Friday, April 26, 2024

Consumers hungry for food price answers

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By Andrew Heck

Most food categories at retail in Canada have shot up over the past two years. Pork is a notable exception, but many of the same challenges that exist with other products impact the pork value chain just the same.

Canadian consumers are demanding an explanation for the sticker shock they are experiencing at the grocery store.

In July 2022, general inflation in Canada was close to eight per cent – a four-decade high – cooling down to below five per cent in April 2023 and expected to move lower yet heading into 2024. Food price inflation, however, has continued to hover around 10 per cent for about a year. Even as general inflation eases, food price inflation does not appear to have followed suit.

Coincidentally, in the past year, profit margins for Canada’s major grocers were upwards of 10 per cent. Meanwhile, on the side of food production and processing, higher input costs, lower commodity prices and other factors have spelled negative margins for hog farmers and meatpackers.

When it comes to explaining why Canadians’ grocery bills are so steep, little of substance has been provided by those who know why or have the ability to do something about it. Grocery executives continue to pay themselves generously while shoppers watch their weekly bills get bigger. While it is impossible to offer a comprehensive explanation for all food categories, which stakeholders are making the most off struggling consumers?

Producers, processors and retailers are all within their rights to concern themselves with their bottom lines. Capitalism, at the end of the day, still reigns supreme in all parts of the value chain, just as in most sectors of our economy. While profit motive undoubtedly belongs in the equation, it would be inaccurate to suggest all stakeholders have been raking in the dough. The closer you look, the more obvious it becomes.

In the Canadian pork value chain, for years, producers and now processors have seemed to absorb a greater proportion of the mounting costs that retailers are able to recoup simply by charging more for their goods. As Canada’s grocery sector has steadily moved in the direction of oligopoly – with fewer and fewer legitimate choices – has big business finally reached a tipping point when it comes to providing essential food products and services, fairly, for Canadians?

As time goes on, consumers are rapidly losing faith in the belief that the cutthroat practices of large-scale supermarkets are leading to greater purchasing power for them. Certainly, the data – or lack of transparency around it – is making the disparity plain to see.

Grocers garner harsh criticism

Grocery chain bosses were called upon to justify their business practices against growing accusations of profiteering amid soaring food price inflation, sometimes called ‘greedflation.’

Starting from the most visible part of the agri-food value chain, grocery stores were once trusted as ethical, people-minded enterprises that play a crucial role in any community. While at least part of that assumption remains true, skepticism has become a popular perspective.

When COVID-19 struck in early 2020, short-term losses for grocers quickly mounted, in response to gathering restrictions imposed by government and a need for physical distancing, masking and sanitation. As grocery employees were considered essential frontline works, several grocers began offering ‘hero pay’ to recognize and retain employees. At the time, it was surmised these necessary adaptations could account for immediate food price increases. While reasonable-sounding, pandemic living eventually became the norm. With restrictions already well-established, employee incentives were taken away, but prices kept climbing.

Executives from Canada’s three largest grocers – Loblaw Companies Ltd., Empire Company Ltd. and Metro Inc. – were summoned before the House of Commons Standing Committee on Agriculture and Agri-Food in early March to clarify the connection between food prices and corporate profits.

Those questioned included Galen Weston Jr., Chairman & President, Loblaw, with more than 2,400 stores in all provinces, including Real Canadian Superstore, No Frills, Zehrs and Provigo; Michael Medline, President & CEO, Empire, with more than 1,500 stores in all provinces, including Sobeys, Canada Safeway, Thrifty Foods and Longo’s; and Eric La Flèche, President & CEO, Metro, with nearly 1,000 namesake, Super-C, Food Basics and Marché Ami stores in Quebec and Ontario.

The committee wanted to find out whether current grocery prices equitably reflect the supply chain challenges that have cropped up since the start of COVID-19, when inflation and grocery revenue began to grow in step with each other.

When asked about his company, Weston used the example of a $25 grocery spend and suggested that $24 of that total amount represents accumulated supply costs, while only $1 represents profit for Loblaw.

“If we didn’t raise retail prices as costs went up, the companies that we operate would disappear almost instantly,” he said. “A hundred per cent of the profit in the food industry could go into lower food prices, and the price of the basket for that customer would still be 24 dollars.”

When pressed further to elaborate on his reasoning, Weston doubled down on his analogy, effectively silencing any meaningful inquiry.

“This one dollar of the 25 dollars is what we’re focused on, and all of this time, effort and exposition is focused on that amount,” he said. “No matter what is there – and there isn’t anything of significance there – that isn’t going to change the cost of food.”

When asked about Canada’s incoming grocery code of conduct – which is expected to be in place soon – Weston insisted Loblaw already negotiates with suppliers cooperatively, despite instances of “bad judgment on both sides,” referring to his company and manufacturers.

“We believe that we do business in a fair and transparent way 99 per cent of the time… It’s really important that any code or any set of practices that we engage in are properly balanced,” he said.

That one per cent discrepancy may have been a subtle reference to an earlier controversy that many Canadians will remember: in 2015, Loblaw sister company Weston Foods came under investigation by the Competition Bureau of Canada after being accused of colluding with Canada Bread as part of a price-fixing scheme that artificially inflated bread prices at retail for more than a decade. While the allegations were never proven in court, in 2018, Loblaw reacted by offering $25 gift cards for Canadians to use in its stores – a fitting and precedent-setting amount, foreshadowing the latest debacle.

In early April, just a month after the parliamentary hearing, Loblaw announced that Weston would receive a pay raise this year, based on last year’s stellar performance. Not long after, the company announced it would commit $2 billion to open 38 new stores and renovate 600 others. Certainly, expansion, not stability, remains the dominant mindset for Loblaw, as the company battles with only a handful of others like Empire and Metro – not to mention Costco Canada and Walmart – for highly coveted market share.

Suppliers squashed in several ways

Canada’s meatpackers have faced an ongoing list of problems in recent years, most of which are beyond their control. Others stem from unfortunate investments into expanding processing capacity or experimenting with non-meat products.

While grocers continue to triumph, in meatpacking, the situation is far less encouraging for business.

When it comes to pork processing, profits for meatpackers were healthy and improving in the years immediately preceding COVID-19, but since 2021, that relationship has worsened from growth, to stagnation, to deficit.

Factors such as reduced access to high-volume pork markets like China, coupled with difficulties around finding workers, have hammered at the earnings of Canada’s largest pork processors, including Maple Leaf Foods, Olymel and HyLife.

Maple Leaf Foods reported its financials for the fourth quarter of 2022 in early March, including a loss of more than $40 million.

A cyber-attack led the list of problems, along with disruptions to the movement of pork and routinely poorly performing plant-based protein, from which the company has continued to lose money since it began investing in meat alternatives in 2017.

However, between 2021 and 2022, Maple Leaf’s sales increased from $4.5 billion to $4.7 billion total. Adjusted earnings for the company’s real meat category, while consistently positive, dipped from $527 million to $379 million, or by 28 per cent. Plant-based proteins managed to lose 17 per cent less, at only $105 million in the red, compared to $127 million the year prior.

Olymel, on the other hand, has faced a protracted series of disappointments in the past year. In November, the company announced the closure of its slaughter facility in St. Hyacinthe, Quebec. Then, in early February, the company closed two further processing plants in Blaineville and Laval, followed by an additional slaughter facility in Vallée-Jonction, in mid-April.

According to the company, “the decision was necessary to stop losses in the fresh pork sector, which have amounted to more than $400 million over the past two years and are jeopardizing the entire company’s profitability.”

In 2019, Olymel acquired rival brand F. Ménard for a handsome, undisclosed amount, consolidating a good chunk of the province’s hog production, integrated with the company’s existing pork processing capacities and related functions, like feed milling and trucking. It was expected that this decision would eventually pay off, but the unfortunate timing, occurring just prior to COVID-19, has proven daunting.

For HyLife, cracks have begun to show more recently, in early April, as the company has struggled to sell off its slaughter facility in Windom, Minnesota, originally purchased in 2020, right as COVID-19 had taken hold. The plant was acquired to increase overall capacity, in addition to HyLife’s main plant in Neepawa, Manitoba.

A common domestic theme for all meatpackers has been a lengthy list of labour concerns. While HyLife never experienced any plant closures due to workers being infected with COVID-19, Maple Leaf’s plant in Brandon, Manitoba; Olymel’s plant in Red Deer, Alberta; and Conestoga Meats’ producer-owned plant in Breslau, Ontario were all shuttered for several weeks due to outbreaks in 2020 and 2021, resulting in disruptions to the supply of pigs and pork.

During the plant outbreaks, at least one worker died as a direct result of contracting COVID-19, causing a news media stir and adding fuel to the fire for critics of the meat industry. On top of that, as temporary and permanent plant closures across the country have resulted in the laying-off of workers, labour rights advocates and unions have pressured governments to adopt stricter measures to protect workers. While the desire to support workers is entirely justified, there is no question the circumstances surrounding those outcries have had the effect of gradually chipping away at processor margins.

Given the examples of Maple Leaf, Olymel and HyLife, it is clear food suppliers have been under the gun more intensely in recent years. In some cases, companies’ misfortunes have resulted from untimely or misguided business decisions, but in other cases, uncontrollable pandemic-related factors have taken a toll that has been felt at both ends of the value chain.

Pig and pork production absorb heavy blows

Retailers have been taking an increasingly larger share of pork value in the past five decades, while the gap between producers and processors remains relatively consistent, by comparison.

Hogs raised by Canadian producers – processed at facilities like those owned by Maple Leaf Foods, Olymel, HyLife and a few others – are regulated by the Canadian Food Inspection Agency (CFIA), representing upwards of 99 per cent of total production across the country, though this does not translate to the volume that is sold in Canadian grocery stores, which can include cheaper pork of foreign origin.

Hogs procured by CFIA-inspected processors are priced according to market formulas derived from mandatory, daily reports compiled by the U.S. Department of Agriculture (USDA), which reflects aggregated prices paid by processors to producers in the U.S. In Canada, no such reporting mechanism exists, which has been an ongoing problem that provincial pork producer organizations and the Canadian Pork Council (CPC) have been trying to address for years. Political buy-in has been lukewarm, at best.

Between 2000 and 2020, it is estimated that Canada lost more than three-quarters of all independent hog producers, while consistently growing the size of the country’s total pig herd. This phenomenon is not due to a declining interest in raising pigs or selling pork, but profitability barriers that have made modern agriculture inaccessible without sufficient capital. Partly because of this, one approach by processors has been to vertically integrate their hog supplies by either owning barns outright or independently contracting producers as finishers for more of the hogs that end up at their plants.

This suggests that, while we have fewer farmers making a living off commercial hog production, those few have expanded their operations to make up the difference, as global demand for protein continues its bullish trajectory. As the number of hogs produced has levelled off in recent years, and the number of producers continues to drop, it is easy to speculate as to why, given the situation at-hand.

Since the 1970s, data gathered from the USDA suggests the share of value between producers, processors and retailers has not stayed proportional. Extrapolating this data for a Canadian context is not a perfect comparison, but given the inter-connection between our national industries, the relationship is about as close as we can get without better, currently non-existent data.

Canadian market hogs are priced using processor-specific formulas that reference the USDA’s information, as a starting point. From there, hogs are measured against a ‘grid’ that includes a range of weights falling below or above an ideal target, which sets the starting price. Then, carcasses are assessed for indicators of quality – like fat marbling, loin depth and colour – which may be paid out in the form of premiums and bonuses defined by a producer’s contract.

To evaluate hog prices in a general sense, market analysts use a standardized 100-kilogram ‘dressed’ carcass, referring to one that has been slaughtered and has had most of its non-meat features removed. Considering the financial share of that carcass, one that fetches a producer $200 can be sold by a processor for roughly $300 in profit once broken down into ‘primals,’ or large, basic cuts. Most primals are sold to wholesalers internationally or domestically, to perform further processing in any number of ways.

Fresh or frozen cuts like loin chops, racks of ribs, belly portions and shoulder roasts – along with cured products like bacon, deli meats and sausages – are among some of the many options Canadian consumers have when it comes to purchasing pork in-store. While detailed sales data for these items is not publicly known, even taking a low-end estimate of $8 per kilogram – the price of ground pork at Real Canadian Superstore, as of early 2023 – that would mean the full value of the meat from a hog carcass approaches $800 at retail, which is, conservatively, about four times what a producer earns and at least twice what a processor earns.

While the numbers cited here cannot be exact and are highly variable, a picture of proportionality begins to emerge: producers and processors, together, take home only a meagre slice of the total value of the pig, most of which belongs to the retailer and its middlemen. Granted, these middlemen represent additional input costs for retailers, on top of losses attributed to meat that goes unpurchased and is wasted. However, until retailers choose to shed a brighter light on the breakdown of their costs, as a way to rationalize what they charge and justify their margins, consumers and the rest of the pork value chain are left guessing.

Farmers bear the brunt of the burden

The pork value chain can be very complex on certain levels, but it starts with the farm and producers who are committed to animal care, food safety and traceability, backed by quality assurance programs that are validated and audited by veterinary experts.

Consider what it takes to get the pig from farm to fork: from ‘farrowing,’ or birth, the pig is raised to market weight at six-months-old, then hauled to the processing plant, where the next steps take a mere matter of days. From there, its outputs are sold and shipped all around the world to end users who may get weeks or months of shelf life out of the product, depending on how it is prepared or stored.

All in all, while processing and retail are indispensable parts of adding value to the hog carcass, most of the time commitment – and much of the up-front risk – lies with the producer. Producers, being at the beginning of the value chain, have little to no recourse when it comes to affecting the prices paid for their pigs, while facing the same unstable market conditions as processors, with none of the mark-up ability of retailers.

While input costs have increased across the board throughout agri-food, livestock feed, energy costs and insurance rates have gone up faster than hog prices. When looking to re-invest into a hog operation, including modernizing barns for eco-efficiency and animal welfare standards, producers have suffered, as the confidence of lenders has eroded. On top of that, if a producer underperforms in another area of his total farm operation, such as reduced crop yields during an off-year, government-funded business risk management (BRM) programs are often insufficient to balance out total losses.

With everything considered, it is hardly short of miraculous that many of Canada’s food producers are able to stay afloat at all. 

Market downturns make it tougher

The predictable yearly ebb and flow of pig prices – lower in winter, higher in summer – experienced a particularly tragic anomaly in mid-2020, as African Swine Fever (ASF) and COVID-19 ravaged the industry for months.

Market conditions for pigs and pork took a sharp turn, starting in late 2018, with the outbreak of African Swine Fever (ASF) in China. Almost overnight, pork values for processors jumped dramatically as China looked to fill the void left by widespread culling of animals on its farms, which led to a situation of unexpected low supply but predictable high demand for protein, with pork being the cultural preference even among other options like beef, chicken and seafood.

Shortly after ASF hit China, hog prices in western Canada were around $150 per hog, with cost of production estimated at around $180, signifying a $30 loss. This period continued until 2020, when COVID-19 struck. While summertime usually spells the highest hog prices, they sunk to around $140 per hog, as costs approached $200. Producers were then losing more than $50 per hog, on shipments of about 200 hogs per week, for many weeks of that year.

Recognizing the severity of what was happening, western Canadian producer organizations – B.C. Pork, Alberta Pork, Sask Pork and Manitoba Pork – approached processors with a humble request to work toward bringing about some relief in their pricing structures. Olymel made favourable adjustments to its base pricing and bonuses, while Maple Leaf introduced a pricing floor, which temporarily kept base prices from falling too far, too fast. Separate from the producer organizations’ request, HyLife had recently introduced base pricing using cut-out (primal) values, rather than whole carcass values, which were lower. The net effect of all these changes was a small boost for producers. But, despite the efforts, which were appreciated, little could have prevented the damage that had already been done.

This situation ended up financially crippling many, as a result of that comparatively short period of market volatility alone. Some producers managed to limp through the most difficult parts, while others did what they could to escape the industry with as little collateral damage as possible.

While hog prices stabilized and became favourable through much of 2021 and 2022, costs kept climbing to historical highs. In good times, producers may have profited between $60 and $100 per hog for several weeks in the summer months of 2022, descending to break-even, at a low point, during this past winter. As of the first part of 2023, hog prices were sitting at $230 per hog, though future pricing estimates suggest this summer will be mediocre, if not outright negative. Compounding the problem, costs have yet to cool down, now upwards of $240 per hog.

It would seem that the roller coaster ride is set to continue, and for those who are unable to stomach the inevitable ups and downs, they may be looking to bow out. Should the number of active producers, once again, shrink faster than the reduced hog supply can be displaced, it will have a ripple effect on everyone, from processors and retailers, to consumers.

Producers and consumers deserve better

Despite the pork value chain’s internal struggles, for consumers, pork stands out as a candidate for being incredibly nutrient-dense and easy-to-prepare, along with being unusually affordable in the current high-price environment.

Retail pork prices by weight have actually declined year-over-year, making pork attractive relative to its red meat cousins, poultry and heavily promoted fake meat substitutes. Other categories of food – like produce, bakery and dairy goods – have increased.

And while the Canadian public should be encouraged to keep purchasing pork – undoubtedly, a mutual benefit for the consumer and industry alike – it may enhance their understanding if they took a deeper dive into the parts of the value chain that are less observable to the average person.

In the absence of clear answers to questions around food prices, and solutions to bring them closer to what is considered ‘fair,’ consumers will continue to eat. For the vast majority, that means frequenting grocery stores, often with few true options or cost savings to be had. Unfortunately for consumers, just like producers, most of the bargaining power does not belong to them.

At the same time, as pig prices fail to represent an equitable share of producers’ efforts, and as processors grapple with treacherous territory in the global pork marketplace, farmers and meatpackers will continue to deliver their products – feeding Canadians and the world. But for how long can it last in an economically sustainable fashion, under current constraints?

Consumers should not feel guilty about buying pork at discounted prices – hypothetically and unintentionally on the backs of producers – but they should keep searching for the reasons why grocery prices are the way they are, no matter the food item. Producers, too, will keep pressing.

Supply management bill tampers with trade tools

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By Dan Darling

Editor’s note: Dan Darling is President, Canadian Agri-Food Trade Alliance (CAFTA). For more information, contact Adam Taylor, Interim Executive Director, CAFTA at exec.dir@cafta.org.

Supply management of certain Canadian agricultural outputs is a given. But what about the 90 per cent of other commodities that rely on access to global markets?

Few pieces of legislation being considered by Canadian parliamentarians have the potential to jeopardize more sectors than they’re seeking to protect like Bill C-282, An Act to amend the Department of Foreign Affairs, Trade and Development Act (supply management).

In summary, the bill – put forth by the Bloc Québécois – would prevent Canada from ever contemplating concessions in sectors regulated through the system of supply management, specifically, dairy, eggs and poultry. As an organization representing the 90 per cent of producers, processors and agri-food exporters that rely on access to global markets, we believe this bill is ultimately unnecessary and runs counter to Canada’s broader economic interests.

First, this bill contradicts Canada’s long-standing trade policy objective of achieving comprehensive trade outcomes, as described by the Department of Foreign Affairs, Trade and Development Act.

Furthermore, tying the hands of trade negotiators before talks even begin will result in less ambitious pursuits across the board, as other countries will counter by excluding products or sectors from discussions where Canada has offensive interests.

This bill will also encourage other sectors to also seek exclusions from trade talks and will send the signal that protectionism is acceptable and indeed desirable – a public policy course that would be devastating for an export-dependent country like Canada.

Second, C-282 erodes Canada’s credibility as a leading voice for free and open trade. We shouldn’t kid ourselves; other countries are watching this legislation closely, and this bill’s passage will have immediate negative consequences as we fully expect many of our trading partners will respond by threatening to refuse to extend, review or modernize existing trade agreements. It would establish Canada as an undesirable trading partner and would limit our ability to even be invited to a seat at the table of various bilateral and multilateral negotiations. Perhaps most worrisome, this legislation contradicts Canada’s leadership at international forums like the World Trade Organization (WTO), where Canada opposes protectionism and supports free- and rules-based trade.

Third, this legislation is bad policy for a highly diversified economy like Canada’s. Removing options from trade negotiations out of the blocks would lead to less commercially meaningful results for all of Canada, because it would encourage every country to avoid making any significant concessions, especially in sensitive areas.

Simply put, prioritizing the economic interests of the products or sectors excluded above the economic interests of any other sectors in Canada is bad policy for a country where one-in-six jobs is generated by exports. And, make no mistake, this approach to trade negotiations will harm future growth opportunities for sectors that depend on trade, such as agriculture, energy, manufacturing, forestry, mineral products and consumer goods.

Canada’s ability to conduct free- and rules-based trade, without unnecessary obstacles, is fundamental to supporting our commitments to feeding the world. Image © Paul Kagame

Finally, C-282 is bad from a food security perspective. International trade supports the accessibility and affordability of food. We cannot achieve global food security without free and open trade. As the world’s fifth-largest food exporter, Canada has taken on an obligation to feed the world. Closing access to markets is closing access to food. To that end, this bill also contradicts Canada’s commitments in recently signed declarations on food security at the Group of Seven (G7) Summit, Group of 20 (G20) Summit, WTO and Asia-Pacific Economic Cooperation (APEC) forum.

It should be noted that support for supply management and protecting it in trade negotiations is already long-standing government policy, from successive Canadian governments of all stripes. In fact, all of Canada’s recent marquee trade negotiations have been successfully concluded while protecting Canada’s system of supply management.

At the end of the day, there is no need or benefit for Canada to embrace and entrench protectionism on the world stage and set a dangerous precedent that delivers few – if not zero – benefits to the Canadian economy.

This is not an agricultural issue; this is a trade strategy and negotiation issue for an export-dependent country. We are calling on Canadian parliamentarians to look at the wider potential implications of this bill beyond the perceived short-term political clout.

Spring 2023 – Editorial

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The Spring 2023 edition of the Canadian Hog Journal is here!

Like most Canadians, my grocery bills are eating up more of my income, but I have to wonder where the money’s going. Producers can certainly tell, it’s not going to them. Consumers, too, are questioning the cost of food, and they’re right to be concerned. While pork remains refreshingly affordable, achieving a greater understanding of how costs and profits are distributed across the agri-food value chain is key to levelling the playing field for everyone.

Though value chain disparities certainly exist, it is in the entire industry’s best interest to work collaboratively to continue promoting pork. While the benefits of promotion are widespread, veteran ag journalist Will Verboven believes producers have the most at stake.

When it comes to analyzing the economics of agricultural commodities, not all products are equal, either. Supply management has been a boon for producers of dairy, eggs and poultry. Politically, it is one of the few issues on which all federal parties are in total agreement: supply management must be defended! But has this unwavering support for the system, favouring some commodities over others, come at the expense of trade relationships for the red meat sector? Canadian Agri-Food Trade Alliance (CAFTA) boss Dan Darling thinks so.

The federal government has also been aggressive in pushing its idea about sustainability in agriculture. This spring, the government said, “We want to hear from you!” when it comes to “a roadmap to meet our environment and climate goals.” During multiple consultation sessions, they heard, but are they listening? The Canadian Pork Council’s (CPC) policy expert, Katerina Kolemishevska – who provided critical, informed contributions to those discussions – weighs in.

The Canadian Meat Council’s (CMC) government relations manager, Lauren Martin, has been blazing a trail and meeting with a lot of important people since coming on board less than a year ago, trying to get political buy-in for meatpackers. Reflecting back on Canada Pork’s Annual Conference – joining representatives from pig production and pork processing – she offers her thoughts on the big picture.

Research in this edition is all about feeding weaners, including the effects of using high levels of zinc oxide and strategies to effectively encourage growth. Consider how these topics affect your production.

Going to World Pork Expo in June? The Canadian Hog Journal has a media partnership with the show, and I will be there. The organizers have graciously given me a free admission promo code to provide to readers, so if you are planning to go, let me know, and I will gladly send that to you by email. If you aren’t going, don’t miss the coverage in our next edition!

Your questions and comments – whether supportive or critical – are always welcome by contacting andrew.heck@albertapork.com. Healthy discourse requires diverse opinions and speaking up, which is why I want you to ‘follow’ the Canadian Hog Journal on Facebook and Twitter (@HogJournal) and take part in advocating for our sector, relying on your experience and expertise.

Industry Demand & Profit Challenge

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Pork Commentary
Jim Long President & CEO Genesus Inc
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April 27, 2023

Last week’s commentary seemed to resonate more than any commentary we have written in 20 years. Our premise the National Pork Board is spending money from producers Checkoff to focus on a sustainability bureaucracy of environmentability issues, animal welfare and public health. This while not seeming to focus on the industry crisis of negative margins, lower pork demand and continual market share loss. Seems the bureaucrats at National Pork Board are more concerned about public health then the health of the producers who pay the Checkoff ($70 million per year). Question, are you seeing value from the 10s of millions paid in Checkoff year after year? A billion dollars in Checkoff in not many years. To be clear we favor Checkoff. We don’t value the direction of its use. 

We have lost market share and Pork per capita consumption has flatlined for decades. In the meantime, we see no efforts to address the main issue. We continue to produce pork that doesn’t deliver taste. Are there any other reason last Friday US pork cut-outs at 80.84 lb. and Beef at $3.06 lb. Almost four times Pork. If we had half of the Beef cut-out = $1.53? Life would be good. Instead, we languish as an industry with losses and a failing leadership being funded by the millions and Checkoff dollars.

What we say is probably not appreciated by the bureaucrats that run our National Pork Associations. We seem as an industry to tolerate mediocrity. How do we measure success? To us profits and market share should be the main measurement for assessing the effectiveness of our Pork Organisations. How are we doing? If they can’t deliver maybe time for some real change. As producers we need to demand results in return from Checkoff money not more slogans and bureaucracy. Our livelihood depends on upending the status quo. We need a revolution.

Below are some reader comments from last week’s commentary:

Spot on with your commentary! Where is the product development? Where is product marketing? Where is our social influencer presence?  It absolutely drives me crazy that our industry doesn’t seem to want to do anything different when incurring major losses!! Why are the losses accepted so easily? 

I have cussed your commentary in the past so I also need to praise your comments. Not only did I like what you said I have been on the phone with producers also telling me ” jim nailed it” I have never had this many people call me about your comments as I did today. And it just came out. Good job jim!

Jim
I appreciate your commentary today, so frustrating to see money being managed is such a misguided manner.

Well Said Jim

Great commentary I would like to add to the topic of demand we hear now all the time from the Pork Producers associations in collaboration with the veterinarian association and I suspect a few politicians about how important this VFD rule is to help cut back on antibiotic use I was at a meeting the other day and a veterinarian said antibiotic use has been cut in half but now, of course they’re going to make it even stricter so my question to them is if we have cut way back on antibiotic use why hasn’t demand picked up if they think the consumer is so concerned about it?

I wonder with those facts, do any of the “USA or CDN meat players” come and discus this this situation with you??? What is their solution???

Great article and 100% accurate. Glad Genesus has continued the fight about meat quality. We just got too tired to keep up the fight in an industry that doesn’t see the need for quality pork products. National Pork Producers doesn’t care or doesn’t have a clue to what is happening in our industry with independent producers.

Spot on!!

Amen. 100%

Jim, 

You are spot on, but someone needs to take the lead, and that could be you. Why, because people know and respect you!!!

Spot on

One of your best 

National Pork Board like Nero “fiddled while Rome burned.”

Jim:

I’m in your corner with the National Pork Board and the Illinois Pork Producers.  Check off $$ are continually wasted.

Love your commentaries Jim … thanks always for sharing!  GO PORK!!

God bless what you do for the Pork industry!

U.S. National Daily Pork Carcass Cut-outs 78.25 / U.S. National Daily Beef Cut-outs 301.93

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Pork Commentary
Jim Long President – CEO Genesus Inc.
April 17, 2023

Doesn’t take an Ag-Economist to point out the massive difference between the wholesale price of Pork and Beef cut-outs. It’s a terrible testament to Pork demand. It’s a terrible testament to what consumers prefer to spend their money on. It’s obvious Beef by almost a 4 to 1 ratio. As a person who has everything invested in the Pork industry, it is an alarming issue.

We have had people send us emails saying the Pork price debacle issue is inflation and lack of consumer buying power. If that’s the case, why do consumers have money for Beef? Beef is near record price levels while the Pork price languishes. Consumers have money they just prefer to spend it on Beef, not Pork. At the staggering 4 to 1 ratio.

The Pork Checkoff money spent to have “The Other White Meat” has been successful we now have raced to the bottom. Whole Chickens last week $1.39 lb. Tom Turkeys $1.70 lb. We now it appears to us made a product that sells for less than not only Beef but Chicken and Turkey.

What is our National Pork Board doing about our terrible Pork demand? The one that collects 10’s of millions in Checkoff a year. They appoint more bureaucracy a National Sustainability Officer to lead a sustainability team of five public health, animal welfare, and environmental experts. To us, sustainability isn’t more bureaucracy and costs. It’s about efforts to make our industry profitable. That’s real sustainability. The industry is suffering from not only poor demand that sucks but financial losses that are crippling many producers and some packers. (This past week’s announcement of two plants shutting – one in Minnesota – the other in Quebec. No one shuts a plant if they are making money).

Where are our Checkoff dollars being used to promote demand and better Pork? Is it about more hires and a bigger bureaucracy to fill more cubicles? Maybe you agree with the direction of our industry. Maybe we are out of step saying losing money is not sustainable. Maybe we are wrong to say Beef taste has consumers paying more. We believe when a Major Genetic Company has a customer banquet and serves Beef it is in itself a condemnation of what some in our industry think of the Pork (also the crap the Genetic Company produces). 

We need a taste revolution, or our industry will shrink from financial losses. We need to bring up demand. Sustainability bureaucrats focused on public health, animal welfare, and environment will not turn around Pork demand or profits. It’s like the story of a major company losing millions a week having a companywide meeting about lowering cellphone use to cut costs. It didn’t matter and didn’t help. They are no longer in business.

Real Sustainability is a profitable industry not chasing woke issues at the expense of the driver of real Pork demand. Taste.

Weaning device wins prize and praise

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By Stacey Ashley

Editor’s note: Stacey Ashley is Public Relations and Communications Manager, HyLife. She can be contacted at stacey.ashley@hylife.com.

The F.X. Aherne Prize for Innovative Pork Production recognizes individuals who have developed either original solutions to pork production challenges or creative uses of known technology. The prize is named for the late Frank Aherne, a professor at the University of Alberta, who was a major force for science-based progress in the Canadian pork industry.

HyLife’s Robert Lafrenière (left) and Barak Doell (right) accepted the F.X. Aherne Prize, for their team’s invention of a weaning ramp to improve animal care.

A new HyLife weaning ramp has the potential to improve animal care across the industry. The device was awarded the F.X. Aherne Prize during the 2023 Banff Pork Seminar.

The ramp was created by HyLife’s Continuous Improvement (CI) Team, a group of engineers dedicated to solving challenges while improving animal welfare. After listening to farm employees, it was discovered that picking up piglets and bringing them to the employee performing vaccination placed a strain on both the staff and animals.

The award-winning invention

To use the invention, piglets enter the alleyway and towards the ramp, in groups. Once up the ramp, a gate using a pulley system is lowered. Employees can easily begin picking the piglets from waist height to be vaccinated. The animals are then gently placed on a slide, depending on their sex. Gradual sloping slides, off each side of the station, bring the piglet back down slowly and safely to ground level.  

“We knew there was a better way. We prioritized animal care and leaned on our in-house experts and CI team to develop a creative solution,” said Lyle Loewen, Senior Vice President, Farms Division, HyLife. “The result is a ramp that eliminates the need to pick up piglets. This means less stress and more safety for both our animals and employees.”

Even before winning the Aherne Prize, the in-house invention captured the interest of renowned animal behavioralist, Temple Grandin.

Renowned animal behavioralist, Temple Grandin, toured HyLife’s farms and processing plant in Neepawa, Manitoba, praising the team’s efforts.

“This innovative system should be in every sow farm for vaccinating weaned piglets… I can’t say enough good things about it,” said Grandin. “It should go industry-wide. I was amazed how well those little pigs used the ramp; that’s the kind of stuff that makes handling easier.”

Grandin is widely considered a leading expert in her field, and as part of HyLife’s ongoing commitment to animal welfare, the company recently engaged the professor of animal science and distinguished author. She traveled to Canada to extensively tour operations, including HyLife’s farms and processing plant in Neepawa, Manitoba. During her evaluation, Grandin paid close attention to animal handling practices and was extremely impressed with the uniqueness of the award-winning ramp.

HyLife is now investing in the ramps across all sow barns and continues to look for creative ways to improve animal care and employee safety.

Swine health topics target disease mitigation

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By Lexie Reed

Editor’s note: Lexie Reed is a food animal veterinarian based in Lethbridge, Alberta. She can be contacted at lexiereedvm@gmail.com.

Swine health is an important and popular topic every year at the Banff Pork Seminar, and 2023 was no different. This year, breakout sessions included information about Streptococcus suis (Strep suis) and Escherichia coli (E. coli) in the nursery, along with a veterinary practitioner’s perspective on circovirus in the present and future.

Brooke Smith of Cargill Animal Health and Nutrition, and Ryan Tenbergen of Demeter Veterinary Services, led these respective sessions, focusing on what should matter to producers.

Strep suis and E. coli in the nursery

Nutritional strategies can help manage disease, but not by themselves, according to Brooke Smith of Cargill Animal Health and Nutrition.

Smith led session attendees through novel health management tools for the purpose of improved nutrition – an area of innovation that combines her Doctor of Veterinary Medicine with her PhD in swine nutrition.

“Increased virulence of common pathogens and increased resistance to antimicrobials creates an opportunity for additional health management strategies. If we know the mechanism by which a pathogen causes disease, that can give us a clue as to what nutritional intervention is best able to target the pathogen,” said Smith. “When it comes to nutritional interventions, I have two approaches I can take: directly interfering with the pathogen’s ability to colonize the pig, or improving the immune system’s response to the presence of the pathogen.” 

These approaches can be deployed on common nursery pathogens like Strep suis and E. coli. Strep suis infection in nursery pigs is often a function of combined factors: primarily, concurrent viral disease, ventilation and temperature; genetic predisposition; high stocking density; and dietary changes.

“All commercial pigs are a carrier of at least one serotype of Strep suis,” said Smith. “When we move pigs into a nursery, some pigs have never seen the serotype that the other litters have. We combine all of those external stressors to a naïve population that is faced with a serotype they have never seen before, and it creates an opportunity for clinical disease to occur. Tonsilar epithelium is the predominant site of colonization in Strep suis serotypes found in North America.”

Nutritional strategies to limit colonization include using amino acids to manipulate pig growth rate and to increase nutritional support towards the immune system. Smith and her team at Cargill are exploring how reducing amino acid concentrations in the diet early in the nursery phase could help, by diverting these amino acids away from rapid growth, which puts metabolic stress on the pigs, towards the immune response. And then there are functional proteins, like plasma, that directly contribute to improved immunity.

“Because that infection is not localized to the gastrointestinal tract, and Strep suis spreads systemically after it colonizes the tonsils, I need to start thinking about nutritional strategies that are absorbed, metabolized or circulated, rather than just having an effect at the site of the intestine,” said Smith. “Not only is plasma a highly digestible and palatable source of protein, it also contains compounds like immunoglobulins that bind pathogens in the gastrointestinal tract, which is work that the immune system would have to do otherwise.”

Phenolic compounds – the natural defense molecules in plants – have direct antimicrobial properties and can be added to the nursery diet.

Smith believes increasing dietary fibre could help prevent E. coli infections.

Another ubiquitous nursery pathogen that Smith and her team are working on addressing is E. coli. The site of colonization of E. coli in the pig is the small intestine, where it binds specific receptors on enterocytes – the cells lining the interior surface of the small intestine. The expression of these receptors can be up- or down-regulated by age, genetics and prior or concurrent gastrointestinal disease like Rotavirus and coccidia. The severity of E. coli infection is increased by cool and damp environments, poor sanitation, the transition to a plant-based diet, reduced feed intake and high stocking density.

“For us as nutritionists, this means that we have the potential to use ingredients that will have prolonged contact with E. coli in the gut. Or I can use the diet to create an unfavourable environment for E. coli to grow,” said Smith. “One strategy for a base diet is to increase dietary fibre. This increases the turnover of the cells lining the intestine and stimulates mucous production, which blocks E. coli from binding onto the receptor site of the cell.”

Mucilages are additives that act in the same way when they reach the small intestine. Another strategy is the use of essential oils, which can physically alter the cell membrane of bacteria and disrupt the communication between E. coli, making them less able to colonize the intestine.

While nutritional strategies can help, they alone cannot manage disease in nursery pigs.

“A number of nutritional strategies and ingredients are available, but understanding what type of pathogen is driving clinical signs, and how, is key,” said Smith. “External factors impacting exposure to, and dynamics, of disease need to be addressed. This includes managing husbandry, environment, genetics, concurrent disease and population dynamics.”

Circovirus: a practitioner’s perspective

Ryan Tenbergen of Demeter Veterinary Services wanted to draw increased attention to circovirus with his presentation.

Ryan Tenbergen led his session with an important takeaway message: “Do not forget about circovirus!” 

Circovirus vaccines, which have been available commercially in North America since the early-2000s, are largely successful at controlling Porcine Circovirus Type 2 (PCV2). However, there have been reports of PCV2 clinical disease in vaccinated herds in recent years. PCV2 causes a wide range of clinical presentations. One of the hallmarks of the disease is this varied clinical presentation and severe immunosuppression.

“In order to stay ahead of circovirus-associated diseases and avoid the potential of significant losses associated with clinical disease, we need to rethink circovirus monitoring and vaccination strategies against it,” said Tenbergen. “It’s multi-factorial. You have infectious and non-infectious causes, and then circovirus is there to cause clinical disease. Generally, alone, it’s hard to produce disease.”

PCV2 monitoring can be done with PCR testing on processing fluids, tissue or blood. A positive PCR test would indicate replicating and circulating virus in the body. Some studies have found this to be associated with negative growth performance in growing pigs, suggesting that a subclinical PCV2 infection is occurring; however, it is important to note that PCV2 is widespread in swine populations. PCV2 is in barns and circulating in pigs, but just because we find it in pigs does not mean it is causing disease.

Tenbergen stressed that when interpreting PCV2 PCR results, it is important to look at the degree of positivity and the cycle threshold (CT) value. The degree of positivity is the proportion of positive samples in a total sample submission. The CT value is the number of times that the PCR process had to be run in order to detect the virus. The more virus present, the lower the CT value will be. When there is a high percentage of positive samples and CT values are low, the more likely PCV2 is circulating at high levels in the herd.

Referring to a summary of Demeter’s PCV2 lab results, Tenbergen said, “What’s interesting is that, in 2021, there was an increase in strong positive results. Generally, as pigs get older, we see more positive results. We are more likely to find it in the finisher than the nursery.”

Tenbergen has seen an uptick in Porcine Circovirus Type 2 (PCV2) in Ontario herds recently.

Tenbergen shared some case studies of farms in Ontario that presented with high mortality after weaning. On these farms, pigs would fall back after weaning. One week after weaning, pigs began to lose condition, and in two to three weeks post-weaning, mortality would spike anywhere from 10 to 30 per cent. In these herds, a co-infection with porcine respiratory and reproductive syndrome (PRRS) virus was also present, and in some of the herds, so were porcine dermatitis and nephropathy syndrome (PDNS), an inflammation and dying off of the underlying skin structures that appears as dark patches of skin on the hind limbs and underside of the pig.

“If you see PDNS, it is worth investigating if PCV2 is present in these pigs,” Tenbergen advised.

In these herds, antimicrobial treatment had little effect on reducing mortality in the growing pigs. However, mass vaccination of the sow herds and an addition of a PCV2 vaccine in piglets at processing (two to four days after birth) in the short-term successfully reduced disease and mortality in the growing pig herds.

So why do PCV2 infections occur in herds that are vaccinated? Tenbergen explained that this happens when sow immunity is not uniform in the herd. When pigs are born infected or become infected early in life with PCV2, vaccination is ineffective, and the disease spreads among the growing herd. To achieve stability, gilts and sows must have immunity to PCV2 so that they do not shed it to their piglets. Vaccinating the female breeding herd achieves this goal of uniform immunity.

“I think monitoring the herd status and determining the stability of the herd should be a priority,” said Tenbergen. “With a higher PCV2 natural challenge, a one-dose program isn’t enough to carry them through their entire lifetime.”

Tenbergen explained that herds with high replacement rates in gilts are at greater risk of PCV2 instability in the sows. Incoming gilts could be susceptible to the strain of PCV2 in the barn or could bring with them a strain not present in the herd. PCV2 has the ability to re-combine, and co-infection of more than one PCV2 has been reported in Canadian diagnostic lab data.

Tenbergen noted that it is common for replacement gilts to receive only one dose of circovirus vaccine at weaning. In addition to PVC2, Tenbergen implored producers to consider the emerging Porcine Circovirus Type 3 (PCV3). PCV3 was first recognized as causing clinical disease in 2016. Though both PCV2 and PCV3 fall under the same broad virus family, Circoviridae, they share less than half of their genetic similarities. Like PCV2, PCV3 is thought to be endemic in herds and likely has been circulating in the swine population for years. PCV3 has also been reported to cause post-weaning multisystemic wasting, reproductive failure and PDNS. Looking at Demeter lab data, Tenbergen reported an increasing trend of PCV3 positives from 2020 to 2022. He has found three clinical cases of PCV3 in Ontario to date.

“Looking at PCV3 results, there are more positive results than negative, and the strong positive results are increasing each year,” said Tenbergen

Tenbergen reminded session participants that PCV vaccines are effective, but not perfect, and that the disease continues to evolve. His final suggestion was to consider implementing a PCV2 monitoring program in the herd and consider routine PCV2 boosters in the breeding herd. He recommended that PCV3 positive test results be interpreted in light of the pathological and clinical findings in the herd.

Road Trip – Week 2 – United Kingdom

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Pork Commentary
Jim Long President-CEO Genesus Inc.
April 9, 2023


After leaving Spain we went to the United Kingdom. Our report:

  • The industry was devastated by huge losses the last two years. A combination of Covid related issues that led to massive backups of market hogs, high feed prices and low hog prices. There was major sow liquidation.
  • Current hog prices are 2.13 British Pounds per kilogram carcass (97¢ lb. U.S. liveweight). We understand this is the highest price ever in the United Kingdom.
  • Slaughter numbers the last few weeks are down 20 to 25% from a year ago. It’s what happens when that percentage of sows go to slaughter.
  • Packers are scrambling for hogs due to the shortage of hogs. We expect from discussions with various people even fewer hogs will be available due to seasonality and sow liquidation. This is the same scenario we observed last week when we were in Spain and talked to various people at the Figan trade show. It is very likely the UK and European hog prices have upside beyond already record prices.
  • About half of the UK’s hogs are outdoors. Many of these are owned by Packers. From what we understand producers receive 20 British Pounds ($25 U.S.) premium for these pigs which are part of the Freedom Food program. Producers told us they needed this premium to cover lower sow production in outside farrowing huts and higher feed conversion in outside finishing sheds.
  • The UK with the lower hog numbers will be importing about 60% of its pork needs. All from Europe. UK used to have 800,000 sows, now it’s under 250,000. There have been over the last two decades multiple animal welfare mandates that have driven up costs a production and left the UK industry vulnerable to cheaper imports not encumbered by similar rules. It appears that the bulk of consumers have little regard for many labels (animal welfare, nationality, housing, etc.) when it comes to purchasing pork.
  • In the UK retailers seem to have more power to dictate pork products than anywhere we have visited. Lots of pork is labeled to retailers’ brands at plants and even priced before it leaves the plant becoming shelf ready.
  • A producer told us that the total sales of ready-made sandwiches is greater than all farmed products produced in the UK. Tells us that there are a lot of ready-made sandwiches and reflection of the amount of ag products imported to the UK.
  • The unique part of the UK pork industry is that there are significant imports but still the UK is an exporter. The UK is sixth in the world on exports. They export ribs, offal, etc. products they don’t consume.
  • We were in the UK to visit Genesus Genetics production facilities we have in the UK. Genesus is working with five sow units including nucleus and multiplication. We agreed to adding a six site on our visit.
  • Genesus now has more purebred production in the UK than any other genetic company. Sales are not only in the UK but EU countries and Africa.
  • The UK used to be home of much of the world’s major genetic companies, NPD, Newsham, Cotswolds, are no longer in business. JSR now works with Topigs. PIC which is based on the London Stock Exchange has little if any genetic nucleus in the UK. Genesus is firmly committed to growing the UK market.
  • We visited the Wood’s family one of Genesus first customers in the UK. They use Genesus Jersey Red Duroc and Genesus F1 material’s. Congratulations to them being honored for being the UK’s finisher of the year.

The Wood’s have also begun to sell some of their pork directly to local people. They tell us customer satisfaction from the better taste of Genesus pork is bringing many repeat customers. It is great to see producers not only get excellent production results but producing pork that consumers want to eat. Taste matters.

The Wood’s receiving the award for UK Finisher of the Year

Summary 

The UK like Europe has record prices. Last week the price was almost double the U.S. price. We expect the UK and Europe’s pork supply to fall further in the near future. The combination of high feed prices and lower supply led many import countries to look to U.S.-Canada for their pork needs. Last week’s U.S. export pork sales of 53,000 plus tonnes is the highest this market year. We expect continued increase in U.S.-Canada export sales which will push domestic hog prices higher. We need it.

Why sharing your story matters

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By Andrew Campbell

Editor’s note: Andrew Campbell is a dairy farmer and award-winning storyteller based in southern Ontario. He presented the closing plenary session during the 2023 Banff Pork Seminar. He can be contacted at andrew@thefreshair.ca.

Campbell is not a fan of the mentality, ‘mine is better than yours,’ when it comes to evaluating farming practices. He believes diversity and choice are better for instilling consumer confidence in the entire industry.

Whether it is a pig farmer, veterinarian, feed truck driver or dozens of other jobs in Canada’s pork sector, anyone I’ve ever talked to has been proud to be involved in the industry. Maybe it’s the $24-billion impact pork has in Canada or the 25 million animals that are produced to supply billions of servings of nutritional protein around the world. Or maybe it’s the more than 100,000 jobs that are supported by 7,000 farmers. Whatever the reason, anyone in the pork sector is proud to be there.

But then when you go outside the sector, and especially when you go beyond the agriculture industry, there are millions of Canadians who are unaware of these impacts, let alone how that pork chop or rib ended up on their plate.

For the generations before today, you could argue it didn’t matter. People bought based on price, taste and quality, and any other factor wasn’t relevant. Today is different. Today, those attributes may still trump other concerns, but consumers also want to feel good about what they are eating. They want to feel good about the environmental impact, welfare of the animal, treatment of farm workers or many other issues. It’s why today is the most important time to consider what our non-farming neighbours think of pork production and how pigs are raised in this country.

After all, if they don’t know and hear something on television or read something online that isn’t true and attacks the current system, is it fair to think that consumer will start a research journey? Will they investigate all sides of a discussion? Will they ensure they only read peer-reviewed articles? Of course not. The reality today is everyone is in information overload, and quite simply, if the pork sector doesn’t come to the table with its own story, then, to consumers, that side of the story simply doesn’t exist.

And without the pork side of the story, it can lead to companies like processors or retailers demanding new production practices or governments stepping in with regulations making it more difficult to raise pigs in an environment that may actually be better for animal health or farm productivity.

It’s why sharing your story matters, and you’ve got to be prepared to talk about it. Here are four things to keep in mind when doing that, whether it be in simple one-on-one conversations or to larger audiences, like over social media.

Facts aren’t as important as feeling good

When it comes to modern farming, consumers are being inundated with information. Most of it doesn’t matter to them as much their personal preferences, regardless of ‘truth.’

Maybe this is an oversimplification of an issue, but the reality is consumers don’t necessarily trust every fact as truth.

An easy example would be the Canadian Pork Council commissioning a study that finds eating pork is good for you. I’d believe that, because I know the importance of animal protein in my diet. But others will treat it as boughten research, stating that, of course the pork council says pork is good for you. It’s why simply coming out with facts, statistics and research data isn’t going to cut it. Think instead about perception and how people perceive facts.

Feeling good is better than feeling guilty

At the end of the day, most people just want to feel good. They want to feel good about what they ate, the impact they had, and avoid anything that makes them feel guilty or fearful. Just look at what pork has to offer: a source of protein or Vitamin B12 are easy sells for those looking at the label. Bacon and ribs as a source of ‘deliciousness’? Even better!

It’s really not hard to get people to feel good. However, if anything else is nagging them about why they shouldn’t eat pork, they simply won’t. There are just too many other options on the grocery store shelf to worry about feeling guilty.

You don’t need to win

It’s a habit we all share. The habit that we want to convince someone we are talking with that we are right, and their point of view is wrong. I always question how often that has worked with your spouse or teenager. Usually zero per cent of the time.

Don’t think of every opportunity to connect as an opportunity to change minds or to educate them on why you are right. Instead, focus on just having a conversation. Focus on learning where their point-of-view comes from and connect their concerns to your concerns. That way, you’ll be able to simply share your perspective that will undoubtedly have a lasting impact on how they view a particular issue.

You do need to find common ground

Part of how people perceive facts is by understanding what is important to them. By thinking about shared values, farmers and consumers can actually find a lot in common. Things like raising kids or the importance of family, concerns about sustainability, or community involvement are all things that farmers and non-farmers share. Why not start the conversation there, to find what those shared values are, and then tie-in why those values impact how you run your business.

So step up and share your story! No-one else is going to do it for you.

March 1 USDA Hogs and Pigs Report – Production Flatlines

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Pork Commentary
Jim Long President – CEO Genesus Inc.
April 3, 2023

The March 1 USDA hogs and pigs report indicates production flatline with last year. Same number of breeding pigs and same number of market hogs.

March 1 (Thousand Head)
 20222023
Breeding6,0986,127
Market66,59166,734

You would think same number of pigs the market hog prices would be similar. Unfortunately for hog producers supply obviously goes with demand. Hog prices currently about $40 ahead lower than last year. Losses are at least $30 per head for most producers. Our industry has currently a real demand challenge. Pork cut-outs 77¢ lb., Beef cut-outs $2.80 lb. Someday we might figure out as an industry to start producing pork that tastes more like Beef rather than The Other White Meat.

The breeding herd declined from December report by 17,000, we expect further erosion as losses and the lack of optimism permeate our industry. A reflection of the financial reality is farrowing intentions down 1% March-May and down 3% year over year June-August.

We have believed that market hog numbers would be similar to a year ago. The inventory reports indicated the same. It’s somewhat bizarre that with European prices at record levels but more importantly about $100 per head higher than the U.S. that U.S. pork exports haven’t captured more of the Asian market. Maybe it’s a timing lag because you would think arbitrage would rule.

We are optimistic maybe to a fault, but we see the arbitrage to work for exports and the price difference between U.S. Beef and Pork too narrow as U.S. Beef supply plummets throughout the year. Last year summer we had hogs over $1.20 lb. with the same number of market hogs. Maybe we are delusional, but we still believe $1.20 plus is possible. Hope springs eternal but maybe it’s not a business plan.

Spain

Last week we were in Spain. We were in a market that is inverse of North America. While one market is losing $30-40 per head the other market making $30-40 per head.

We visited Genesus customers and attended FIGAN the major pork event in Spain. Spain has 2.6 million sows and is the biggest producer in Europe.

A year ago, Spanish producers were losing $30 plus per head as was all of Europe. Over the last two years Europe sow herd has declined 1 million sows and 12 million market hogs. Now most if not all European countries have hog prices at record highs. The saying “surest cure to low prices is low prices” comes to mind.

Spain’s industry is driven by family owned and driven family integrators. They have a passion for the business and their multiple families have pushed for their own and their countries expansion. Spain is the only country in Europe that has expanded in the last few years.

Today Spain is being challenged by new environmental, antibiotic, and animal welfare regulations.

  • Sows need to be in pens 2.2 sq. meters (24 sq. ft.)
  • Farrowing create space 6.5 sq. meters brackets (70 sq. ft.), and some expected to go to 8 sq. meters bracket (86 sq. ft.) plus must have farrowing pens
  • Finishing space over 220 pounds (100 kilograms) .75 sq. meters (8 sq. ft.) maybe going to 1 sq. meters (10.7 sq. ft.)
  • Antibiotic use has been next to eliminated. Zinc oxide has been eliminated
  • Spain’s main pig data system SIP indicates wean to finish average mortality has gone from 8% in 2019 to 14.4% in 2022, a 6.4% increase. In Spain that is at least four million more pigs dying since 2019. All these rules to be for animal welfare? Is mortality not an indication of animal welfare?
  • Spain sow mortality is similar to USAs at 14% which is also up in the last few years from 8%. Too lean of sows which lack robustness that can’t handle pen gestation continue to die at a faster rate. Spain has also been gifted sow prolapse issues by the world’s biggest genetic company compounding sow mortality. Prolapses Is Coming. Using genetics that can live is maybe a good idea.
  • Spanish producers we talked to are pleasantly surprised at the prices have reached over 2 Euros/kg. 99¢ lb. U.S. liveweight. Some believe price could reach 2.35 Euros/kg. $1.15 lb. U.S. liveweight. They could be correct. Their marketing hogs from last summer’s breeding’s. Europe saw herd decline about 300,000 sows since then. Less hogs with continued high mortality are cutting numbers. Spanish Packers are chasing hogs to fill kills, pushing hog prices up and hauling hogs from other parts of Europe to try to fill shackle space.
  • Spain average current cost of production 1.86 Euros/kg liveweight (93¢ lb. U.S. liveweight)
  • Feeder pigs current price for a 20 kg. pig is 110 Euros = 40 lb. pig is $120 U.S. 

Summary 

Europe and USA’s prices at $100 per head difference is the greatest spread ever. Both areas are major pork exporters. It’s not if but when USA exports increase from a combination price advantage and supply (less pork in Europe less to export). Maybe we will have to fall on our sword, but we don’t believe arbitrage is gone from the pork industry.

Genesus team present at FIGAN 2023 in Zaragoza, Spain
Cured Hams hanging at a plant in Spain
Spencer Long and Jim Long in front of the Arc de Triomf in Barcelona, Spain