage, are a reality of modern, commercial hog production.
Effective biosecurity management is key component of a successful hog operation. Proper biosecurity protects both herds and humans from disease incursions that can affect animal welfare, staff health and business continuity.
Over time, the pork industry has been compelled to adapt biosecurity practices to fit the evolving reality of production, which means fewer but larger farms, workers travelling overseas, imported feed and equipment and other considerations that challenge the disease-free status of a farm.
Dr. John Harding, Professor, Western College of Veterinary Medicine, University of Saskatchewan, acknowledges that biosecurity remains the number one defence against disease: “We have a very complex animal health intensive livestock sector now involving multiple sites and large airspaces, with pigs being transported great distances,” he said in an interview with Farmscape. “We also have emergence of diseases or new viruses, new pathogens, emergence of antimicrobial resistance, potential zoonotic diseases – so there’s a lot of change that’s happened over the years.”
For producers, it is a constant battle to establish a biosecurity culture within a farm. Biosecurity is demanding, and most would sooner ignore it, if that was a reasonable choice. Ideally, biosecurity principles are backed by formal, written documentation, such as on-farm protocols. After that, discipline and conscientiousness must take over.
Standards demonstrate producer commitments
Alberta Pork’s cost of production study, launched in January 2020, is seeking to better understand producers’ on-farm costs.
In January 2010, based on recommendations of the former Canadian Swine Health Board Biosecurity Advisory Committee, a first draft of the National Swine Farm-Level Biosecurity Standard was created. This voluntary standard is a tool for producers and industry stakeholders to tailor biosecurity measures to individual farm needs and provincial regulations.
The adaptable biosecurity standard addresses various planning considerations, direct and indirect routes of potential contamination and on-farm animal health. Underscoring these considerations are routine veterinarian check-ups, the use of medicines and many material costs including disposable gloves, masks and booties, plus disinfectants, degreasers and other products that are required for an effective program. All of these considerations come with a price tag, and those costs are often buried or overlooked, which is why further efforts are being made in some provinces and nationally to understand exactly what producers are paying when it comes to biosecurity.
The dilemma for producers is understanding and appreciating the importance of these practices while having little or no money to cover them. With that hit to producers’ pocketbooks constantly hammering away at already meagre farm incomes, it adds to the list of stresses that have producers reconsidering their hog operations altogether.
Every little bit adds up over time, creating a “death by a thousand cuts” scenario. When producers look across the table and see processors’ profits continuing to roll in, they are left wondering what value there is to their additional efforts.
Cleanliness does not come cheap
Blue Water Wash in Red Deer, Alberta features 20 wash bays and Canada’s first industrial-strength drying and baking bay for livestock trailers, but this level of clean comes with a cost.
From one producer to the next, the realistic implementation of biosecurity protocols differs. Implementing biosecurity protocols extends beyond putting words to paper. Words require action, and action requires paying the running tab of costs associated with cleanliness. One of the most critical precautions and significant costs is truck washing.
In Alberta, nearly half of all pigs are self-hauled, while the other half are hauled commercially. In either situation, thorough cleaning is required after each load is delivered to the plant. The price to thoroughly wash and bake a livestock trailer commonly reaches into the hundreds of dollars.
Specifically, a proper truck-and-trailer cleaning job often costs no less than $1 per pig for a load of 200 pigs. This adds insult to injury after already having shipped a full load at a loss of several hundred dollars, with no direct financial incentive to reinforce the good behaviour. For many producers, the cost raises a series of questions: Do I wash with detergent, rinse with water, bake and disinfect? Or do I just wash and rinse? If no-one notices, can I get away with only rinsing?
Sadly, this process of rationalization is well-known. Experts agree, and most stakeholders in the value chain are aware, that enhanced biosecurity requires extra attention to detail and a concerted effort. But if the money is not there, is it surprising that any person in this situation might consider cutting corners? It is a dire prospect. In a world where several hundred dollars can put food on a family’s table for a matter of weeks, a truck wash might, unfortunately, not look like the best investment, even if it is critically important.
While all transport trucks are required to be clean before arriving on-farm, for a very small minority of producers who self-haul pigs, on-farm wash bays are an enhanced biosecurity feature used before the truck leaves the farm, which helps further eliminate potential biosecurity gaps. What does not change, no matter the producer, is that making use of appropriate post-delivery truck washing services means paying for the service each and every time he ships pigs, usually weekly… unless he decides not to, due to the prohibitive cost. That decision fundamentally challenges the quality assurance guarantees that processors rely on to influence consumers’ perceptions of food safety further down the line, which demands the implementation of additional best practices at the processing and retail levels.
Quality assurance depends on producer action
All commercial pork producers in Canada – those that sell their pigs to federally inspected slaughter facilities – are certified under the Canadian Quality Assurance (CQA) program or the new Canadian Pork Excellence (CPE) program. Quality assurance covers biosecurity at the farm and plant level, but these conditions inform mostly food safety, not farm management, in the strictest sense.
In 2019, the CPE program was launched with the intention of phasing out and modernizing CQA, which was first implemented in 1998. While CPE program adherence varies across Canada, the number of certified producers is steadily growing. In Alberta, objections to the cost of CPE have stalled the implementation of the program.
CPE includes 10 modules, including one for biosecurity. Under the biosecurity module, there are recommendations for feed and water, proper handling of live animals, pest control techniques, equipment maintenance and more. Program recommendations are consistent for all producers, but it is left up to producers to make choices that fit their individual operations. Almost universally, these choices are driven by financial impact. Whatever choices are made must be deemed acceptable by program validators, which is a measure of the program’s integrity. Individual producer choice does play a role in keeping costs down, but across the country, in most jurisdictions where pigs are raised, options are often limited.
Disease-free pigs translate into safe food
Food safety in Canada continues to evolve. In January 2019, the Canadian Food Inspection Agency (CFIA) released its latest food regulations.
The challenge of maintaining strict biosecurity is compounded by the increasing costs producers must pay to meet quality assurance demands, which, for processors, are the basis on which their brands’ reputations are built.
For producers, the decision whether or not to embrace quality assurance places them between a rock and a hard place: pay for the program and sell to federal packers, or choose not to, and rely on other outlets such as provincially inspected plants or other marketing routes, which are few. Most often, this kind of decision would completely change the nature of an operation. For large-scale producers who raise the vast majority of hogs across the country, supplying our largest processors, it would be unconscionable.
A safe food system is paramount for Canadians and our international export partners. If food safety cannot be guaranteed, everyone in the value chain suffers. Food safety starts with proper biosecurity undertaken by producers and continues with further proper handling by processors and retailers. Food service establishments and consumers too have a role to play when preparing food in restaurant kitchens and at home.
While producers are more than willing to take seriously the demands of biosecurity, shrewd business considerations can undermine proper procedure, begging the question: if producers are not reasonably able to cover biosecurity costs, who will be left to produce the safe food that is generating record-setting revenues for some in the supply chain while taking every last penny from others? In the end, biosecurity on-farm and food safety in the plant, grocery store and at home are only as strong as the weakest link. For our part, as an industry, that means sharing the burden fairly.
Pork Commentary, May 11th, 2020 Jim Long, President-CEO, Genesus Inc.
Last week U.S. Pork Packers started to recover some production capacity lost to Coronavirus plant issues.
U.S. 2-day Harvest – Friday (May 8th) and Saturday (May 9th):
Last week – 554,000.
Prior week – 403,000.
Last year – 449,000
For the week (ending May 9th):
Last week – 1,768,000.
Week before – 1,553,000.
Last year same week – 2,232,000
A gain of 150,000 head Friday-Saturday compared to the same 2 days week before. With Tyson – Waterloo and Logansport, Smithfield – Sioux Falls, JBS- Worthington, plus others coming back online there is hope the daily harvest numbers will continue to increase.
Other Observations
There is no doubt hogs have been backed up.
Probably a couple million hogs at least. Hog slaughter weights going up now in the 221 lb. carcass range. The week of April 10th they were 212.54 lb. A gain of almost 9 lbs., almost 12 lb liveweight up. That is at minimum a week’s worth of hogs backed up (2.5 million?).
U.S. Pork cut-outs
About three weeks ago U.S. Pork cut-outs were 50₵/lb. Some Pork Bellies were at that time, being sold at 30₵/lb. Last Friday skin on 10-12/lb. bellies were $2.96/lb.
Pork Cut-outs closed last Friday at $1.16 – up from 50₵ three weeks ago. That is an increase of $146 per head. Goes to show what happens when supply decreases in a market that has solid demand.
If we use the current National Daily Base lean price 53-54% hogs price of 63.32₵/lb. and subtract that from U.S. pork cut-out of $1.16 we come up with a difference of 53.22₵/lb., times a 220 lb. carcass, we have Gross Packer Margin of $117 per head. As far as we know the biggest spread in history. Certainly, a huge incentive for every Packer everywhere to get hogs slaughtered. An idle plant will be losing money and missing out on huge, huge profit margins.
Farmer arithmetic: a plant with 10,000 head capacity, sitting idle is short at least $1.2 million a day in today’s market.
No doubt there is sow herd liquidation
Latest weekly sow slaughter numbers were 68,409 heads, last year average 57,500. The sow price has collapsed, most in the 15₵/lb. range. Sow packer Margins are probably at record levels. The adage “You only pay what you have too” comes to mind.
We expect U.S. sow herd decreasing at 15-20,000 sow a week range. The combination of sow herd liquidation, less gilt retention, planned abortions, litter size management, and euthanization is certainly cutting the number of hogs coming this fall and into next year. We estimate fall hog numbers could be up to 150,000 less a week than were expected the first of March.
Plant capacity
We have read in several places that there are estimates the U.S. hog plant capacity could be cut by 80% due to Coronavirus operational rules. We question this. We believe some plants are running over 80% now. How are Saturdays factored in this? There is no arbitrary 80% rule, it is just speculation. Time will tell.
We expect American ingenuity driven by opportunity will be yet a huge factor.
Running out of meat is not expected in America
Some Wendy’s have run out of burgers.
Meat sales are being limited by some retailers.
A few states are allowing restaurants to re-open.
Some retail meat counters running out of different meats.
Demand is there, however, the supply of pork, beef, and chicken have all been cut by plant issues. President Trump seems to get it. He invoked the National Defense Act to get plants up and running.
Last week at a meeting President Trump was having with Iowa Governor, Kim Reynolds, U.S. Secretary of Agriculture, Sonny Perdue, was asked for a timeline regarding plants reopening. His reply “probably a week to 10 days where it is fully back up.”
American society is used to getting what they want when they want it. Running out of meat is not expected in America! Let us hope plants get rolling and to capacity.
The financial impact of the current situation for many producers is terrible. This is a resilient industry. Some positives include continued strong exports and obvious domestic pork demand.
Get plants close to capacity, many of the current issues in the market go away.
Genesus Customer Testimonials
Green Acres AB, Canada
“Purebred gilts coming into the herd adapt very well. We are seeing our numbers creep up due to the Genesus F1. We are happy with the service we get from Genesus.”
Brantwood Colony, MB, Canada
“We are still happy with Genesus pig performance. Always getting better. Going on 30 years all Genesus.”
Pork Commentary, May 4th, 2020 Jim Long, President-CEO, Genesus Inc.
The U.S harvested 1,545,000 hogs last week. At least 1 million heads less then it should have. No doubt a real calamity. Too many packing plants closed and others not running at full capacity. The Coronavirus issue is a scourge on the hog industry.
Last Tuesday President Trump mandated the Defense Production Act for Packing Plants. It appears it could give some relief – Tyson Logansport (15,000 per day) announced to reopen this week and the Governor of South Dakota saying Smithfield Sioux Falls (20,000 per day) should reopen soon.
With the backing up of Hogs into the millions of heads over the last few weeks, there has been some euthanasia of pigs and abortions of sows. We have seen pictures of piles of hogs euthanized. We have no idea of the real total numbers involved but for every day hog slaughter is diminished increases the likelihood of ever greater numbers of euthanized pigs.
Once again, we are baffled by the Futures Market. In the midst of a Pork debacle where hogs can’t get slaughtered, June lean hog futures up to $11.18, July up to $9.45 lb. Hopefully, it translates into the cash hog market.
Two weeks ago, U.S Pork Cut-Outs were just over 50¢ lb, Friday they closed at $1.06. A jump of over $100 per head in two weeks! It’s what happens when Pork supply gets cut drastically.
The difference between $1.06 for Pork Cut-Outs and a lean hog market at 56.52¢ is 50¢ per lb. 50¢ per lb. times a 210 lb. carcass – it’s $100 per head gross packer margin. Great incentive if there ever was one for Packers to get plants rolling. Plants sitting idle with all their overhead in place are losing money. Talk about extremes? Producers with a percentage of the cut-outs and who can get them hogs killed are in a group of winners.
The latest weekly sow slaughter was 67,495 heads, last year averaged 57,500 heads. We believe the sow herd is decreasing by at least 15,000 a week. Combination of greater sow slaughter and lower gilt retention.
The latest U.S Pork Exports were 44,700 Metric tonnes (China 20,680 mt.). About equal to 500,000 market hogs of Pork. The ramification, in our opinion, with Pork exports holding at near-record levels and hog slaughter down 500,000 head a week, the decrease of Pork supply is all in the U.S domestic market. We expect the consequence will be some U.S retail stores not having enough Pork to sell. Our society is used to going to the store and getting food when we want it. Empty meat counters will not make happy constituents.
Less Beef also – U.S Cattle Harvest last week 425,000 down at least 200,000 head. Choice Beef cut-outs 373.85 a lb., up by $1.50 in the last couple weeks.
Chicken placement down 8% from a year ago last week (-13 million).
So, what we have is less Pork, Beef, and Chicken all being triggered by Coronavirus issues. Total Meat and Poultry significantly lower. We expect cold storage of all has been ripped down. Our conclusion if the Plants don’t get going the U.S retail meat cases will become next to empty in many places with ongoing rationing to customers. Not exactly a symbol of a system that is working.
The pressure to get plants up and running will become even more extremely intense when empty meat cases become the story on the National news.
Genesus Welcomes Heath Nelson to our team
Genesus is pleased to announce that Heath Nelson has joined our team as Territory Manager for the Dakotas and Montana.
Heath brings to our team lifelong experience in the pig business, having grown up on farm in South Dakota that raised purebred breeding stock. Heath then went on to become a partner in the family farm after graduating from the University of South Dakota.
“We are very happy to have Heath join our team, he has the right mix of experience, attitude and work ethic to very effectively service our clients in the Dakotas and Montana and help Genesus grow our presence in those areas” says Greg Gilsdorf, US General Manager for Genesus.
Pork Commentary, April 27th, 2020 Jim Long, President-CEO, Genesus Inc.
Bad news seems to be becoming worse news. Below some observations:
At the time of writing, hog slaughter plants closed: Tyson- Waterloo and Logansport; Smithfield- Sioux Falls; JBS- Worthington. Roughly combined 80,000 head per day capacity. Other plants are slowed down due to coronavirus labor-related issues. Last week the U.S. harvested 1,995,000 head, probably 600,000 less than there needed to be.
Hogs are backing up at an unprecedented level.
Fewer hogs have led to U.S. pork cut-outs rising at an unprecedented rate as shortage of pork is pushing hog prices higher. Last Friday, U.S. pork cut-outs closed at $77.48. Ten days earlier they were $50.00, a jump of roughly $55 per head. Unfortunately, the hog price gained only about $6.00 per head and is 47₵ a lb.
For Packers that continue to operate, big gross packer margins. Plants that are closed are missing out and at same time paying all their employees not to work. Strange situation. One thing for sure, huge packer gross margins are a big incentive to keep and get plants operating.
U.S. cattle slaughter plants are having similar issues with coronavirus and employees. Last week cattle numbers slaughtered 469,000. They should have been in the 625,000 range.
Chicken slaughter last week was 9 million less birds then same week a year ago.
Put Pork, Beef and Chicken together- Huge meat tonnage decrease. At some point, real government intervention could be needed and soon, to keep food supply system operating and feeding people.
As the hog production system backs up with supply, we understand there are sow units inducing abortions and pigs being euthanized. The degree of these intervention points we are not sure. Early wean pigs are under $10.00 each. It is a mess!
U.S. sow slaughter in March was 283,000, up from a year ago by 34,000 (+ 13%). Year to date up 66,000. No doubt there is breeding herd liquidation.
The U.S. government has announced financial support to Ag for coronavirus related issues. For swine producers, it looks like a cap of $125,000 per entity. Many, if not all think this is insufficient support.
With hog losses for some at $40 per head, it appears to us that it will not do a lot for many. With 75% of U.S. hogs concentrated in 40 producers, the $125,000 cap will do little to stop the bloody losses for that group.
It is sad when you watch the news and see thousands lined up to get food from food banks, while at the same time we cannot get hogs slaughtered. You wonder when the coronavirus testing in New York that shows at least 20% of people had coronavirus titres, how any slaughter plant employee profile can stay negative. It is an impossible task.
Below are two letters. They are a call to arms for every pork producer. It’s a crisis. All need to call and or contact, State Representative, Congressman, Senator, Secretary of Ag, Vice President and President. You need to voice your individual problem and situation; it is more real and not from some Washington Lobbyist. We need to invoke the Defense Production Act. Basically, this cuts through all the red tape and fear of lawsuits, and with this, the President can order the opening of the packing facilities in some way shape, or form. These letters below (click on each to open) can facilitate your talking points when you visit your representatives.
Pork Commentary, April 20th, 2020 Jim Long, President-CEO, Genesus Inc.
The last great debacle the North American Industry had was in late 1998. Market Hogs got to 8₵ lb., too many Hogs for Packer Capacity, the price collapsed.
When the dust settled many of the largest producers i.e. Murphy Farms, Carrolls, Heartland, Premium Standard Farms, Purina etc. had new ownership structure or even bankruptcy. Scale can be a plus but also a curse. Losing $30-40 per head times lots of hogs means lots of money lost.
We have no idea the financial status of the current pork powerhouse group, but we expect there will be some change of ownership and structures over the next twelve months.
The first week of April the U.S. sow slaughter was 67,300, last year averaged 57,500. We estimate to maintain the U.S. sow herd approximately 65,000 gilts a week need to be added. The U.S. sow mortality from various data sets is 1% per month.
In our opinion, the U.S. sow herd is currently contracting about 15-20,000 a week. Last quarter the USDA data shows the sow herd contracted 7400 a week, estimating the current situation, doubling or tripling this number is not extraordinary thinking. At 20,000 a week, the U.S. sow herd would be down on June 1st, 340,000 from December 1st.
We believe the Canadian sow herd is also shrinking.
At some point cutting USA-Canada hog supply significantly.
Coronavirus Curse
The curse of coronavirus continued last week with Smithfield – Sioux Falls and Tyson- Columbus Junction packing plants resulting in about 30,000 a day capacity lost. It also appears the other plants had slower line speed with daily slaughter totals around 45,000-50,000 lower than capacity. No doubt hogs are backing up.
The cut in daily slaughter numbers pushed USDA Pork cut-ups from low 50’s first of week to 60₵ lb. on Friday.
Of Note:
Genesus sales teams in France, Spain, and the United Kingdom all reported last week that slaughter plants working, hogs moving, with hog prices in low 70₵ U.S. liveweight a lb. It’s interesting because all 3 countries have had per capita coronavirus deaths far greater than the U.S.
It appears many contracts for early weans, feeder pigs and even market hogs are being adjusted to the reality of prices, cash flow, and barn capacity. We expect this will continue.
There is talk about pigs being euthanized, not sure it’s happened or will but it is a sign of the current reality that it’s being discussed seriously.
When you review hog marketings, chickens, lower cattle slaughter numbers, there has been a rapid decrease in the total red meat and poultry supply.
Some numbers:
Poultry
Last Week
Year Ago
Young Chicken Slaughter head
155,11
164,410
Chicken Eggs Sets
-5% year ago
Chicken placements
-4% year ago
Chicken National Composite6 lb. bird
50₵ lb.
97₵ lb.
Red Meat
Last week
Same week year ago
U.S. Slaughter Cattle
502,000
642,000
Hogs
2,236,000
2,384,000
What we are seeing is a decrease in total red meat and poultry production. The financial losses will, in our opinion, decrease total protein tonnage in future as all segments cut production.
It’s not hard to calculate close to a $1 billion decrease a week, currently in red meat and poultry sector revenue. The point is this is not just a pork sector calamity, it’s across all protein sectors (including dairy)
We hope a quick recovery from the coronavirus issue can happen. The longer it goes and society stays quasi paralysed, the worst the financial impact on the pork sector and much of the economy.
Health
Some facts about deaths around the world from the World Meter Database January 1 to April 18, 2020
Current World Population 7,788,629,065
Deaths resulting from:
Number of deaths Jan 1- April 18 2020 (Lowest numbers to Highest numbers)
Mothers during childbirth
91,803
Flu
144,474
Coronavirus
156,270
Malaria
291,343
Suicides
318,506
Traffic accidents
400,944
Aids/HIV
499,307
Alcohol
742,874
Smoking
1,484,797
Children under 5
2,257,606
Cancer
2,439,369
Communicable diseases
3,855,866
Other
4,787,428
Total World Deaths
17,470,587
World Corona deaths 156,270 representing 0.89% of total world deaths 17,470,587 year-to-date.
Milltown, MB, Canada
“Genesus sows have an awsome born alive, great weaning weights. Days to market are excellent”
Gadsby North, AB, Canada
“We have been a client of Genesus Full Program for many years and have been very satisfied. The salesman has given us great service. A great team.”
If Misery loves company, we have a real hootenanny* going. (*Scottish word, meaning party)
The Utter Collapse of the U.S. and some other countries’ pork markets is unprecedented. Coronavirus and what it has done to the food chain logistics and demand is crushing.
Random Observations:
Market not working for anyone:
U.S. Pork Cut-Outs last Friday at $52.85.
Integrated packers with own production, in all likelihood, have a breakeven of $70. If correct losses would be in the $36.00 – $40.00 per head range.
Producers farrow to finish losing at least $30.00 per head.
It’s one Ugly Duckling. No one is winning.
The last week of March the U.S. sow slaughter was 67,201. Last year the average was 57,500. We expect we are in the throes of a massive sow head liquidation.
Last quarter (Dec-Feb) the U.S. herd decreased 96,000. We expect a decrease of 150 – 250,000 this quarter. We are already cutting supply of hogs for this fourth quarter.
We expect Canada to also decrease sow numbers in proportion to U.S. declines. Cutting overall supply in the U.S.A-Canada in 2021.
The damage the market price is doing will be hitting all size of producers. We had already started the sow head liquidation last quarter as the industry had been losing money. This will be the death-bell for many.
We expect this Black swan Event to lead to further industry consolidation.
China
China might be a communist country, but they sure can understand capitalism. With U.S. pork at an unexpectedly low price, China jumped in last week to purchase 38,730 metric tonnes. All country sales last week were 55,900 metric tonnes. Both numbers were at historically high levels.
Take home – Everyone loves a bargain and they can use the pork.
China hog price last week was $2.25 U.S. liveweight a lb. China early wean pigs averaging $325. U.S. Also we had more than one report last week that African Swine Fever (ASF) still a big factor. Use of illegal ASF vaccine (ineffective) has compounded the issue.
All indications: China slaughter will decline from here to end of summer, making China’s need for imported pork even greater.
Packing plants
Sioux Falls (Smithfield), Columbus Junction (JBS), and Quebec (Olymel) have all lost days due to Coronavirus in the workers. It will be a challenge to keep plants going.
We suspect all producers are pushing as many hogs to their designated plants as possible, trying to stay ahead of the fear their plant might slow down.
Below, Kenneth Sullivan, CEO of Smithfield sums up reality of Sioux Falls plant closing and what it can mean.
Smithfield warns of food shortages:
April 12, 2020 5:55 PM ET by: Stephen Alpher, SA News Editor
The U.S. is “perilously close to the edge in terms of our meat supply,” says Smithfield CEO Kenneth Sullivan, earlier today announcing the closing of his company’s Sioux Falls processing facility.
That facility alone accounts for 4%-5% of U.S. pork production, and Sullivan notes a growing list of closings of other protein producing plants.
Sullivan: “It is impossible to keep our grocery stores stocked if our plants are not running.”
Sullivan also warns of the “disastrous” consequences up the supply chain once plants stop running, i.e. for the nation’s livestock farmers. “These farmers have nowhere to send their animals.”
We have a stark choice as a nation: “We are either going to produce food or not, even in the face of COVID-19,” concludes Sullivan.
One good thing, we are heading to summer when supply of hogs declines seasonally (usually starts mid-April). This seasonal decline will help in packer capacity effected by Coronavirus and hog-pork pricing.
We should be thankful (really reaching here) that Coronavirus is hitting now moving towards summer hog supply, rather than October-November hog supply.
Chicken Price
Chicken Price has also been affected by Coronavirus.
Last Friday National Composite wtd avg. was 50.51₵ lb.
2 weeks ago, 60.61₵ lb.
March avg. 79.35₵ lb.
A year ago, 96.25₵ lb.
Obviously chicken price has cratered like hogs. A week ago, chicken placements were same as year ago. We suspect the chicken industry will cut chicken placement significantly, as it is almost a totally integrated industry.
Within 5-6 weeks of cutting chicken placements, they can cut supply supporting their price and help alleviating fears of processing capacity slowdowns due to Coronavirus.
We don’t know the cost of production of chickens, but a 6 lb. bird compared to a year ago is $2.70 less, times 150 million chickens, it’s a big difference in revenue. Farmer Arithmetic – over $400 million. We expect chicken production will be cut significantly and fast.
Summary
Hog Losses are big.
Sow herd liquidation is accelerating.
U.S. Export sales supportive at historically high levels.
Packer capacity challenged by Coronavirus. Good we are going into summer with lesser hog supply.
Huge drop in chicken prices will likely lead to quick cut in chicken production.
Springpoint Colony, AB, Canada
“We started with the Genesus Durocs five years ago, we saw tremendous growth in our finishers. Since switched to the Full Geneus Package our total born on our gilts is phenomenal and seeing 14-15 born alive”
Big Bend Farming, AB. Canada
“We have been using Genesus for 10 years now, our packer tells us that they like the consistency they get from the Genesus Program. That’s why we use the Total Package”
Pork Commentary, April 6th , 2020 Jim Long, President-CEO, Genesus Inc.
Lean Hog futures continued to be the pox on our house, creating fear and financial calamity in the swine sector. April Lean Hogs were 66.42¢ on March 24, on Friday, April 3, they closed at 40.22¢. A $50 per head drop in 10 days.
We aren’t lean hog future historians but we would guess this is the largest drop in lean hog future history. The National Daily Base Carcass slaughter 53-54% has decreased from 65.62¢ to 59.59¢ (March 26 – April 2).
Part of the fear of driving the market lower is the thought pork (meat) consumption will decrease due to Coronavirus and slaughter plants will be closed or slowed down. We thought it would be a good idea to look at what’s happening in Europe (Spain) re Coronavirus, slaughter plants and pork prices.
Spain – 3rd largest hog producing country in the world.
Coronavirus deaths in Spain as of Saturday – 251 per 1 million people, in the USA deaths were 22 per 1 million people.
This is a report at the end of last week from Mercolleida, a coalition of Spanish producers, packers, and processors (translated from Spanish).
Packing plants are working well, there are some little problems with personnel.
So far pork prices have not plummeted.
Internal demand for pork is down but export demand is stronger.
One of the safest places in this country seems to be inside a slaughterhouse, whose strict biosecurity measures have now been joined by those specific to Coronavirus.
Spanish integrators are not nervous about the market situation, because it appears no one cancels trucks and they have constant demand.
Price of Pigs in Spain
The historic high was March 5 at 1.54 Euro/Kg. (75.6₵ lb. U.S. liveweight).
Last week on Thursday, April 2 – 1.18 Eur/Kg. (72.65₵ lb. U.S. liveweight).
Not much of a drop. No doubt so far Spain has significantly more problems with Coronavirus than the U.S., with a death rate 10 times U.S. per 1 million people.
So far plants remain open, with good demand for export and with internal pork price stable.
We hope the U.S. can stabilize prices. We expect U.S. consumers will continue eating pork and exports will stay strong.
One other thing Spain doesn’t have lean hog futures to destabilize their market. As my late friend Doug Maus called Chicago “Las Vegas with no rules”. We can only imagine the devastating margin calls the last ten days on many. It’s one thing to lose value in the stock market, but at least you don’t have to cover the decrease with cash immediately.
The lean hog future value collapse we expect was driven by sharpies on Wall Street running computer models and the reality of margin calls eliminating contract holders.
If futures are a true reflection of the market coming i.e. August 54₵ there’s no way May next year will be 64₵. The liquidation of the sow herd by the spring of next year would be unprecedented.
Sow Herd
Last Quarter (Dec 1 to Mar 1) showed a 96,000 sow head decline. The latest sow kill week was 66,500 – last year averaged 57,500 per week. We expect the scenario we are in now will see from March 1 to June 1, a decline of 150,000 – 250, 000 sows.
Someone asked us last week how is the market going to sort? Our reply was, its happening; the sow herd liquidation that is happening will fix any packer capacity issues real soon if we are half-ass correct.
A 6-month decline of 250,000 – 350,000 sows cuts annual production capacity by 5-7 million hogs. Do you think any new financing for sow barns from bankers is going to happen in the next 6 months?
Summary
Sow herd liquidation that began in December will continue but at a faster pace.
We expect consumer pork demand to stabilize and exports continue at record area levels.
Packing plants and all food processing will be challenged by Coronavirus, but whether it’s Walmart distribution centers, pork, chicken, beef, plants, milk or any food processing, society cannot afford the collapse of the food chain due to Coronavirus positives.
China made sure during coronavirus food kept coming, we expect the U.S. will too. There is little choice.
Genesus Welcomes Chad Bierman, PhD
Genesus is very pleased to announce the appointment
of Dr. Chad Bierman, PhD to the position of Geneticist.
As a Geneticist he will oversee genetic improvement programs at genetic nucleus farms, provide leadership for our health R&D program and provide genetic improvement technical support for customers.
Chad has over 18 years of experience in the pig genetics industry in various genetic improvement and research and development roles. In addition to his extensive experience in developing and managing genetic improvement programs, his production and customer support experience will serve him well in his new role.
As a member of the Genesus genetic program team, he will collaborate with other team members, university and government researchers and Genesus technical and sales staff.
“We look forward to Chad’s contributions to our program. His skill set, experience, and desire to develop the best genetics for our pork industry make him an excellent choice for this position. Furthermore, Chad’s Iowa location provides the opportunity to continually engage our US-based genetic program partners and collaborators. Our genetic improvement and R&D programs continue to develop and finding the right people to lead these programs is a key to the future of Genesus” says Dr. Bob Kemp, VP of Genetic Programs and R&D.
Chad holds a Ph.D. degree from the University of Wisconsin-Madison and BS and MS degrees from South Dakota State University. Agriculture has always been part of his life having been born and raised on a livestock and crop farm in southwest Minnesota. Chad resides in Indianola, IA with his wife and children.
