Wednesday, April 24, 2024

Good pig management controls costs at all stages

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By Treena Hein

The latest on-farm best practices relating to all phases of production were shared as part of several presentations during three management-focused breakout sessions during the 2023 Banff Pork Seminar, including the impact of mortality and efficient feeding.

Lee Schultz of Iowa State University and Kurt Stoess of HyLife showcased their work and how it can save money for producers.

Putting a price on mortality

Lee Schulz from Iowa State University has developed a decision tool to measure the monetary angle of mortality.

With colleagues from his university and others, Lee Schulz has been working on a spreadsheet-based decision tool to help producers examine the costs of reducing mortality on their operations by a certain level. It is important, he said, to determine whether the costs are worthwhile in terms of the profit benefits of the lowered mortality.

That is, there is an optimum total farm profitability level of mortality that can be determined for any given operation. Producers should note, however, that this level can also change over time. Schulz stressed that economists think differently about the optimal level of mortality compared to producers in general.

“It’s where marginal revenue, the last dollar I get, is equal to marginal cost, or the last dollar that I spend,” said Schulz. “It sounds really simple, but it isn’t. It’s a very different task to calculate it.”

Schulz further explained that the value of a dead pig should not just be measured through the money that has been invested in that animal up until the time of its premature death, but must also include the lost revenue that would have been received had the pig provided its maximum profit, similar to what its fully grown peers brought in, at the point of marketing. The cut-out value and not just live weight at marketing should be the focus.

He also suggested defining the value of, for example, what a percentage point drop in mortality would do related to the return realized for the costs involved.

“When you think about making a change on your operation, you usually know the cost because someone’s quoted you the cost of an animal health intervention, a nutritional intervention,” said Schulz. “But you need to know the value of it in order to decide whether you should incur that cost.”

Schulz’s decision tool asks users to input their own data, then spits out simple analyses based on defined formulas. The basic example is shown here.

He then illustrated with the decision tool an example of comparing the value of going from six to five per cent mortality. The spreadsheet is simple and easy-to-use while factoring all the information needed for good analysis. Producers tailor the information to their farm and also input current market characteristics. Schulz explained that a large part of the calculation is the average weight of pigs at death.

“The later they die, the less cost savings producers have,” said Schulz.

He added that there might be some differences in the calculations of wean-to-finish feed efficiency that come with changes that producers employ, to try and reduce premature death, but everything else in the calculation needs to stay the same – feed costs, for example – in order “to tease out the true cost of that one per cent of mortality.” He also added that the overall cost of reducing mortality can vary depending on the cause.

While it may not be completely exact, Schulz insisted this tool is a valuable starting point for producers to weigh the projected benefits of mortality-reducing strategies against the anticipated costs.

Feed-related choices can be significant

Saving money on feed is a tall order, but producers and nutritionists need to work together, according to Kurt Stoess of HyLife.

The critical importance of ongoing in-depth conversations with your nutritionist is what Kurt Stoess stressed. He urged producers to discuss many aspects of their swine diets with their nutritionists on a regular basis if they want to see farm performance improve.

“Nutritionists are one of the biggest influences on your feed costs, which covers two-thirds of your costs,” said Stoess. “The other thing I want you to remember is that your farm is unique, and there is no one-size-fits-all solution to your problems.”

Stoess advised that nutritionists must, first of all, know the pig you are feeding in terms of any change in genetics, or new information that may become available from your genetics firm, along with gender, health status, target end weight and any other updated packer specifications.

Referring to the feed itself, Stoess touched on energy, amino acid ratios, ingredient availability, feed additives, mash versus pellets and the reformulation schedule.

Energy is divided up into maintenance, growth or challenges, he explained, but that growth is a complex aspect that needs close attention from you and your nutritionist.

“At the beginning of your finisher batch versus late in your finisher batch, for example, you may want that growth to be doing different things, and a lot of this is dependent on genetics,” said Stoess. “In the beginning, you’re going to get more lean deposition versus fat deposition, so maybe you want your nutritionist to feed higher energy there if you get bonuses for loin eye size and things like that – maybe there is payoff there.

“Vice versa, maybe you just want to keep your energy level steady throughout your whole feeding stage and let things play out, or maybe you drop your energy level at the end. Maybe your back fat needs to rise [at the end] if your genetics are very lean, and you will get penalties for having it too low. There is no one right answer, but you need to have that conversation with your nutritionist.”

Alternative feed ingredients are a popular option for cutting costs, but the western Canadian climate and other issues can put a damper on options, at times.

With amino acid ratios, the key, in Stoess’ view, is to continue learning and keep abreast of new findings. Similarly, Stoess encouraged regular discussion about all the latest feed additive developments. One newer finding he pointed out relates to feeding ionophores, where there are bigger benefits being seen with higher-fibre diets. 

On the ingredients front, he noted that western Canada usually has good advantages for availability, but things like drought, labour and other factors can get in the way quickly. Comparing mash to pellets, he said that, while pellets cost more but have more benefits, particle size is important. Pelleting wheat and barley has more benefits than pelleting corn.

To maximize the value of reformulation, Stoess strongly recommended that producers and their nutritionists have a prescribed plan as to how often diets are being assessed and what factors trigger reformulation.

“How does that work?” asked Stoess. “As your nutritionist is running different scenarios and trying to least-cost your diets, you both have to also remember ingredient availability, so you need to have constant communication.”

Producers and nutritionists also need to decide how to implement stage feeding plans and perhaps increase the number of stages. With only three, he believes producers are leaving money on the table and instructs that five to seven is best. To determine where one stage ends and the next begins, “I like to go with tonnage [rather than weight],” said Stoess, “as it’s nice and simple to control.”

Overall, he also thinks producers should work with nutritionists to focus on gut health through vaccinations, investing in veterinary advice, and using ionophores and feed additives such as essential oils.

“If you focus on improving your gut health from day one, when those little health challenges happen, they will not affect your bottom line nearly as much,” said Stoess.

U.S. Prices Continue to End Up with Financial Losses

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Pork Commentary 
Jim Long President – CEO Genesus Inc.
March 27, 2023

This past week was not great once again for hog producers. Cash hogs in the high 70’s means farrow to finish losses over $30 per head. We need a rally.

Observations 

  • Slaughter continues higher than a year ago with pork production 1% higher year to date. 1% doesn’t seem to be a good reason hogs are about $40 less than a year ago. Beef production down over 4% with total red meat supplies lower year over year.
  • U.S. pork export sales from what we can observe are higher year to date. Exports themselves will catch up to sales soon. The huge price gap ($90+ per head) between Europe and USA-Canada will pull pork from USA-Canada to import markets. This will pull the USA-Canada hog prices higher.
  • U.S pork cut-outs closed Friday at $81.05 lb. We need to see this to rise as an indicator of pork demand and supply. We don’t expect lean hog futures will lead a rally, it will follow the cut-outs and export reports.
  • Chicken supply seems to be flattening out. Chicks placed running at year ago. Chicken currently $1.30 lb.
  • The reality of low hog prices and low beef cut-outs relative to the hog price means integrated packers are being quite challenged. You can see it in the financial reports of packers and the moves of some to cut costs. There are next to no winners today in the U.S. hog industry.
  • U.S. sow slaughter in the first two months of the year was 506,000, last year 492,000. Last year the U.S. reported a decline of 27,000 December to March. We expect the March sow herd this year will decline from December.
  • There were reports this week that said reports of African Swine Fever in China is being overestimated. We don’t agree. Genesus has several people on the ground in China. We see almost daily reports of ASF devastating producers. The only truth will be the prices. As long as China keeps liquidating due to ASF the hog price will stay low. When it ends, we expect prices will explode. We expect this to be in July-August.
  • A reflection of livestock and poultry production in China is soybean prices. We have read and heard reports of China backing off soybean purchases. A reflection of soybean meal demand is futures in China. At first of the year 4600 RMB tonne ($750), now 3500 RMB tonne ($571). We believe this is an indicator of fewer hogs due to ASF market expects to see.
  • Spain and most other European countries set new record prices for market hogs last week. The price spread is now $100 U.S. per head. Nothing like fewer hogs to lift prices. This coming week we will be in Spain visiting customers and attending Spain’s largest pork industry congress in Zaragoza. We will report our observations.
  • Yesterday in Madrid we went to one of many shops that the main business is selling pork. As you can see by the picture the price of cured hams – these are half Duroc and half Iberian. Many of these are sired by Genesus Jersey Red Durocs. The price is 24 Euros/kg or $11.80 lb. for the whole ham. If you have never eaten this excellent pork product you are missing a great experience. It reflects that consumers will pay more for taste. Someday our industry will realize taste is what can drive up prices and demand. U.S. pork cut-outs last week 81¢ lb. – beef cut-outs $2.80 lb. Maybe when we want to have an industry that does more then turn corn into a product that gets 81¢ lb. we will begin a revolution.

Tough Week for U.S. Hog Market 

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Pork Commentary 
Jim Long President – CEO Genesus Inc.

March 20th, 2023

This past week was not good for U.S. hog producers. Lean hog futures, cash hogs and pork cut-outs declined. In our opinion driven mostly lower because of banking issues that seem to trigger fund selling in futures. Some of it could be pressure to generate liquidity due to other banking related issues i.e., bonds. You get more sellers than buyers, the price declines.

We also understand lean futures decline was pushed by a speculation the USA was getting African Swine Fever which it hasn’t.

We certainly wonder the benefit of lean hog futures to the hog industry. Almost all the world’s pig production has no futures market of significance. Most of the world has higher hog prices. As my late friend Doug Maus used to say, “Chicago Futures – Las Vegas with no rules.” Indeed, last week we viewed a “Chicken Little” panic instruction by a broker recommending liquidating all long positions immediately due to potential ASF. No wonder market got hammered. Wild speculation by people who never owned a pig and never will.

Other Observations 

  • Spain set a new record for lean hogs last week reaching 2 Euros/kg (96¢ lb. liveweight). Feeder pigs market price is 110 Euros each – over $115. The spread between U.S. market hog price and Spain continues over $90 per head. European swine industry has declined triggering these high prices in Spain and throughout Europe.

Last week we got the following from a reader, “I’m asking politely not to keep talking about record prices in Spain or anywhere else for that matter. We are tired of listening that Spain is at all-time highs. Have a little empathy for North American producers that are losing lots of money.” 

Our answer. We appreciate feedback and thoughts. Indeed, we as well as anyone knows the negative ongoing situation in North America. We also believe it’s important for us to report what we see beyond just one market. It’s a global Pork Industry. The U.S. exports 27% of its pork production, it matters what’s going on in Europe (Spain) which has double U.S. production and major pork export competitor.

Indeed the U.S. – North American industry should be buoyed by the high prices in Spain (Europe). The reality of Arbitrage is going to pull U.S. prices higher as importers in Korea, Japan, China etc. react to the price advantage of North American prices. All North American producers should rejoice at European prices and not be afraid of hearing the reality.

  • March 1 cattle on feed report indicates a 4% decline year over year. This should continue to support cattle prices. Year to date U.S. beef production is down 4.2% (-251 million lbs.). Week upon week of lower beef production and high prices will be supportive to pork complex.
  • Year to date U.S. pork production is up (.9%), up 53 million lbs. Unfortunately, despite a small increase in production, last week’s prices for lean hogs and carcass cut-outs are down about 17¢ lb. (i.e., $35 per head). To say we got a problem is an understatement. While beef is pushing prices on cut-outs almost 3.5 times pork. Beef demand good – pork not so much. Maybe someday we will figure out that Taste drives demand. What other reason market demand has beef 3.5 times pork cut-outs. We chase pennies in cost of production to supply pork that doesn’t make consumer crave like they could. Taste, Taste, Taste is main demand driver. We need to stop thinking as farmers and packer fabricators and more like marketers.
  • U.S. pork exports year to date are steady with a year ago (+1%). It appears to us pork sales are higher this year to date, so at some point the increased sales should lead to larger exports supporting hog prices.
  • Seems to be more industry chatter of greater ASF breaks in China in support of our reports beginning a few weeks ago. Since we first wrote about it Rabobank, Reuters and Bloomberg have picked up the story.

From mid 2021 for a year, the financial losses in China swine industry were devastating, there was a large liquidation. Prices doubled in the fall as supply declined, Covid issues in December cutting consumer demand and prices dropped. Scenario – liquidation last year – ASF this year could mean 10 million less sows. At some point prices will exceed $500 U.S. per head (30 RMB/kg). China will be a major pork importer to fill the shortage.

  • We expect the March 1 Hogs and Pigs Report will show a decline since December 1 of the breeding herd. Sow slaughter continues strong, sow mortality is the highest in history (prolapses courtesy of the world’s largest genetic company contributing to a significant attrition in the sow herd). The economics of the industry are not good. High feed prices, high break evens relative to low hog prices are not conducive to optimism or profits. We believe ongoing liquidation is underway.

We still expect a major pork rally. Less beef, less pork in Europe, less in China, pork price will rise as total meat supplies continue lower domestically and internationally.

Sustainability hangs on to pigs and pork 

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By Andrew Heck

The much-anticipated plenary session on sustainability, matching the seminar’s overall theme, was a popular topic of conversation.

‘Environmental, social and governance’ (ESG) goals: you may have heard of them, and you may be skeptical that they are a hip but unsubstantial layer within the complexity of big business. On top of that, you may be wondering what they have to do with agriculture at all, or at least raising pigs or selling pork.

Like a cultural tsunami, these corporate priorities have swept up investors, executives and media pundits alike, and they are probably coming to a barn and processing plant near you, soon, if they have not already arrived.

In fact, two presenters at the 2023 Banff Pork Seminar, Mauricio Alanis, Director, Sustainability Strategy & Partnerships, Maple Leaf Foods and Banks Baker, Director, New Product Marketing, Pig Improvement Company (PIC) are riding the crest of that tidal wave but bringing plenty of hope and encouragement along with them, rather than heavy-handed morality or guilt-inducing tactics of those who sometimes like to pick on the livestock sector.

Alanis and Baker were recruited to speak about their companies’ sustainability commitments, what they mean and, most importantly, how they are measured. And they did so with a great deal of fluency and convincing, providing some helpful insight into where sector leadership is headed in the very near future.

Maple Leaf considers all aspects of production

Mauricio Alanis faced a critical crowd but provided evidence for how Maple Leaf Foods is backing up its sustainability commitments.

In 2019, Maple Leaf Foods declared itself the ‘world’s first carbon-neutral food company,’ based on its systematic approach to avoiding, reducing and replacing emissions of carbon dioxide.

According to Mauricio Alanis, throughout Maple Leaf’s operations – from farms to packing plants and beyond – the company uses instruments to measure carbon dioxide releases, where possible, such as from manure lagoons. These readings are validated by an unbiased party, for accuracy. Whatever carbon is unable to be mitigated by making process optimizations is offset by the purchase of carbon credits.

“Offsets are not the solution; they are part of the solution,” said Alanis. “They keep us honest on our sustainability journey.”

The idea behind purchasing offsets is to contribute to investments in projects that work toward addressing carbon intensity in all kinds of areas inside and outside of agriculture. Offsets are verified by third-party registries that endorse projects based on their ability to make a difference in the bigger picture. Projects include renewable energy development, anerobic digestion of manure for electrical generation, regenerative crop production and carbon sequestration.

Maple Leaf’s ‘carbon inventory’ spans everything from greenhouse gases (GHGs) resulting from barn heating and other production inputs, to emissions from feed crop production and end-use considerations like transportation and packaging materials for its food products.

But, for Maple Leaf, sustainability takes into consideration more than just emissions. Alanis believes the food industry today faces a burning platform in terms of emissions, antibiotic use and food waste. The intersection of what the world needs and who you are creates purpose, and that is the driving force behind the company’s sustainability initiatives.

Maple Leaf’s 2021 Sustainability Report summarizes the key areas in which the company is constantly trying to improve.

“It’s not just the bacon you scraped off you breakfast plate. It’s everything that preceded it,” said Alanis. “We can do good by food, and we can promote our industry’s positive effect on society.”

Maple Leaf is currently the largest producer in North America when it comes to pork raised without antibiotics (RWA), representing a 99 per cent reduction in use across company-owned hog operations since 2014. Maple Leaf previously committed to ending gestation crate use by 2024 and exceeded that target by meeting the goal in 2021. Additionally, the company’s own farms also recycle 100 per cent of hog manure, by using it on crops.

The business case for sustainability is also not lost on Maple Leaf. Following consumer trends and making marketing claims is an important part of the follow-through on their initiatives, which translates into company profits.

Product claims on packaging highlight the company’s values in “delivering nutrition, affordable and sustainable food choices that don’t compromise on taste,” which appeal to some consumers’ appetites for a ‘better’ product than comparable goods that are, perhaps, unable to make the same claims regarding carbon neutrality, animal welfare and meat quality – even if those claims ultimately rely on perception and preference.

For an integrated producer-packer with retail-branded products, like Maple Leaf, it all adds up to consistently favourable meat margins, even though the company’s plant-based portfolio has yet to make much profit, if any. While many producers may not always consider the value added by processing to be returned to them, at the independent farm level, it stands to reason that Canadian companies like Maple Leaf need to stay on the cutting edge to compete with even larger players around the world, including next door in the U.S. Any loss of global pork market share by the likes of a Maple Leaf or another major packer in Canada ultimately spells worse outcomes for Canadian producers.

PIC approaches carbon reduction differently

PIC’s Banks Baker is not a climate alarmist, but he is a bit of a canary in a coal mine, when it comes to alerting others to where the industry is headed.

While Maple Leaf Foods is focused on addressing sustainability across its supply chain, PIC is looking through a wider lens and working to make pigs that naturally pollute less, through gene editing. PIC is working with industry partners to develop a genetics framework, which, once developed, will be available to all swine genetics companies.

It is a decidedly contemporary direction for the genetics sector. Not only does the framework have the potential to reduce the carbon intensity of pig production, but performance, too, could see gains and cost savings with fewer inputs.

“Agriculture is being asked to do a lot,” said Baker. “And we’re being asked to do this in the face of a food affordability challenge.”

While lower-carbon pigs will not bring grocery shoppers’ bills down, they do conform to a trend that is being seen across the business landscape. Companies spanning the industrial spectrum are aligning with the Paris Climate Accords: science-based targets set out by the United Nations (UN), covered under a treaty signed by all 194 UN members, including Canada, and representing more than one-third of global market capitalization today.

While the Paris Climate Accords have been universally agreed upon by UN members, how will transitioning to lower-carbon activities be funded? Countries in North America, western Europe and eastern Asia have the deepest pockets, thanks to industrial development, which is, paradoxically, the main climate change culprit. Image © World Bank

“I’ve heard from some people they don’t believe in climate change or that they don’t believe it’s caused by humans,” said Baker. “I’m here to say, it doesn’t matter. Our customers are asking for these things, and our governments are compelling them.”

Baker points to the U.S. Government’s net-zero commitment by 2050.

“When you look at this from a logical deduction standpoint, what’s coming next? Is it something like a carbon tax?” said Baker. “This is on our doorstep. This is here.”

While planet-minded pigs could certainly boost the hog industry’s image, improved genetics also have obvious profitability benefits for the producers who raise them. As genetics companies and other suppliers make these kinds of climate commitments, Baker feels it is important to reward producers for assisting in the process, by providing financial incentives.

There are even opportunities to build bridges with critics. Animal activists may support animal welfare improvements through gene editing, which also contributes to company sustainability. When it comes to those who question the safety, healthiness or taste of eating pork from gene-edited pigs, and whether that could deter consumers, Baker is not worried.

“PIC has been in this business for 60 years, and we plan to be in it for another 60,” he said. “We’re not trying to interrupt choices or jeopardize trade.”

Whether sustainability comes in the form of enhancements to genetics, on-farm production, processing or end-use efficiencies, the challenge will remain for the entire industry to equitably spread the benefits across the value chain. 

Sustainability can improve image and bottom line

Sustaining the planet is important, but that will not happen without sustained profits around agri-food capacity to feed the world. And a sustained planet is only as valuable as its people, many of whom are suffering from food insecurity. Image © WFP/Michael Castofas

All told, the discussions around sustainability in agriculture must continue to balance saving the planet and saving profits – but that is not necessarily a bad thing.

Whereas navel-gazing and self-consciousness are a real risk with these discussions, producers, packers and everyone with a stake in food production (which includes anyone who eats food) should consider that the weight of world hunger – sad as it to acknowledge – must ethically outweigh sentimentality around environmental concerns, even if those purported concerns are said to exacerbate food insecurity, which is a shaky argument, at best.

Sustainability matters, but only if food is making it onto the world’s plates. This does not, however, mean that pie-in-the-sky idealistic thinking can be ignored, since, without it, progress is seldom realized.

Working to curtail the carbon intensity of the hog industry, while also being mindful of other consumer demands that tend to overlap this issue, is still a relatively unexplored frontier. ‘First mover advantage’ may not have disappeared yet for agri-businesses, when it comes to novel concepts regarding sustainability, but there will come a time when that ship has sailed, and the scrutiny will shift toward those who have failed to adapt as quickly. Today’s values-based consumer or foreign buyer will have the option of simply looking elsewhere for their purchases – perhaps a commodity other than pork or a country other than Canada, altogether.

On-farm tech must make sense (and cents)

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By David Speller

Editor’s note: David Speller is a poultry farmer and CEO, OPTIfarm, based in the U.K. He presented as part of the ‘Technology’ breakout session during the 2023 Banff Pork Seminar. He can be contacted at david.speller@optifarm.co.uk.

According to Speller, ‘Technologies don’t always start from problem-first principles.’ When the solution comes before the problem itself, it may be time to take a step back and re-consider.

Digital farming, technology and data insights have all become popular subjects for many animal agriculture conferences. The terms offer so much yet often deliver so little when we try to apply them. Indeed, it appears crop farming is accelerating away from us with self-steering, precision applications, GPS mapping and, soon-to-come, self-driving or driverless tractors.

For more than a decade, livestock sectors have been focused on gathering data on environmental impacts, feed and water consumption, and performance. The aim is to capture, store and analyze this data, to help farmers. This will surely lead to an increased understanding of our businesses, better decision-making on-farm and increased livestock productivity, health and welfare. This trend has definitely set businesses on a journey, but not so many businesses have seen the actual, tangible benefits and extra profits related solely to the new technologies they have implemented.

Most recently, we have seen a focus on using technology to conduct the same evaluations as a skilled stockperson, focusing on sight, sound and smell, with a lot of activity around visual data. Some technologies have been specifically developed for the agricultural implementation, such as camera weighing systems or microphones listening to animals, while others have been taken from other sectors and adapted for agriculture, such as an electronic ‘nose’ originally designed for human health or robotics from the nuclear industry.

We now appear at a point where the possibilities of technology know no bounds. We have reached a place where we appear full of data, with more different data sets arriving daily and an ever-growing desire to find ways to use this data, from generating improvements, validating supply chains and, more recently, answering questions around sustainability. However, there are still few ways of turning any of this data into real-life business actions to deliver value to livestock farmers.

Finding the right problems for the right solutions

Technology ideas are easy to come by, but to be effectively applied, they must be scalable.

Although the specific problems in different livestock sectors vary, there are some common themes. Primarily, we see technology being developed to bring new insights and understanding, reduce the demand on labour and compile data to enhance the prediction of animal health challenges. Examples of this include monitoring animal activities to understand behaviour, using robotics to support human tasks such weighing pigs and analyzing sounds to predict swine respiratory diseases.

Most of the digital and technology solutions we see globally are originating from a ‘start-up’ culture, as a spin-off of an established business, academic institution or as a standalone company with a product idea. By their very definition, start-ups require significant investment or early adopters willing to fund the realization of a concept. This has really driven most developers to answer the call of their investors by offering new business models, innovative approaches and a drive to finding solutions that are believed to meet the mutual needs of a global livestock sector.

In the last few years, we have seen larger supply companies acquire technology from start-ups rather than incubating it internally, and they are also showing a desire for these innovative solutions to support their legacy products. It appears that we may be on the cusp of seeing innovations implemented within existing supply chains that have a need to improve performance, but relatively few of these solutions have seen rapid global scaling to date. Innovators are still wondering who the customers are for their solutions: farmers, processors or allied supply industries?

Companies in livestock are now very committed to addressing the demands of their own sustainability pledges. While these initiatives complement good business practices with resource efficiency and output optimization, what will also be needed, moving forward, is a way to validate sustainability claims. This is where digital insights can really support a business, and it is an area in which technology uptake will likely continue to grow.

Return-on-investment should rationalize uptake

Even technology that ‘works’ can lead users astray. Speller urges caution, with an analogy: a compass can help guide you out of the woods, but if you head north in a straight line while relying only on the compass, you will probably run into a tree.

Digital technologies have the potential to support productivity gains on-farm, but how is that value realized? Consider the use of insights and technology to improve uniformity in a batch of pigs delivered to a processor. If the supply contract does not reward the producer for the improved uniformity, the processor gains a more desirable carcass without any costs incurred, while the producer pays the price without much direct benefit. On the other hand, if the processor is offering a premium for pigs raised without the use of antibiotics (RWA), the producer may have an incentive to implement technology that allows for improved decision-making around disease issues.

Uptake of digital solutions and technology differs across livestock sectors and regions of the world. Ideas and offerings have been around in a ‘proof of concept’ format for many years, so there may be an argument that uptake is too slow. The availability of commercial-ready offerings is increasing, but many producers are still trying to determine the return-on-investment (ROI) for these solutions.

What we need to see now is the growing acceptance and use of these digital solutions, as not only does this endorse the solutions themselves to the industry, but it allows innovators to learn and adapt their technologies much faster, as they can see how their solutions being deployed in the real world, at scale.

Slow but steady progress – the way forward

The successful and practical implementation of digital solutions and technology in livestock sectors can be seen more as an evolution, not a revolution. There are still critical issues to address, such as rural internet connectivity and the declining cost of hardware to catch up with the aspirations of innovators.

In many farm enterprises, the margin between profit and loss is incredibly narrow, so solutions must be cost-effective, offer strong and reliable ROI and meet the current day’s needs. All this from the coming together of academia, start-ups and large corporations makes this is a hugely interesting and exciting time for all involved.

10th Annual Kalmbach Feeds Agribusiness Conference

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Pork Commentary 
Jim Long President – CEO Genesus Inc.
March 13, 2023

This past week we attended and spoke at the Kalmbach Feeds Agribusiness Conference held in Columbus, Ohio. The conference is one of if not the best organized ag events we have attended. Multiple speakers and food were excellent. The hosts Paul Kalmbach Sr, Paul Kalmbach Jr and the entire Kalmbach team were omnipresent which made the event enjoyable and knowledge enhancing.

This year is Kalmbach Feeds 60th year in business. We first met Paul Sr. about 40 years ago when Kalmbach Feeds was much much smaller. Since than the company has grown in multiples becoming an agribusiness powerhouse a true example of entrepreneurial success and American opportunity.

Other Observations

  • The U.S. National Average Corn Price has gone from $6.88 bushel in late February to $6.25 last Friday. December corn futures last week $5.65 bushel down from highs that touched $7.00. It appears the low volume of U.S. corn exports is weighing on markets. Cheaper corn is obviously good for pork producers.
  • Spain is the third largest pork producing country in the world. It is the largest in Europe. Last week set another record hog price at 1.967 Euros/kg (95¢ lb. U.S. liveweight). The Spanish price has gone up for nine weeks in a row (most of European countries also at record levels). At the end of January last year, the Spanish price was 1.02 Euros/kg (49¢ lb. U.S. liveweight). A 285 lb. pig is now bringing $131 per head more than a year ago. The price spread currently between Spain and the U.S. is over $95 per head. It’s not if but when the U.S. and Spanish price narrows, we don’t believe it will be from Spanish price declining. The current spread will obviously pull pork exports from Spain to the U.S. Arbitrage.
  • Last week the Genesus team attended VIV Asia held in Bangkok, Thailand. It was the first VIV Asia held in three years due to Covid issues. Genesus people from the Philippines, Vietnam, Thailand, China, South Korea, UK, and Canada participated at the Genesus Exhibit. Genesus has genetic production in China, Vietnam, and the Philippines.

VIV Asia was well attended with many visitors from throughout Asia. Many global projections indicate the major growth for pork consumption will be in Asia in the coming years.

  • Last week we wrote it appears ASF is spiking again in China. At VIV last week several Chinese visitors had the same sentiment. One Chinese company just lost 30,000 sows. We continue to believe the low China hog price is due to many pigs going to slaughter at any weight due to ASF breaks. At some point the dog will hit the end of the chain. China’s prices will take off again exuberated by the liquidation last year due to the billions of dollars lost due to real low prices and now further hampered by ASF liquidation.

Last week we showed a China map indicating current major ASF breaks. We were told by Chinese producers that the map underestimates the current situation.

We received a report last week from industry insiders, the recent rising epidemic (ASF) has led to 70% of sows lost in Shandong and Hebei provinces (latest inventory we have pigs Shandong 31.5 million, Hebei 18.1 million). Some areas in Henan lost 30-35% (Henan 44 million pig inventory) and some pig farms in Northeast China lost 15-18%. The incidence rate of disease in Shanxi is also high, with one large enterprise losing 70% (Shanxi 9 million pig inventory). Some parts of Guandong lost 15% (20.7 million pig inventory). The five provinces listed above had 121 million in pig inventory reported prior to current ASF breaks.

  • Last year we wrote about the major liquidation ongoing in the United Kingdom. This was due to the massive losses’ producers were suffering from. Last June sow inventory was down 18% year over year. Through the fall until the end of the year, year over year slaughter numbers stayed the same, but with ever lighter carcasses. Since the first half of this year, year over year slaughter numbers have collapsed running over 15% lower, with carcass weights over 5 kgs lighter (11 lbs.). The hog price is now at record levels of 2.09 up 70% from a year ago. The old saying the surest cure for low prices is low prices comes to mind.
  • Europe is down 1 million sows and 12 million pigs in inventory from two years ago. The elimination of copper sulphate, antibiotic limitations is driving up mortality. The decrease in pigs and high prices will cut Europe’s pork exports. This will pull U.S. – Canada – Brazil prices higher as Export markets are back filled.
Paul Kalmbach Jr. speaks at the 2023 Kalmbach Feeds Agribusiness Conference
Jim Long speaks at the 2023 Kalmbach Feeds Agribusiness Conference

Spain Sets New Record Hog Price

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Pork Commentary
Jim Long President – CEO Genesus Inc.
March 6, 2023

Last week Spain the largest swine producer in Europe set a new record price for market hogs at 1.932 Euros/kg (93¢ U.S. lb. liveweight). Many other countries are also setting price records in Europe – i.e., France, Germany, Italy, Netherlands, Poland, etc. It happens when you liquidate 1 million sows and have 12 million pigs less in inventory.

Factors 

  • Liquidation was triggered by financial losses from ASF in Germany – Poland. Rest of Europe high feed prices relative to hog prices.
  • New environmental and animal welfare rules leading to producers leaving industry.
  • We wrote a couple weeks ago about Spain’s national production record system indicating wean to finish mortality average has gone in the last two years from 9% to 14% a 5% increase – much of the increase is due to removal of copper sulphate and antibiotics. These rules are now implemented throughout the European Union. We expect this will lead to higher mortality. The EU produces about 240 million market hogs per year. Every 1% change in mortality is 2.4 million pigs. If all of EU goes up 5% like Spain it would be 12 million fewer pigs to market a year. Having fewer pigs always leads to higher prices i.e., Record Hog Prices.

China

Below is a map from China indicating when recent African Swine Fever breaks are occurring. Our observation in 2022 there was ASF in China, but it was not severe. From reports we are hearing it has ramped up again. In the map the darker the area the more severe the break. The darkest area is the provinces of Liaoning, Hebei, Shandong, Shanxi. The most recent reported swine inventory in their four provinces is over 100 million (context U.S. inventory is 73 million). We estimate there could have been about 9 million sows in the four provinces combined. Reports we are hearing (no real facts) if ASF is leading to rapid sow mortality and liquidation. Some reporting 20% to a wild number of 80%. One person said they weren’t sure what number is but more empty barns every day.

When ASF hit China in August 2018 it took to July 2019 before hog prices took off. The main reason in China when herds break with ASF the pigs die from ASF or go to slaughter (at whatever weight). Their liquidation pushes pork supply up in short-term holding prices down.

Last year we wrote continually that China sow herd liquidation that began in July 2021 due to losses of $80 per head for several months was leading to sow liquidation on a grand scale. What we saw was rapid price increase of hogs from 13 RMB/kg April 2022 to over 25 RMB/kg by the fall – almost double or over $200 U.S. a head more. On December 1 China hog price 23.65 RMB/kg. The country than opened up and Covid surged. Hundreds of millions of people didn’t feel well and we expect it cut pork demand (when you’re sick how hungry are you?). The hog price went from 23.65 RMB/kg to 15.12 RMB/kg – a drop of almost $150 per head.

We expect when Covid hit not only did pork demand slow but as hog prices declined producers pushed hogs to market. We understand market hog weights declined dramatically after December 1. Less Demand – More Supply = Lower Price.

What we struggled with is with major Covid breaks now over in China why hasn’t the hog price rebounded. The liquidation of the sow herd that we saw in the high prices in the fall didn’t reverse. It doesn’t happen that fast. We now wonder without facts is the new ASF breaks that seem serious pushing up supply from liquidation of pigs? If so, it could even get more interesting as the earlier liquidation from the financial losses will be augmented by major ASF liquidation leading to even fewer hogs?

USA

  • USDA has projected lower Red Meat Production in USA in 2023 compared to 2022. The first such year since 2014 the U.S. has had year over year decline (2014 was great year for pig prices). So far in 2023 (March 3) year over year U.S. red meat production down 1.8% (Beef -4.5%, Pork +0.9%). We expect to see a larger percentage year over year decline in the coming months which will be supportive for the hog price.

PigCHAMP

PigCHAMP is a major record keeping system. Below is the median data USA – 260 farms plus.

USA PigCHAMP DataMedian Average
YearBorn Alive/LitterPigs Weaned Mated Female YearSow Mortality
202213.8825.1214.54%
201812.9025.2811.68%
201412.2924.388.81%

Certainly, you can see Born Alive has jumped up significantly. Pigs Weaned Mated Female Year up some. Sow Mortality a significant increase up almost 6% from 2014. SMS – MetaFarms record system estimates a minimum loss of $1,000 a sow when one dies. Some Farmer Arithmetic a 6% increase on 6 million sows = 360,000 dead sows/year x $1,000 = $360 million. Real Money.

We all know the major reason of the sow mortality increase. Too many genetic companies selling gilts that prolapse, cripple, can’t recover from lactation, need hoof trimming a reflection of poor phenotypes, vulva biting, can’t adapt to pen gestation… etc.

If you like hauling out dead sows keep doing what you are doing. If not maybe time to look around to see if there are options. Gene Editing won’t fix prolapses, phenotypes and dead sow syndrome.

Kalmbach Feeds Agribusiness Conference 2023

This week we will attend and speak at the Kalmbach Feeds Agribusiness Conference in Columbus, Ohio. Last year’s conference was one of the best conferences with some of the best speakers we have ever heard.

Banff 2023 – Editorial

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

For the second year in a row, the Banff Pork Seminar returned in-person. This year’s seminar took place with the theme: ‘A Sustainable Pork Journey.’ By now, many people in a lot of industries reflexively roll their eyes when they hear the word, ‘sustainability.’ But, true to its definition, it has every intention of sticking around as a principle touching everything from farming and processing, to retail and restaurants. Hence, the cover photo of this edition is a dish served at the Juniper Hotel’s bistro in Banff – noted for its commitment to eco-consciousness and preserving the area’s Indigenous heritage.

Choosing that image, on my part, wasn’t without purpose. Other than being an incredible-looking and delectable-tasting dish, to me, it illustrates the line-of-sight our industry must have when it comes to everything we do. While many people in our industry may consider the connection from the farm to the table to be tenuous, Banff is one of the most pertinent examples of how wrong that notion is.

Consider where Canadian pork ends up: most of it goes to Asia. Walking through the streets of downtown Banff, guests at the seminar may have noticed Japanese script on storefront windows and signs indicating shops carrying everyday cultural staples, such as instant noodles. Those are not random observations but should suggest something about the origins of the tourists who visit our country to spend money. These same tourists buy our pork at home, in their own countries. Tourists, just like guests at the seminar, frequent Banff’s businesses, including restaurants. The one I chose to highlight was singled out for its additional values that align with this year’s theme for the seminar and encourage positive public perception – something that continues to be desperately needed in animal agriculture.

With that in mind, there is a skewed side of sustainability, and it is sustainability that compromises the product – the pig, which becomes pork. While society undoubtedly expects our industry to fall in line with sustainable practices, if these practices result in worse-performing pigs or pork that is lower-quality or less food-safe, the sector will have lost the plot, and society will have lost an affordable, delicious, nutritious source of sustenance. At that point, sustainability may be counter-intuitive. On top of that is also the issue of financial gain – the ‘brass tacks’ of why producers are able to raise pigs, why packers are able to slaughter them, and why end-users are able to sell pork to customers. If sustainability, in that sense, amounts to widespread consumer buy-in, then it all has a round-about way of being justified. But if that financial element is overlooked, everyone loses.

Writers are seldom the most knowledgeable people in the room, but yet, we’re the most inclined to open our proverbial mouths by publishing our words. Case in point: the photo on this page shows me, at right, with Alberta Pork’s Production Team, Javier Bahamon and Cris Neva, at left and centre – two very astute individuals with an invaluable dedication to this industry that many of you share.

With that considered, let me know what you think about this edition by emailing andrew.heck@albertapork.com. I would also encourage you to participate on social media and ‘follow’ the Canadian Hog Journal on Facebook and Twitter (@HogJournal).

Dissecting gene editing for pig production 

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By Andrew Heck

Editor’s note: This article has been corrected regarding the xenotransplantation of a pig kidney, which was performed on a brain-dead human.

CRISPR/Cas gene editing technology was discovered in 2012. The scientists who discovered it won the Nobel Prize in Chemistry in 2020. In just over a decade, the technology has positively disrupted the field of genetics forever. Image © U.S. National Human Genome Research Institute

When science fiction becomes science fact, heads quickly turn. Such is the case with gene editing – an emerging suite of technologies enabling precise changes to the DNA of a cell or animal.

While the discovery of DNA in the 1950s heralded a new age for biotechnology, the field really began to take off after the 1990s, thanks to successive breakthroughs in genetic engineering.

Fast-forward to the 2020s, and gene editing technologies are now taking centre stage, with more than 35,000 scientific papers published on the subject since 2013, including 7,000 alone in 2022. More than 100 of those published last year were related to pigs, specifically in the field of biomedical science.

Just prior to the start of the 2023 Banff Pork Seminar, Swine Innovation Porc (SIP) hosted three researchers to present their knowledge on the subject, including Ray Lu from the Department of Molecular and Cellular Biology at the University of Guelph, Vilceu Bordignon from the Department of Animal Science at McGill University, and Stuart Smyth from the Department of Agricultural and Resource Economics at the University of Saskatchewan.

The researchers each spoke on different aspects of gene editing. For Lu, the possibility of using gene editing as a solution to the wild boar problem; for Bordignon, an exploration of where the technology has been successfully deployed in various aspects of our world; and, for Smyth, the state of the technology’s public acceptance.

“Our goal in presenting this information is not about being ‘for’ or ‘against’ gene editing,” said Arno Schober, Chair, SIP. “It’s about bringing together farmers and researchers to have discussions about how we can prepare for the future and what role it could play in our industry.”

To begin to understand the basics of gene editing, it is important to establish what it is. ‘CRISPR/Cas’ gene editing is a precision genetic toolbox that singles out individual nucleic acids – the building blocks of DNA. This allows for the creation of new gene sequences at the same level as nature, in principle. Genetic variations exist naturally between organisms but also between cells within an organism, and most of these differences play no role in ‘phenotypes,’ which are the visible expressions of genetic variation, such as what makes brown hair, brown, and blonde hair, blonde.

Comparing gene editing to genetic modification or ‘GMO,’ the major difference is that gene editing relies on existing genetic material to perform edits, rather than introducing new genetic material – typically from entirely different organisms – which is the case with GMO.

At the higher level, more traditionally, genetic variation within livestock has been brought about through selective breeding strategies. These have, for a long time, led to the favourable genetic advancements in pigs that we can all appreciate. But can isolating, slicing and replacing strands of DNA achieve results in a similar fashion, with greater speed, efficiency and effectiveness? Certainly, and science is only beginning to scratch the surface.

A radically different approach to wild boar

By introducing gene-edited wild boar into existing populations, they could reproduce slower or become resistant to certain viruses.

On the Canadian prairies, in parts of Ontario and across the southeastern U.S., wild boar – sometimes referred to as ‘feral swine’ or by other terms – are a highly destructive invasive species. Controlling wild boar populations has proven incredibly difficult or impossible, in some regions. Hunting causes their groups to scatter and infest new areas, leaving the most credible solution, at present, to be tracking, trapping and culling whole groups, called ‘sounders.’

But what if there was a proactive way to manage the wild boar population? Ray Lu believes gene editing could help reduce the harm they cause in two ways: one, by making them resistant to the African Swine Fever (ASF) virus, or, two, by limiting their ability to replenish their numbers so quickly.

The first option is called ‘population replacement,’ which refers to editing an organism’s genome so the specific gene that transmits a certain pathogen is altered in a way that does not allow for transmission. With successive generations of reproduction, the altered gene becomes more prevalent, eventually snuffing out any virus-carrying potential. The second option is called ‘population suppression,’ which acts as a method of generating female infertility to reduce wild boar numbers outright.

In 2015, Pig Improvement Company (PIC) began to develop a gene-edited pig resistant to porcine reproductive and respiratory syndrome (PRRS). Currently, the company is working toward making the pig commercially available. There has been a great deal of enthusiasm around the PRRS-resistant pig, and some have wondered if the approach can be applied to other swine viruses.

“For ASF resistance, it is more complex,” said Lu. “This virus is very stable in the environment.”

ASF is presently less widespread than certain other swine viruses, including PRRS, but its existence anywhere is much more concerning for the pork value chain, collectively, along with Foot-and-Mouth Disease (FMD), which affects swine and several species of ruminants. PRRS continues to take a massive toll on swine herds around the world, and recovery from PRRS is costly for individually affected farms; however, the discovery of an ASF or FMD case in Canadian wild boar or a domestic pig herd would close our borders to the international markets into which around 70 per cent of all pigs and pork produced and processed in our country are sold. Given the relationship between Canadian and U.S. markets when it comes to pricing pigs and pork, a case of ASF or FMD discovered in the U.S. could be equally devastating for Canadian exports of live animals or pork and beef products.

While the agri-food industry certainly has a vested interest in controlling wild boar and diseases they carry, other disease issues have a broader, global impact on humans. Mosquito-borne viruses like dengue, malaria, Zika and West Nile kill upwards of one million people annually, with the vast majority of cases and deaths affecting people in Africa, especially young children. As such, the scientific community has been actively pursing gene editing solutions to combat these viruses, demonstrating that the real potential for positive improvements in this area goes well beyond the hype. Suffice to say, the world is ready for any credible strategy that lowers the toll of insect- or animal-borne disease transmission, which is a promising inclination for everyone.

Where gene editing is already finding success

The world’s first pig-to-human kidney transplant took place in September 2021. The pig from which the kidney was harvested was gene-edited to remove a gene sequence that causes organ transplant rejection in humans. Image © Joe Carrotta/NYU Langone Health

Vilceu Bordignon believes advancements in gene editing can have mutual benefits for human medicine and livestock production, while also recognizing the pitfalls.

“Not all genes can be edited,” said Bordignon, referring to genes that are fundamental to an organism’s existence. “What we do in the lab isn’t ‘natural,’ but it’s pretty close to what nature does.”

Bordignon provided several examples of how the technology is already being deployed, including ‘xenotransplantation,’ which is the transfer of living cells, tissues or organs from animals to humans. Notable instances include a pig-to-human kidney transplant, in late 2021, and a pig-to-human heart transplant, in early 2022. Both examples were taken from pigs that had 10 gene edits applied.

In the case of the heart transplant, the recipient, unfortunately, passed away just two months following the procedure. The recipient was a 57-year-old male with terminal heart disease. Had nothing been done, his fate may have been the same. But thanks to his willingness to participate in the experimental procedure, his contribution and the work of the surgeons who performed the transplant will long be remembered as a necessary step toward meaningful progress. Such examples exist in many scientific fields throughout history, and their value cannot be overstated.

In livestock production, gene editing is more familiar to the bovine industry. It has already been used to produce hornless dairy cattle with genome-edited cells, and within the past year, the U.S. Food and Drug Administration (FDA) has approved beef from gene-edited cattle for human consumption.

“Gene editing is much more than cutting genes with scissors; it’s more like a Swiss Army Knife,” said Bordignon. “The CRISPR/Cas system allows for all kinds of modifications and combinations.”

Piglet castration is a contested practice within production, along with tail-docking. While it makes practical sense, the animal welfare component is constantly brought to light. The main goal of castration is to remove the testes to prevent male pigs from reaching sexual maturity, to avoid ‘boar taint’ in meat. A novel approach could be to use gene editing to delay puberty beyond market age – so it is never fully reached – or generate sex reversals in utero by preventing the expression of the genes that present the male phenotype, resulting in an all-female piglet litter.

No matter where gene editing in livestock is headed, the possibilities cannot be denied, while the full scale of unknowns surrounding the technology warrants further research and dialogue across the agri-food industry and society. 

Getting public buy-in on gene editing

What do Canadians value, when it comes to food? ‘Naturalness’ ranks significantly below some other considerations, according to recent research by Stuart Smyth and colleagues.

Looking at the history of innovation and science within the public consciousness, Stuart Smyth presented some alternative examples of how, over time, acceptance continues to grow.

‘Mutation breeding’ has existed since the 1920s, when researchers zapped crops like corn and barley with X-rays to find out if radiation could be used to create beneficial genetic variations. It worked, and it has been instrumental in advancing crop science ever since. But imagine the reaction of someone a century ago after being told that the same corn and barley their ancestors had grown for years could be drastically improved through advances in biotechnology – like magic, to the untrained eye. Are we, today, going through a similar shift with gene editing?

“Messaging around this issue is just as important as the science,” said Smyth. “Those people who are fighting against science and innovation in agriculture are appealing to emotion. If the messaging doesn’t appeal to emotion, the public will reject it.”

As of 2022, Health Canada no longer requires additional risk assessments on gene-edited crops; however, we still have no regulatory framework for gene-edited animals.

“The pace of innovation exceeds that of regulation, causing lengthy delays,” said Smyth.

Public perception in Canada on gene editing is currently split. In 2018, two-thirds of Canadians were opposed. In 2020, that decreased to just over half, with many remaining uncertain. Yet, it is becoming abundantly clear that the Canadian pork sector has an opportunity to prevent zoonotic diseases and overcome potential trade barriers by using gene editing.

Trade protectionism is increasing in the world, and when it comes to meat and plant products crossing borders, buyers are becoming even bigger skeptics on the disease front. If gene editing can create a closer-to-guaranteed solution to disease issues, in addition to farm biosecurity and in-plant food handling practices, Canada’s important trade relationships may be easier to preserve with airtight confidence.

While keeping borders open is the goal of free trade, the biggest challenge, it seems, may be to open minds.

Benefits of gene editing coming into focus

Research enthusiasts were more than happy to do some pre-work prior to this year’s Banff Pork Seminar, on the afternoon of the first day, just before the networking session to kick off the event.

Wherever you find yourself on the spectrum of opinions about gene editing, there is little doubt, given the growing body of research interest, that the subject is poised to change many aspects of our world, including the pork sector.

“We are a science-based industry; that’s a big part of the success of Canadian agriculture,” said Daniel Ramage, Executive Director, SIP. “It’s how we do more with less, and it’s how we produce safe food efficiently. Research is a foundation to that.”

If gene editing can lead to better pork production, safer food or enhanced human medicine, it is increasingly likely you could soon come across gene-edited technologies in a barn, grocery store or hospital near you. As time goes on, however, wrinkles in the social fabric caused by gene editing might prove even more stubborn than the brilliant minds using gene editing to achieve the goals of scientific progress.

Inflation could cause markets to balloon this year

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By Andrew Heck

Unless you have been living under a rock or in some kind of banana republic with absurdly worthless currency, you have probably noticed that things have gotten pretty expensive in the past year especially, from farm supplies to food.

At the 2023 Banff Pork Seminar, two presenters, Brett Stuart of Global AgriTrends and Steve Weiss of NutriQuest, offered their analyses of the year to come, as it relates to market impacts on the pork industry.

COVID-19 aftermath, cash and China

According to Brett Stuart of Global AgriTrends, the risk of a global recession, due to inflation, remains high but not certain, considering the market situation.

COVID-19 created a lot of unpredicted and unprecedented market hiccups, but for the most part, its effect on market conditions today has waned, but not without leaving a long-term mark.

According to Brett Stuart, food price indices have stabilized since COVID-19 started, but that baseline has increased by 20 basis points, due to inflation created by increased money supply. In 2020, global broad money supply was 143 per cent of global GDP, and that proportion of money to GDP continues to increase.

“We’re not going back. Don’t hold your breath,” said Stuart. “I’m not saying things are never going down, but it won’t be the same.”

While interest rates are on the rise and concerning, Stuart does not expect them to reach double digit rates of the early-1980s. He expects two or three more rate hikes this year, and then they may actually start to come down.

“The Fed [U.S. Federal Reserve] talks tough to scare the market into compliance,” said Stuart. “That’s what they do. But how hawkish are they going to be this year?”

A large part of the reason why the money supply grew was economic stimulus activity related to COVID-19. In theory, the stimulus was meant to support those who needed it most – such as those who were left out-of-work due to lockdowns – but Stuart posits that more of the money ended up in the pockets of corporations, rather than providing the intended effect of increased consumer spending. While inflationary periods can cause consumers to tighten their budgets, a lot of that activity may be related to the nature of the expense. Unfortunately for our friends in beef, that means them.

U.S. beef production is expected to be down by seven per cent in 2023, representing the single-largest drop in 44 years. This could result in a decline in consumption of around two pounds per person. However, beef’s loss is sometimes pork’s gain, and based on data following the 2008 global recession, pork fared OK during that time. If we head toward a similar situation in the months ahead, Stuart speculates the situation could be the same.

The Chinese market for pork imports has historically been incredibly volatile and driven by sudden demand. Over the course of 2022, imports declined significantly, and Stuart predicts this trend to hold.

Looking internationally, Stuart is not confident much U.S. pork will go to China this year. Reports suggest Chinese domestic production is at its highest in the past eight years, after a sharp decline due to African Swine Fever (ASF) starting almost five years ago.

“They can live without us, but can we live without them? The simple answer is that, if Mexico keeps buying our pork, we can live without China,” said Stuart. “[U.S. and Canadian pork exports] ebb and flow with China. The only growth market is Mexico.”

Mexican domestic hog prices have been at a record high, which benefits U.S and Canadian exports. The corn price in Mexico has contributed to elevated feed and hog prices domestically, growing the demand for foreign pork.

“It’s the only country in the world where production’s increasing, consumption’s increasing, imports are increasing and exports are increasing,” said Stuart. “What it is, is rising incomes.”

Input costs show no sign of slowing down

According to Steve Weiss of NutriQuest, producers and packers need to do more to work together, as risk management becomes a greater focus.

Steve Weiss examined the angle of profitability in the face of high input costs as the focus of his presentation. He expressed some strong concerns about what lies ahead this year, in that regard, suggesting costs will put extreme pressure on business leaders in the hog sector.

“It’s pretty scary and eye-opening what people are looking at in 2023,” said Weiss. “In a commodity business, cost is king.”

In this timeline of rampant inflation, where is the value going for pigs and pork? Weiss suggested the consumer price of pork was shared more evenly between producers, packers and retailers decades ago, but over time, retailers have begun to absorb the lion’s share of profits.

Looking back on his time starting out in the industry, in the early-1990s, Weiss recalled a time when hog industry growth was all but inevitable. The future was brighter then, as he believes the industry has stagnated in recent years, despite optimism it might have become more streamlined and equitable.

“There’s always been a win-lose mentality between producers and packers,” said Weiss. “And I’m not sure that’s sustainable.”

According to Weiss, the most successful producer-packer negotiations result from producers treating packers as their customers. In the absence of price discovery, this is the best approach for producers.

In the U.S., cost of production has increased by at least one-third in two years, but there is high variability among producers Weiss works with. Being creative with alternative feed ingredients is also picking up interest, such as upping soybean meal rations in diets.

Business efficiency, or ‘throughput,’ is the best insulation against losses this year, according to Weiss.

Disease issues and mortality also play an overlooked role in what contributes to costs. The spread of porcine reproductive and respiratory syndrome (PRRS) and porcine epidemic diarrhea (PED) in the U.S. could give Canada an advantage this year, he thinks, given our high standards compared to other jurisdictions.

“You look at China’s hog hotels, and Canada is kind of the opposite, with so much land and good biosecurity,” said Weiss.

With fertilizer prices through the roof, Weiss suggested the value of manure is greater than hog profits currently, for some, but that value is not being adequately recovered by producers. On top of cost savings, using manure responsibly is part of our industry’s sustainability story. Capturing the value of manure and assigning it a dollar value is necessary. Failing to do so is a missed opportunity, which speaks to poor risk management strategies.

“If you don’t do [business risk management] methodically, it’s just not sustainable,” said Weiss.

Weiss has seen how businesses with disciplined risk management approaches are doing the best right now. Operating passively is dangerous in the marketplace today, and benchmarking your losses and gains is vital to improvement. To do so, information needs to be timely and accurate.

Living with the reality of an industry experiencing contraction, Weiss also highlighted the importance of succession planning for those looking to retire or otherwise make an exit from the sector. As the marketplace becomes harsher for independent producers, this may lead to further consolidation and vertical integration but not necessarily expansion of the total hog herd.

Prices versus costs: a balancing act

In recent years, the list of problems for the hog industry appears to have gotten longer than the list of solutions. Perhaps it has always been this way, but as we trend toward stricter budgeting, increasing consumer demands and a more competitive labour pool, pig production and pork processing alike may be forced to continue limping along in 2023 without much financial reprieve except the prospect of hog prices hovering above the five-year average.