Pork Commentary, December 16, 2019 Jim Long, President-CEO, Genesus Inc.
Last Friday China and the United States agreed to a phase 1 trade deal with lots of details. The main point for ag is the China commitment to purchase $50 billion in agriculture products.
To us this means ramped up U.S. Pork sales for two main reasons;
China has a pork shortfall due to ASF (they need pork). To live up to a $50 billion commitment China will need diversified Ag products (soybeans, chicken, beef and pork) to reach that target. Pork is a logical choice. This in itself could put U.S. Pork sales as a priority over other countries to meet the $50 billion commitment.
To be blunt the U.S. has the ability with tariffs to ensure compliance of phase 1 agreement. Other countries pork supply might not be as prioritised in the coming months.
We expect that the Phase 1 will be supportive to U.S. hog markets now with upside potential.
To put in perspective in regards to U.S. pork exports to China;
The last 4 weeks of data shows about 54,000 tonnes exported. This is almost 3 times the level of 4 week pork exports to China averaged in the first 6 months of 2019.
Year to date U.S. exports to China are 316,000 tonnes, up 1236% over 2018.
We expect as JBS and Tyson get Ractopamine free in January, that weekly exports to China could surpass 20,000 tonnes a week, equal to about 200,000 hogs in equivalency.
We expect Canada to return to the export levels it had prior to the June China ban. That would be another 10,000 tonnes a week to China.
Combined U.S. and Canada – 30,000 tonnes a week (300,000 hogs equivalency per week? Big number and would be approaching 15-20% of total U.S./Canada pork slaughter equivalency.
Other Observations:
Cash U.S. early weans and feeder pigs jumped $4.00 last week. Aug. Early weans $39.04,
Feeder pigs $52.89. Break-evens on feeder pigs are in the mid 60’s.
We would not be surprised to see cash pigs continue to climb higher.
It appears to us last week’s slaughter weights have begun to decrease. What to watch is weights relative to slaughter.
If kills stay up in numbers and weights decline, it tells us we are moving to lower hog supply. Likewise if weights hold but slaughter numbers decline it tells us the same thing.
Summary:
We have all been waiting for a reality on China. It appears to be happening with pork exports at record levels and new trade agreement that appears to have commitment for China to purchase more U.S. pork.
Projected January weekly slaughter marketing’s down 300,000 head per week from recent weeks. More demand-lower supply combined with pork cut-outs currently in 80’s, a recipe for rapid hog price appreciation.
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“I work for 25 years in the pig industry. For 5 years now, I encountered Genesus. I have never seen such a good genetic as Genesus. We have changed immediately our genetics in Germany to Genesus and already selling over 20,000 gilts in 2019 with a production of 31.90 weaned pigs/ sow/ year.”
Pork Commentary, December 9, 2019 Jim Long, President-CEO, Genesus Inc.
Last week we attended the Mid-West Swine Conference that was held in Danville Indiana, just west of Indianapolis.
Our Report:
Producers in General are less than enthusiastic. Losing money as most producers are is not one to generate optimism.
The conference was well organized and had good speakers.
Joe Kerns from Kerns Associates spoke on the state of the industry. He Projected that hog marketing’s will drop below 2.5 million a week (currently 2.8) in the new year, which should help hog prices. He also Highlighted Packer Gross Margin at $70 per hog. About as good as it can get.
Made the observation that Corn Yields are down about 5% from last year, despite wet spring, late planting, dry July, wet fall. What will happen to yields if there is good weather?
Joe Kerns is also expecting China exports to ramp up further in the near future supporting hog prices.
We heard more at the Mid-West conference of more non-estrus issues on gilts. Seems not under control and a big problem for the poor souls that buy gilts delivered with the problem. This business is hard enough without buying gilts that don’t breed.
We got the sense in conversations with industry people that packers are looking now for hogs to fill shackle space than they were in the previous few weeks.
Other News:
Canada can now ship Pork to China again. Canada was shut down in June from exports. In the previous month of May, Canada exported 45,000 tonnes to China (equal to 450,000 to 500,000 carcasses). Late June until November, Canada put tonnage in other markets.
The China hog price in May was around $1.00 U.S. liveweight a lb. Last week Chinas Aug. hog price was $2.22 U.S. a lb. More than double from May.
We would bet that Canada’s exports will reach 45,000 tonnes again quickly. Any Pork that leaves North America and goes in the black hole of China’s feed needs is supportive to hog prices.
With African Swine Fever (ASF) in Poland only 60 miles from Germany, the risk to one of the world’s largest hog producer and exporter is very real.
If Germany were to get ASF it will be a challenge to many countries including China to decide if they will accept Pork from Germany. Thousands of people and trucks travel daily back and forth from Poland to Germany. In North America we are weary of ASF but we have oceans in between. Germany and Denmark have millions of pigs moving around. The risk of ASF is a stark reality.
Last Friday China announced tariff waivers on some U.S. pork. Details have not been released. This indicates China’s need for pork and their wish to ease trade tensions. More pork going to China supports hog prices.
Summary:
If U.S. hog slaughter drops to 2.5 million a week down 300,000 a week from where it was last week, coupled with ramped up exports, we expect to see lower packer margins and stronger hog prices. Its simple arithmetic for those who think Packer Margins will stay high. Please look at this past summer. Lower Hog Kill, lower packer margin.
Current 82₵ U.S. pork cut-outs are next to a miracle with 2.8 million hogs being slaughtered. It’s a true reflection of demand, domestic and export. If U.S. hog slaughter drops to 2.5 million a week, where can Cut-outs go? 93₵?
Hang on! There is a light at the end of the tunnel and it’s not a train coming.
Last August Soon after ASF broke in China, we quoted an industry person with experience in China and ASF in Eastern Europe.
“Now we will find out if the rest of the world has enough food to feed China.”
Get acquainted with the Global Mega Produce
A program of recognition led by National Hog Farmer sponsored by Genesus Inc.
NINGBO TECH-BANK CO., Ltd was founded in 1996 and went public with an initial public offering in 2007.
The company has developed into five business segments, including aquatic feed, biological products, pig breeding (Hanswine Food Group), fresh food (Fantaste) and engineering construction (Tech-Bank Kaiwu).
In the area of pig breeding, Hanswine Food Group produced 2.17 million hogs in 2018. The targed sow inventory by end of 2019 is to reach 250,000 head.
In 2019, African Swine Fever hit China hard and greatly affected all producers in China. Well established companies such as Techbank are making great efforts to rebuild the Swine Industry in China.
Photo: Left to right: Yan Fu, Chief Scientific Officer of Techbank; Yaping Gu, General Manager of Genesus China
An Alberta pork producer is taking a large environmentally sustainable leap, thanks to a new heat recovery unit that will help improve operational profitability and self-reliance. The new unit adds to the producer’s existing suite of carbon-neutralizing tools, which includes conservation cropping to earn “tillage credits.”
Cogeneration, or combined heat and power (CHP), is the use of a prime mover engine to generate electricity and heat at the same time. A new CHP unit was unveiled on August 8 at Hartland Colony near Bashaw, about 130 kilometres southeast of Edmonton. The unveiling event welcomed more than 100 producers, industry partners and community members to learn more about the technology and celebrate the accomplishment. Hartland’s use of CHP as part of their farming operation in Alberta is turning heads as this technology starts to take hold outside of Europe.
Hartland’s CHP unit took under two weeks to install and has been up and running at 85 per cent capacity since mid-May 2019. Approximately 90 per cent of all recovered heat can be used during nine months of the year, which translates into a 35 per cent reduction in overall energy costs or more than $230,000 per year. In just under three years, the system is expected to have paid for itself, while the life of the equipment is estimated to be 15 years.
“The CHP unit efficiency uses clean-burning natural gas to run an engine that creates power and recovers waste heat. The system is kept stable by using a combination of temperature-regulating inputs and outputs.”
“Consumers want to see how producers are ‘going green.’ By adopting systems like CHP, we can say the pork industry is moving in the right direction,” said Darcy Fitzgerald, Executive Director, Alberta Pork. “Staying competitive in the global market today means that you have to cater to consumers who are better-informed and more conscientious than ever before.”
CHP works by taking a single fuel source (natural gas, in this case) and outputting two types of energy: heat and electricity. Depending on the ambient air temperature, which changes dramatically from season to season in Alberta, the system automatically regulates its internal environment by preheating intake air or rejecting excess engine heat as required.
“Our electricians started looking for ways that we could save costs, and when they looked into CHP, they thought it was a good idea. We crunched the numbers and determined it was worthwhile to pursue,” said Martin Waldner, Hartland’s hog barn manager and board director with Alberta Pork. “Before making our decision, we went over to Europe to see what kinds of units were being used there. Everyone we spoke to was satisfied with their experience using CHP.”
“Martin Waldner, hog barn manager, Hartland Colony (left) and Darcy Fitzgerald, Executive Director, Alberta Pork (right) proudly stand next to the new CHP unit.”
Hartland’s starting point in evaluating the potential of CHP was to measure the colony’s emissions and energy consumption, which included everything from the hog barn, feed mill, canola crushing plant and other on-farm processes, in addition to residential demands. Once that information had been collected, it was plugged into a return-on-investment (ROI) calculator to determine exactly how much benefit a CHP system could bring.
To further understand the implications of CHP, the colony worked with Airdrie-based CSG Canada to model the data using the company’s proprietary software. By analyzing the data models, it was possible to determine the colony’s peak and minimum demands (their highest and lowest electricity usage rates) to find out how and when power was being drawn. CSG’s goal is to drive change to smarter energy use while seeing a lasting, transformational benefit from doing so.
“Higher energy costs and carbon offset incentives make Alberta a natural fit for CHP,” said Matt Alfke, Sales Manager, CSG. “Colonies and other large producers with high energy demands especially can take advantage of these highly customizable systems, which we tailor according our clients’ unique needs.”
“Matt Alfke, Sales Manager, CSG Canada, presents on his company’s work during the unveiling event”
In Europe, CHP technologies have been a mainstay for more than three decades. In Canada, they are just starting to make waves. In Alberta today, operational CHP systems are in use at the University of Alberta and Calgary’s Chinook Mall, among other locations. The technology has even been adopted by recreation centres, grocery stores and property developers.
There are a variety of CHP systems available around the world. One such manufacturer is TEDOM of the Czech Republic. In North America, TEDOM products are distributed by Calgary-based Co-genergy Corporation, which helped connect Hartland to their unit of choice. The company’s objective is to bring turn-key cogeneration and trigeneration solutions to clients in various sectors, including agriculture, healthcare, oil and gas, manufacturing and more.
Currently, a 1,100-kilowatt CHP system is being built in Lethbridge by Co-genergy to produce dried hay and corn silage animal feed for domestic use and export—major progress for using CHP to lower the cost of feed for livestock producers.
“It is very encouraging for Co-genergy and TEDOM to find Alberta farmers receptive to this well-established technology, realizing the benefits to livestock farming in colder climate regions,” said Chris Cilia, President, Co-genergy Corporation. “Sustainability is key in farming, and CHP and other technologies have a lot of potential to help agriculture become more efficient in this competitive sector.”
TEDOM’s units come in several sizes and can be installed outdoors or indoors—factors that are considered when designing a functional system. After having seen TEDOM equipment in operation, Hartland worked with Co-genergy and CSG to tie together the colony’s wishes with what could be successfully implemented on-farm.
But CHP is only one part of the equation for Hartland. For the better part of a decade, the colony has worked with Carbon Credit Solutions Inc. (CCSI) to take advantage of carbon offset incentives. CSG is a wholly owned subsidiary of CCSI, which was founded in 2008 to develop and consult on carbon credit projects for clients in Canada and beyond.
“The CHP unit efficiency uses clean-burning natural gas to run an engine that creates power and recovers waste heat. The system is kept stable by using a combination of temperature-regulating inputs and outputs.”
In 2007, the Government of Alberta established its Emission Offset System, which has been rewarding eco-conscious producers who are looking to cash in on reducing their carbon footprint. For grain growers, including pork producers who grow feed for their herds, no-till seeding or “conservation cropping” has become a popular practice. The program pays $1.50 for every acre direct-seeded, which reduces soil disturbance, assists with nutrient fixing and sequesters carbon. The practice means less fertilizer is needed, which helps limit the dispersal of nitrogen in the atmosphere.
In addition to conservation cropping, opportunities exist for producers to qualify for carbon credits or government subsidies. To do this, applicants must be able to quantify energy savings, which takes into consideration the generation of supplementary heat and power, along with electricity usage and displacement. Once a baseline is established—the predicted or historical energy usage without efficiency upgrades—the applicant measures against this baseline to determine how much energy is saved versus the actual usage as part of the project.
While any producer can take advantage of the program on their own, it helps to have the support of experts. As part of its contracts with producers, CCSI acts as the “project developer,” which takes risk away from the client and does not come with any up-front costs. CCSI purchases the credits as a guarantee, then works to demonstrate a client’s energy savings under the program. Once verified, CCSI passes those savings onto the client, keeping some of that share for their services. Since the introduction of the program, CCSI has helped more than 3,000 Alberta producers earn over $50 million by quantifying and selling their carbon credits.
Agriculture across Canada is becoming increasingly more energy-efficient and eco-friendly than ever before, thanks to proactive approaches in the public and private sectors to incentivize positive change. While producers across Canada have lamented the introduction of more recent provincial and federal carbon taxes, Alberta’s carbon markets provide opportunities for producers to profit from emission reductions, rather than penalizing the agriculture sector.
In Alberta pork production, Hartland Colony stands out as an early adopter of power- and money-saving strategies that will surely impress upon other producers and consumers alike. Alberta’s pork industry is leading by example, along with partners across the country, when it comes to environmental sustainability in agriculture.
Pork Commentary, December 2nd 2019 Jim Long, President-CEO, Genesus Inc
Last week the U.S. celebrated the Thanksgiving holiday. It is a holiday to give thanks but for pig producers it’s a time where hog prices plummet as seasonal maximum supply collides with holiday shortened slaughter capacity.
The end result; hog prices are weak and usually selling below cost of production. This year is no exception. Current Hog Prices at 58₵ lean a lb., are well below break-even.
Some Observations: The September 1st U.S. Hogs and Pigs Report indicates 5-6% more hogs under 120 pounds then the previous year while 120 lbs. was 2% higher. We should begin to be marketing in the 2% range now – this will help hog prices.
U.S. Pork Cut-Outs were 82₵ lb. Friday and Hog Prices 58₵. A difference of 24₵ per lb. or $50 per head packer gross margin. 82₵ is good, it means pork is selling despite record kills. A packer told us last week that a couple weeks ago was their most profitable week ever. As weekly kills decline, there is definite upside for Pork Cut-out and hog price increases.
China is looking for Pork. We sell swine genetics not pork. We are getting many enquiries for us to supply pork. If we are getting such activity, suspect Packers getting inundated. All pork that goes to the black hole that is China’s food need will support our prices.
Chinese government is predicting 3 million tonnes of pork to be imported in 2020 from everywhere. That’s equivalent to 30-35 million market hogs. This expectation is based, we suspect, on significant recovery of China’s pork production. Might be too soon to predict that scenario, with ASF still prevalent.
We expect sooner rather than later U.S.-Canada hog prices will move to European prices that have been supported by large exports to China. Currently they are in the 95₵ to $1.00 lean range. Liveweight U.S. lb. European range 71-74₵ lb. Chinas current Hog Price is average 32.66 rmb/kg or $2.11 U.S. liveweight a lb.
An example of Exports to China is Cranswick – a leading British Pork Packer. Year to date China exports up 94 percent. Cranswick Boss – Adam Couch said “We are sending 100 lorries’ worth of pig meat every week”. “Demand is growing and we don’t see it slowing.”
Summary: Now Thanksgiving is over. September 1st Hogs and Pig Report showed 2% year over year hog supply. We expect lean hog prices to show strength over the coming weeks as Exports continue at a rapid pace.
Get acquainted with the
Global Mega Produce
A program of recognition led by National Hog Farmer sponsored by Genesus Inc.
Hubei Xiang Da Agriculture and Animal Husbandry Company Ltd. was established in 2001. The company is a leading enterprise in National agriculture with an integrated industrial chain covering the business of pig farming, slaughtering, meat processing and feed manufacturing.
Hubei Xiang Da strives for rapid development through “company” plus “farmer” model; and it has established a food safety industrial chain “from field to table.”
The company currently has 6,700 employees with 17 wholly owned subsidiary companies and 66 branch companies in Hubei, Anhui and Henan provinces.
Hubei Xiang Da had 105,000 sows and produced 2.2 million hogs in 2018. Let’s congratulate Xiang Da upon their great achievement and recognize them as an industry leader and 2019 Global Mega Producer.
Photo from left to right: Edwiin Hong, Business Development Manager for Genesus China; Yaping Gu, General Manager for Genesus China and Zhang Guoxiang, Vice President of Xiang Da Group
Pork Commentary, November 25th 2019 Jim Long, President-CEO, Genesus Inc.
The last two weeks it’s like we have reached a tipping point in production misery. The words “Survival Mode” we have heard more than once. Some things we have heard from different producers:
“When is this going to get better?”
“I am tired of hearing about China.”
“I expanded, now I wish I hadn’t.”
“I am in survival mode and hunkering down.”
“It’s obscene how much packers are making, while producers lose their ass.”
“Not only are hog prices bad, but I am fighting to harvest my crop and now with rail strike we can’t get propane to dry what we do get off. It really sucks!”
“Talked to our bank about new money. They are not interested in financing hog production.”
“Our Congress is incapacitated by impeachment, when are they going to realize agriculture is in crisis and it needs help as one of the greatest strengths of our country?”
“A group of us producers has gotten together and won’t sign the Packer contract being offered us until offer gets better.”
Not exactly quotes from a group of happy campers. We are afraid it’s a reflection of many producers. Losing money is a grim reality.
“Hope is Mankind’s greatest weakness and greatest strength”.
Below is our reason for Hope:
U.S. Pork cut-outs at 84₵ lb. in the face of record hog slaughter is amazing sign of pork demand. Packers making gross margin north of $50 per head (some claim its $80), means they have the resources to invest for future higher hog prices. At $50 times 2.7 million head (U.S. slaughter). $135 million gross margin a week, if it’s not more than $50 a head. You do the arithmetic. Certainly profits giving Packers huge incentive to kill all they can.
Feed prices are reasonable and should stay there.
To have hog price increases we expect hog slaughter numbers need to come down. Last week the average weights Monday to Thursday were lower than the same time the prior week. If hog weights drop it’s an indicator we are starting to lower potential slaughter numbers.
North America- U.S.A./Canada/Mexico is essentially one market. Canada starting again to ship to China is a positive. Canada was 15% of Chinas imports- January to June. Then exports were stopped. That pork went into other markets. Now that Pork is going to China again, any pork that goes to China is off all other markets. China needs meat to fill the black hole caused by ASF.
China didn’t start buying U.S. poultry a few days ago because they started loving America. They had banned U.S. poultry for the last five years. Any poultry that goes to China is not in any other market. China needs meat to fill the black hole caused by ASF.
Tyson and JBS didn’t stop allowing Paylean (Ractopamine) to their plants as of January 1 for any other reason than to qualify pork for China. Combined they slaughter 180,000 head a day. Sure the hell this means more pork to China, or at least they expect to do it.
We have been told there is a scramble on for freezer space to get pork frozen for China, and that more inspectors have been hired by the U.S.D.A. to inspect pork to China. A real indicator of more exports happening.
The latest U.S. Pork Exports data from two weeks ago totaled 59,800 metric tonnes. The second highest week on record. Our farmer arithmetic says to an equivalency of 10 hogs per tonne. So our arithmetic equals 600,000 hogs (about 35% of U.S. weekly production). No wonder pork cut-outs are 84₵ lb., pork is moving at record volume. Everything that leaves supports prices. There is no other source of large amounts of meat protein left in the world that China can get except U.S.A. Chicken, Pork or Beef.
Indications are that ASF is far from under control in China. They will have less pork domestically in coming months, increasing further their meat protein needs. It appears that Europe might be near or at maximum amount of pork they have available for exports. The price in Europe due to the huge amount of pork being exported is between 95₵-$1.00 U.S. lean a lb. The wildcard is ASF is now in Poland- 60 miles from the German border. If it gets to Germany, does China accept pork from Germany? Currently Germany is China’s largest source of imports, with Spain second. China will do what they think is best for China.
“Don’t Lose Hope – You never know what tomorrow can bring”.
We are optimistic that once we get slaughter numbers down, which they will do seasonally, the cash hog price will chase the pork cut-outs. The profits from Exports, which we expect to continue at record levels will push the industry into profits. We expect once that happens this will continue for a significant length of time.
“Hope is seeing the light in spite of being surrounded”
Get acquainted with the Global Mega Produce A program of recognition led by National Hog Farmer sponsored by Genesus Inc.
Betagro Group was founded in 1967 under the name of Betagro Company Limited to produce and distribute animal feed. The company started its business with its first feed mill in Pra Pradaeng, Samut Prakan Province.
The Group has grown substantially ever since first, by establishing a livestock production facility in Pak Chong, Nakhon Ratchasima Province, and then expanding further into the integrated agricultural sector with a complete production base in Lop Buri Province, which includes everything from manufacture and livestock farming to animal breeding, from producing pigs, broilers, layer chickens and breeders to manufacturing and distributing animal health products.
Betagro works in collaborations with local farmers in price guarantee and contract farming schemes. These are fully compliant with internationally recognized quality standards required for effective selection, animal husbandry and advanced farm management under the prudent supervision of veterinarians and animal scientists. With a nationwide network of feed production facilities, the Group’s comprehensive animal feed business meets the different needs of farmers and its subsidiaries.
The pork production segment consists of 120,000 sows, Thailand’s 2nd largest swine producer with plans to expand. The company focuses on producing premium quality food products for export and domestic consumption. In 2017 the Thailand-based agribusiness announced it will phase out crates both in gestation and lactation within 10 years. In the press release, Betagro said the main reason for its move is to enhance ‘quality of life’, calling the development ‘an unprecedented commitment in Asia Pacific’. The company hopes that in 10 years, the measure will apply to 250,000 sows.
In addition to its fully integrated agro-industrial and food business, Betagro has expanded actively into other related industries to Complement its core business:
Wholesale Food Business
Retail Food Business
Betagro Science Center
Property Development
Pictured left to right:- Paul Anderson: General Manager S.E. Asia, Geneus Inc. Khomsun Pintapakung: Assistant Vice President – Livestock Production, Betagro Group Rawat Chantong: Geneticist, Betagro Group Komson Tuangsithtanon: Division Manager – Genetics Improvement, Betagro Group
Pork Commentary, November 18th 2019 Jim Long, President-CEO, Genesus Inc.
Who would have thought on a week in November U.S. pork cut-outs would hit 90.12₵ lb. in the midst of record slaughter (last week 2,749,000).
Pork isn’t 90₵ because buyers want to pay more. Considering the record hog numbers it must truly be a reflection of demand. U.S. Pork Cut-Outs are now are now 15₵ lb. higher than a couple weeks ago, which has increased gross packer margin $30 per head.
If you use a 90₵ cut-out and 60₵ lb. for market hogs, the spread of 30₵ lb. must be approaching an all-time high for gross packer margin.
Last Saturdays hog slaughter was 348,000 up from 244,000 the week before. A sign there are hogs to slaughter but also packer margins that justify overtime pay for Saturday’s plant employees. Being a producer we wish the hog price was higher, but we are glad U.S. pork cut-outs are in the 90₵ lb. range. That price gives room for rapid hog price increases.
We expect that Export demand is excellent. China and other countries are upping their purchases. It really helps that Canada can now once again ship to China. It is expected Canada could sell $1 billion of pork to China over the next twelve months. That Pork will thus be out of the North American domestic market.
Last week China announced that after a five year ban on importation of U.S. chicken the trade could begin again. U.S. government officials estimate the market could be worth $1 billion over the next year. The move is a reflection of China’s need for meat protein to fill the Black Hole created by African Swine Fever. All chicken that goes to China leaves the U.S. and will mean less protein for U.S. consumers which will support chicken and ultimately pork prices.
To sell to China no Ractopamine (paylean) can be fed. The importance of JBS and Tyson to ban Paylean by the first of January (180,000 head combined a day) can-not be overstated. This will create a huge source of more pork for China. Both companies pulled Paylean out for no other reason than the recognition of potential sales to China.
Watch U.S. pork sales ramp up further to China in early 2020.
Currently Hogs in Europe are bringing about 75₵ U.S. lb. liveweight. In the U.S. the price is 45₵ lb. liveweight. A 30₵ lb. spread. The big difference is the huge amount of pork they have been sending to China, which subsequently get it out of their domestic market.
Recently we read an article where the Euro price of pork was financially damaging their processors. There has been discussion about government financial support to processors? A lot different scenario than what is going on in North America.
This past week we had meetings with customers and prospects in Canada and the U.S. Collectively, 160 people. Our take home message from them is “When is this going to get better? We have had enough!” There is real anger from independent producers that they believe Packers are not sharing the pork pie. This will happen when one side is losing money i.e. producers.
For what it is worth we expect the current gross packer margin will be short term. As slaughter numbers decline seasonally, gross packer margin will decline. If cut-outs stay high or go higher, hog prices will chase them fast.
Summer futures are around 90₵ lb. Pork cut-outs are already 90₵ lb. It’s not insane to think Pork cut-outs can blow past $1.00 as hog supply seasonally drops, Tyson & JBS ramp up China Pork shipments, on top of Canada’s pork to China and now chicken leaving the U.S. to China. Historically high hog prices lead to low packer margins.
Maybe we are optimistic, but China hasn’t added U.S. chicken and Canada Pork to list of protein sources the last 10 days for no other reason than to fill their protein Black Hole. A hole that will need to be filled for a minimum of two years.
Get acquainted with the Global Mega Produce
A program of recognition led by National Hog Farmer sponsored by Genesus Inc.
Based in China, COFCO has global distribution in agriculture, grain, oil and foodstuffs, and it does business in more than 140 countries and regions around the word. Total assets were RMB 544.4 billion yuan while annual operating revenue was 470.9 billion yuan in 2018.
COFCO Meat Holding Co., Ltd got listed at HKEX in 2016, with its business involved in feed manufacturing, pig production, slaughter, meat processing and sales of fresh pork and import and sales of frozen meat products.
The company has two core brands for fresh pork – Joycome and meat products Maverick. In 2018, the company produced 2.55 million hogs, with production mainly based in the provinces of Jiangsu, Hubei, Jilin and Hebei.
In 2019, African Swine Fever hit China hard and greatly affected all producers in China. Well established companies such as COFCO are making great efforts to rebuild the Swine Industry in China.
Li Xingyuan, (GM of Operation Analysis of Swine Division) and Xu Jianong (GM) of COFCO Meat Holding Co., Ltd. with Mike Van Schepdael (Vice President )and Yaping Gu (General Manager China) of Genesus Inc.
Let’s all recognize COFCO as an industry leader and 2019 Global Mega Producer.
Pork Commentary, November 11th 2019 Jim Long, President-CEO, Genesus Inc.
Last June China stopped purchasing Canadian Pork. Up to that time in 2019 China’s pork imports from Canada were 15% of total imports, Just below Spain and Germany at about 18-20% each.
The closure put pressure on Canada-U.S. pork prices. The issue that triggered the stoppage was false labeling by a Canadian pork exporter to China that was missed by the Canadian Food Inspection Agency. There was also some political issues involved mainly due to the Huawei Executive being held by Canada for possible extradition to the U.S.
Last week much to the relief of Canadian and should be to U.S. pork producers China agreed to begin again to import Canada Pork.
Our observations:
Pork leaving Canada to China takes that pork out of Canada, U.S. and Mexico markets.
Less supply in Domestic North American market will support prices in all three countries.
Canada’s tariff on Pork to China is 12%. Currently U.S. is 70%
There are reports that over the next twelve months China’s pork production will be reduced by 24 million tons. U.S.A. – Canada – Mexico’s production in total isn’t much more than 15 million tons a year.
The amount of pork Canada can send to China is much more limited by logistics than demand.
China is a black hole for pork. It will go and disappear.
The arithmetic to send pork to China is aided by the raw economics.
We have done business in China for 8 years. Chinese are natural capitalists and traders. The arithmetic of buying pork in North America is simple- Pork cut outs 80₵ lb. last week. China Pork Cuts outs about $3.10 lb.
Example: buy Pork in Canada at 80₵ lb., pay 12% tariff. Sell Pork at $3.10 lb. That’s a spread of over $2.00 a lb. to cover costs.
A 200 lb. carcass = $400. It doesn’t take an Ag Economist to figure out the incentive.
Every 40,000 lb. (200 Head) shipment would be $80,000 gross margin. As they say “Where do I sign up to do this?”
What we calculated is probably over simplified but make it half of what we calculate, it sure the heck beats raising hogs the last couple years.
One of our points of this exercise is that beyond needed pork to fill the black hole created by ASF there is tremendous financial incentive for pork to move to China. We are not sure how fast Canada can get back to full speed shipping to China, but obviously big incentive to get it going.
Other observations:
Market Hogs are $700-$750 U.S. each in China. It is really expensive for some potential producers who have empty facilities or were backyard producers to purchase gilts.
Risk-Reward.
First, do they have money to place gilts and carry the cost to get to production?
Second, ASF has not been stopped. Invest and get ASF ?
Real issues for China to rebuild industry.
Last week we highlighted Meta Farms data that indicates average herd had 12.2% sow mortality. The top 10% 18.1%. This past week we read a feature article on National Hog Farmer blog about Pedicures- feet trimming for sows. Wonder why there are more dead sows? It’s poor feet and legs genetically.
If you wish to lower sow mortality, maybe ask the Genetic supplier if their genetics need feet trimming- Its cause and effect. We will categorically state that Genesus doesn’t.
We have been told that one genetic company actually encourages their customers to go to foot trimming school. That’s a fun job. Foot trim and haul out dead sows.
As Forrest Gump said “Stupid is what Stupid does!”
Meta Farms
MetaFarms is the major Analytic platform for over 500 production companies in Canada-U.S.A.
Below is last quarter finishing results July 1- Sep 30- 2018 and 2019
Get acquainted with the Global Mega Producer
A program of recognition led by National Hog Farmer sponsored by Genesus Inc.
Miratorg is Russia’s largest pig producer with a breeding base of 138,000 heads and a total of 400 thousand tons of pork marketed per year. Live pig production started in 2005 in the Belgorod Region of Russia and are currently in the process of doubling their pig production which is expected to be a 4 year project.
The company is fully integrated from field, live pig production including feed manufacture, slaughter and processing, including production of ready made meals and finally a chain of own brand supermarkets. Miratorg is one of the Russia’s largest employers in the agricultural sector of the economy, with more than 26,000 staff.As well as pork production, Miratorg are also the largest beef producers in Russia with a production output of over 80 thousand tons. They produce also Chicken and frozen vegetables all in fully integrated models.
Sergey Kulikovski – Executive Director, Miratorg and Simon Grey, General Manager Russia, CIS and Europe, Genesus Inc.
Our sense is that the U.S.-Canada swine production sector is getting worn out by the markets and lack of profitability over the last couple years. The hog market has eaten producer equity.
Producers see lean hog futures reflecting profitability, but there is a sense of mistrust if it will become reality. All know about China but the attitude is “Show me the money.”
We always hear about hedging and risk management using future options but we have never seen any data that indicate producer participation. Maybe it’s because most producers think of the lean hog futures as a Las Vegas Casino where the house always wins in the end.
Whatever the reason, our sense, lots of producers are questioning their long term future.
Other observations:
If Paylean makes hogs grow faster, the banning of Paylean (Ractopamine) by JBS and Tyson could mean 180,000 hogs per day grow slower. Will this cut carcass weights?
Feeder Pig break evens $70 for a 45 lb. pig. U.S. Cash Market $44. Spread as wide as we have ever seen. Never better time to buy pigs to put on feed.
The U.S. Sow price has had a big jump over the last month. See Below: (cents per pound)
Sow price
Oct 3
Nov 1
550 lbs. and up
31.5
46.48
500-550 lbs.
30.5
45.18
450-499 lbs.
28.0
41.97
400-449 lbs.
26.5
37.54
290-399 lbs.
26.0
37.62
Big Sows have jumped (550 lbs.) $82 a head in a month. Shows how fast a market can change. Markets usually move when we least expect. No one, we expect, thought sows could jump $82 a head in a month.
We believe at some point small pigs and market hogs, will have an unexpected jump.
The Real Marketing Edible Artificials Truthfully Act
A Legislative Act that addresses deceptive labeling, “The Real Marketing Edible Artificials Truthfully Act” would address deceptive labeling practices in alternate protein and require plant-based meat alternatives to be labeled as “imitation” meat.
The legislation introduced by Congressman Roger Marshal (R-KS) and Anthony Brindisi (D-NY) will codify the definition of beef for labeling purposes, reinforce existing misbranding provisions to eliminate consumer confusion, and enhance enforcement measures available to the U.S.D.A. if the Food and Drug Administration fails to take appropriate action.
The National Cattlemen’s Association is supporting the bill. As Pork producers we should too. It will only be a matter of time before “imitation” pork-meat will be marketed.
Let the “initiators” call it what it is. Don’t “piggy back” on our product names.
Chlamydia
Seems that the chlamydia- lack of estreus issue that has been a factor over the last while in some gilts is being recognised. We understand major credits are being offered as compensation for the problem. If you had problem best to get in line to get yours.
U.S. Exports
U.S. Pork Exports last week were the highest since July 2015, except for the two weeks earlier. China Exports reported last week (10, 220 metric tons), Second highest week on record. (Highest two weeks earlier). No doubt there appears to be more pork being exported.
The ASF issue is going to lead to more exports to China, Viet Nam, Philippines and South Korea.
Metafarm
Metafarms is the leading Pork Production- Analytic System. Below is the average of 270 farms, re: Sow production last quarter.
Sow production – July 1st to September 30th, 2019
Pigs Weaned/Mated female/Year
26.7
Litters/Mated Female/Year
2.36
Pigs Weaned & farrowing space
154
Pigs Weaned lifetime female
40.9
Average Total Born
14.6
Pre-wean mortality
11.9
Pigs/Weaned/Sow
11.8
Average Wean Age
20.4
Culling Rate
42.3%
Sow Death & Destroy Rate
12.2 %
Replacement Rate
50.7%
Couple Numbers jump out at us; Sow Death & Destroy Rate of 12.2% and Pig weaned lifetime at 40.9.
Seems to us there must be lots of female breeding stock that are far from robust.
Get acquainted with the Global Mega Producer
A program of recognition led by National Hog Farmer sponsored by Genesus Inc.
The Vall Companys Group story began in 1956 as an agri-food family-owned operation. The company’s operational model is based on the integration of all stages of the production process. With 213,000 sows in production, Vall Companys is the largest European independent Mega Producer swine company.
What has made Vall Companys unique is the development of an integration model, in which farmers provide facilities and labour. The rest of the services -animals, feed, veterinary control- are provided by the integrating company. The model was first used in the pork sector, and subsequently introduced in the poultry area. They are in all production chain
Key figures:
Total sales: 1.8 billion dollars
Production meat (thousand MT)
Pork: 340
Poultry: 135
Beef: 13
Cured ham: 13
Processed: 7
Sows in production: 213,000
Production of pigs: 5.3 million heads
Production of poultry: 72 million heads
Production of feed: 1.79 million MT
Flour: 470 thousand MT
Associated farms: 2,100
Activities: feed manufacturing, meat industry, animal production (swine, poultry and beef), flour milling, veterinary medicaments, merchandising and transportation.
Mercedes Vega, General Director for Spain, Italy & Portugal; Luis Pico, Sow Production Manager Vall Companys; and Jim Long, President-CEO, Genesus Inc.Mercedes Vega, General Director for Spain, Italy & Portugal with Jose Quirino Cabañes – Production Director and Alfredo Castell – Genaral Manager at Agrocesa, part of Vall Companys Group
Pork Commentary, October 28th, 2019 Jim Long, President-CEO, Genesus Inc.
Sometimes it pays to look at where we are compared to a year ago. · National Daily Base Lean Hog Price – 53-54% – October 24, 2019_64.50 ¢ per lb. – Oct 26, 2018_63.72 ¢ per lb.
· This past week’s hog slaughter – 2,693,000. – A year ago, same week 2,563,000 or plus 5%
· Pork Cold Storage- September 30 up 2% from a year ago -598,899 million pounds compared to 589,403 in 2018
· Year to date Sow slaughter on September 30 – 2018 – 2,242 million – 2019 – 2,235 million – Almost no change
· U.S.D.A cash average 40 lb. feeder pigs – This past week $44. – A year ago, same time $40.
Our Observation: More hogs to market (plus 5%) this year compared to last, but hog prices the same, reflecting better pork demand. Pork in Cold Storage and sow slaughter showing almost no year over year difference, while 40 lb. feeder pigs are 10% higher year over year.
Of note – last year feeder pigs went from the $40’s to $70’s by mid-December. We expect a similar scenario this year.
Below is U.S. Direct Feeder Pig Chart
Get acquainted with the Global Mega Produce A program of recognition led by National Hog Farmer sponsored by Genesus Inc.
Muyuan Group was established in 1992, its main business is hog farming (accounting for over 99% of its total revenue) which has been developed in coordination with other businesses including feed processing, swine genetics, hog slaughtering. Currently the total asset of Muyuan Group is 55.3 billion yuan with more than 40,000 employees and more than 150 subcompanies. The hog farming business covers 93 counties in 14 provinces all across China.
The subsidiary company – Muyuan Foodstuff Co., Ltd was listed in the stock market in January 2014, its current market value is over 150 billion yuan. In 2018, the company marketed over 11million hogs.
Facing with the severe situation caused by ASF, Muyuan Group has been dealing with it in a positive way and continuously groping for good experience and practice for prevention and control of ASF, which has resulted in a fast recovery and even further expansion in the number of sows in their production system. It is estimated that by the end of 2019, their sow inventory will reach 900,000 head.
Let’s congratulate on the great achievement and all recognize Muyuan Group as an industry leader and 2019 Global Mega Producer..
Photo from left to right: Yaping Gu-GM for Genesus China; Lyle Jones- sales direct for Genesus China; Li Yanpeng-production director for Muyuan Group; Tian Fangping-Technical consultant for Muyuan Group
Pork Commentary, October 21st, 2019 Jim Long, President-CEO, Genesus Inc
U.S. Pork Export Sales soared last week with 351,000 metric tons purchased. Of that number 152,600 tonnes were by China combined with the week before’s 142,200.
China purchased 294,800 metric tonnes the last two weeks. Farmer arithmetic equates that to about equivalency of 3 million market hogs.
To say things appear to be heating up is an understatement.
The total collapse of China’s hog production base is leading to the need for massive pork imports. You only need to see the announcement by Tyson Foods and JBS, two major U.S. packers with a combined daily harvest of over 170,000 per day. They both announced in the last few days that they will not accept hogs in the future that have been fed ractopamine (paylean). China will not purchase pork fed by ractopamine. You don’t need to be an ag-economist to connect the dots on what’s happening.
Neither company wants to miss out on China sales- they both want to increase profits. They see it’s here- record sales to China last two weeks. We expect we are about to see a surge in hog prices in the not too distant future. The promise of huge pork sales to China look like they are now a reality.
To put the last weeks export sales in perspective- Total U.S. Export to Oct 10th, is 1.180 million metric tonnes. Of the 1.180 million, 210,900 metric tonnes were sold last week! We are at record breaking export numbers with not only China, but to Mexico, Japan, and South Korea pushing exports to record levels.
When you look back over the last 10 days, market hogs have gone up over $20 per head. This was despite weekly hog marketing’s at record levels. Its obvious demand must have driven prices higher.
We expect some buyers jumped in trying to get ahead of the reality of higher prices coming.
Below is chart on U.S. Meat Export Federation- It says it all!
Graph source: www.usmef.org
China Price Update
China National Average Market Hog Price
36.4 rmb/kg = $2.33 U.S. liveweight a lb.
Highest Hog Price in Guandong
41.5 rmb/kg = $2.65 U.S. liveweight lb.
Retail Pork Price
40-44 rmb/kg = $2.60 – $2.85 U.S. lb.
Pork Belly Price
Pork Belly Price 60 rmb/kg = $3.84 U.S. lb.
LEMAN CHINA SWINE CONFERNCE
As the world’s largest and most influential swine industry event, the Allen D. Leman Swine Conference was founded in 1985 and has a 34 years history. The conference was introduced into China in 2012. Leman China is now considered one of the most valuable meetings in the swine industry through providing scientific solutions to the complex challenges facing the swine industry.
The 8th Leman China Swine Conference & 2019 World Swine Industry Expo was held on October 19-21, 2019 in the Zhengzhou International Convention & Exhibition Center.
Swine experts from North America, China, and Europe presented the latest information and scientific solutions in swine production. Much focus was given upon ASF and best practices to deal with the epidemic. It is expected this year’s Leman China has drawn about 6,000 participants.
Genesus exhibited at this year’s conference and Expo and found much interest in Genesus products and services as the Genesus Brand name has become quite famous in China.
Representing Genesus were: Yolanda Hou, Executive Assistant in China; Lyle Jones, Director of Sales China; Yaping Gu General Manager China; Edwiin Hong, Business Development China (Pictured left to right)
CHINA-U.S.A. PHASE 1 TRADE DEAL Good for U.S. Pork Producers
Pork Commentary, December 16, 2019
Jim Long, President-CEO, Genesus Inc.
Last Friday China and the United States agreed to a phase 1 trade deal with lots of details. The main point for ag is the China commitment to purchase $50 billion in agriculture products.
To us this means ramped up U.S. Pork sales for two main reasons;
We expect that the Phase 1 will be supportive to U.S. hog markets now with upside potential.
To put in perspective in regards to U.S. pork exports to China;
Other Observations:
Summary:
We have all been waiting for a reality on China. It appears to be happening with pork exports at record levels and new trade agreement that appears to have commitment for China to purchase more U.S. pork.
Projected January weekly slaughter marketing’s down 300,000 head per week from recent weeks. More demand-lower supply combined with pork cut-outs currently in 80’s, a recipe for rapid hog price appreciation.
GENESUS
Customer Testimonials
We made a promise, to deliver results…and we did!
“A very rigid and durable animal. Excellent litters and strong sows. Farrowing’s are quick and trouble free.”
Jem Farm, ON, Canada
“I work for 25 years in the pig industry. For 5 years now, I encountered Genesus. I have never seen such a good genetic as Genesus. We have changed immediately our genetics in Germany to Genesus and already selling over 20,000 gilts in 2019 with a production of 31.90 weaned pigs/ sow/ year.”
Genesus Deutschland (Germany)