Pork Commentary Jim Long President – CEO Genesus Inc. Feb 27, 2023
We have been pointing out for the last few weeks the record price difference between Europe’s and the United States prices of market hogs. Last week Spain (largest producer in Europe) market hog price set a new record at 1.89 Euros/kg live – 92¢ U.S./lb. live. Current U.S. price is 59¢ lb. liveweight. The Spain – U.S. price spread on a 280 lb. market hog is $92 U.S. The biggest difference ever.
If arbitrage is happening it is logical to expect an increase of pork exports from USA as foreign buyers look to purchase pork at a lower cost than Europe. The latest U.S. exports weekly sales data indicates 51,920 metric tonnes sold, the week before 45,000 metric tonnes. Export weekly sales have been running in the 30,000-tonne area. Obviously the last two weeks sales are showing a big jump. So far exports shipped have not increased from the 30,000-tonne range. As there is time lag from orders to shipping. The big jump in sales might be indicating orders pulled forward making the sales increase misleading but if sales continue to average well over 30,000 tonnes a week it will be true indicator of bigger exports and we will see stronger hog prices as the pork leaves North America supporting domestic prices.
We expect if U.S. pork exports are increasing so should Canada’s. We know more Canadian pork is starting to go to China from the plants in Canada just approved for export. Any increase of pork exported to Asia from Canada is support for both the U.S. and Canada market, as less Canada pork is available to ship to U.S. market.
There was some more Europe Swine Inventory Data released the last few days. It indicates the Breeding Her has declined significantly from our calculations of December data.
Breeding Herd December (1,000 head)
2020
2021
2022
11,417
11,035
10,407
It appears the European Breeding Herd is down about 600,000 in the last year and about 1 million in the last two years. It’s not complicated people lose money, and you end up with fewer sows and pigs. Massively cut pig production and prices got to record levels. We expect even lower European market hog numbers in coming months as liquidation cuts supply and mortalities stay high from the removal of copper sulfate and limited antibiotic use leads to further attrition. We expect more upside to Europe than downside to Europe’s hog prices due to supply being cut. Their continued high European prices should push U.S. – Canada prices higher as exports increase cutting domestic supply. Arbitrage.
Other Observations
USDA is forecasting 2023-24 corn price at $5.60 bushel down $1.10 from last year. U.S. corn declined 30¢ bushel last week. U.S. corn exports continue to run well below projections. Lower corn price would be welcome news to the swine industry.
U.S. cattle on feed inventory report for February 1 continued to indicate the reality of fewer cattle with 4% less than February 1 last year. The lowest cattle inventory in 50 plus years will lead to record prices and support hog prices throughout the year. Beef cut-outs over $2.88 lb. Hogs are 86¢ lb. Certainly can purchase a lot more pork with $10 then beef.
Last week there was announcement of cooperation agreement between Prestage Foods who have a slaughter plant in Iowa and Wholestone Foods who have a slaughter plant in Nebraska. The pork slaughter industry has had a big challenge to make money recently. You only have to look at multiple financial reports of several packing companies to see the hard reality. The cooperation between Prestage and Wholestone is a logical development in a challenging environment to improve marketing and lower costs.
Wholestone had announced previously they were going to build a new slaughter plant in Sioux Falls, South Dakota and double shift their Nebraska plant. Prestage is a newer plant. We understand it has the capacity to process more hogs per day than they are currently.
Finally
Last week the USDA came out with a projection that total red meat and poultry production will be lower in 2023 than 2022. This is the first time since 2014 of a decline from the year before. We all remember that 2014 was one of the most profitable in history for the swine sector (PED year cutting production). We continue to believe lean hog futures are undervaluing the potential prices in a near future. Less meat protein in both USA and Europe will lift prices as domestic and export buyers bid to purchase from lower supply.
Pork Commentary Jim Long President – CEO Genesus Inc. February 20th, 2023
We have been writing for the last couple of years about the terrible market conditions in Europe and our expectation of a large swine inventory decline and higher hog prices.
There are now December inventory reports from all of Europe’s major hog-producing countries. From what we can discern from the data Europe’s swine inventory is down 7.5 million from last December and 12 million from December two years ago.
Major Country Data (Thousand Head)
2020
2021
2022
Change from 2020
Germany
26,069
23,762
21,330
-4.739
Denmark
13,391
13,152
11,541
-1.850
Netherlands
11,541
10,872
10,706
-835
France
13,393
12,941
12,182
-1.211
Poland
11,727
10,242
9,624
-2.103
Spain
32,796
34,454
34,075
+1.279
As you can see from the data all major countries are down from last year. Only Spain is up from two years ago. There were 145.911 million pigs in the industry in December 2020, 141.681 million pigs in December 2021. We estimate when all data is entered for December 2022 about 134 million. Less pigs always lead to higher prices, and they have.
Last week most countries in Europe reached record hog prices. Spain the largest producer in Europe reached 1.845 Euros/kg liveweight (90¢ U.S. liveweight a lb.) a 280 lb. pig = $252 U.S. ($336 Canadian). The same pig in the U.S. is selling now for about $160. Looks to us about a $90 U.S. per head difference. We don’t believe there has ever been such a price spread between Europe and USA-Canada, the world’s two major pork exporting blocs. It doesn’t take a Harvard MBA to figure there will be greater pork exports from USA-Canada as pork-importing countries move towards a lower costing source. We will arbitrage – the practice of taking advantage of a difference in prices – the effect of prices in different countries will converge. The spread between hogs in Europe and USA will converge. The other factor is Europe with millions of fewer hogs will have less Pork to export.
A week ago, U.S. Pork Export sales were 44,950 metric tonnes. Exports have been running closer to 30,000 tonnes a week so far this year. Watch export sales if they go higher it will lead to higher hog prices.
In the last couple of weeks, China has relisted more Canadian Pork Plants allowing export to China. We expect the main reason is China needs to buy Pork and wants more competition between exporters. Last year Canada exported significant amounts of Pork to the USA due to weakness not only in China market but Korea, and Japan partially due to strong Europe competition. If Canada can shift the Pork from the USA to other markets, it will support U.S. and Canada hog prices.
U.S. Beef production is down 3.7% year to date (-141 million lbs.). Last Friday U.S. Choice Cattle cut-outs were $2.80 lb. as they continue to push higher on lower supply and continued demand. U.S. Pork cut-outs Friday 82¢ lb. The price spread is a sad testimony to our industry’s total lack of comprehension of the importance of taste in consumer demand.
Summary
Europe hog supply record low – hog prices record high. U.S. Beef supply is down with strong prices. We expect at some moment U.S. hog prices will take off with less supply–price competition from Europe and Beef. All leading to greater Pork domestic and export demand. Not if but when.
Editor’s note: Serge Buy is CEO of the Agri-Food Innovation Council. He can be contacted at sbuy@aic.ca.
The federal Standing Committee on Agriculture and Agri-Food has met on multiple occasions to hear support for and opposition to a carbon tax exemption for farms. AIC’s Serge Buy is an outspoken supporter.
For more than a century, the Agri-Food Innovation Council (AIC) has been one of the key advocates for cross-sectoral agri-food research and innovation in Canada. As such, we are asked to weigh in on various issues, including some that may, initially, seem out of our scope.
Such a case took place when, in October 2022, we were asked to present in front of the House of Commons Standing Committee on Agriculture and Agri-Food to discuss Bill C-234, An Act to amend the Greenhouse Gas Pollution Act.
Simply put, the private member’s bill seeks to protect some types of farm activity from the carbon tax. The proposed legislation is the successor of a similar bill that disappeared when the preceding legislature ended when the 2021 federal election was called.
AIC was asked to testify in front of the parliamentary committee to discuss the advancement of innovation leading to renewable sources of energy.
The parliamentary committee’s members were philosophically split on a crucial issue: will Canadians adopt renewable energies and drop fossil fuels voluntarily, or do they need to be pushed to do it?
The carbon tax is called an incentive by some. Indeed, one could assume that a tax may be seen as an incentive not do something, such as how taxes on tobacco are raised to make it unaffordable to smoke. Others see it as a penalty.
Replacing the use of fossil fuels in farming
The use of natural gas and propane for heating barns is still the dominant method in commercial hog production. Animal welfare depends on it, and farmers’ ability to feed Canadians and the world depends on keeping input costs under control as much as possible.
Innovation is indeed enabling renewable energy sources to replace fossil fuels; however, the technology is not scalable to the whole country and all types of farming.
Renewable energy sources are not available all over the country, nor is local production (when it exists) sufficient to support the requirements.
To be clear, the technology will evolve and grow, and so will its adoption rate throughout the country. But we’re not there.
Making clean tech affordable
There is always a cost to adopt new technology. Often, early adopters undertake a cost-benefit analysis and move forward.
In the case of the carbon tax, the intent is to impose a high burden on the users of fossil fuels to encourage them to change to renewable fuels. Our concern is that large corporations involved in farming will have an unfair advantage in comparison to smaller operations. Indeed, they will be able to afford and finance the transition, while the smaller operations will not be able to.
This would mean that small operators would face increasing costs under the carbon tax, while large farm operations transition. This is not acceptable.
Is Canada prepared to abandon small farming? Is Canada prepared to move away from family farms? We don’t think so. In fact, innovation and leadership in farming has often originated from small operators, and they need to be protected.
Food supply versus climate change
AIC hosted a webinar with international experts in food policy, agricultural technology and research, in May 2021, to discuss the global agri-food sector’s role in climate change.
At a webinar AIC organized in May 2021 on agriculture and climate change, various experts, including a representative from the United Nations’ Food and Agriculture Organization (UNFAO), clearly stated that, while work to reduce carbon emissions is essential, so is ensuring a supply of food for the world. Canada indeed has a responsibility – especially in troubled times (considering inflation, the war in Ukraine, droughts in Europe and Africa) – to continue to produce food.
Pushing farmers out of the business by increasing costs is counterproductive to our national and international objectives of greater food security.
Let’s be clear: the devastation from the floods and fires on the west coast in 2021, followed by the hurricane that hit Atlantic Canada and everything in between, shows that our climate is changing – it is more unpredictable and will lead to increasingly destructive weather.
Work is being done to study the impact of climate change – how it will impact humans and animals, how it will impact crops, how regions of the country will suddenly be exposed to hotter temperatures, and more.
Who would have thought a few years ago that berry producers from the U.S. would now be looking at moving their production to Canada, due to the availability of water and expected warmer conditions?
We absolutely have to do our part – and I know that no farmer is waking up today thinking, “How can I pollute more?” However, hitting them repeatedly with a stick (in this case, the carbon tax) when they have no other option is not going to help.
The government’s role should be to create the options – enable the scalability of the technology, support its adoption by creating incentives for farmers, and explain how it can work.
When I spoke at the parliamentary committee, Ryan Turnbull, Member of Parliament (MP) for Whitby (Ontario) stated his belief that, “the price on pollution increases the rate at which industries both develop and adopt new clean tech.” What he means is that, if you increase prices on something, people will look at other solutions, but they first need to exist. In the case of Canadian farms in rural Canada, those solutions are often non-existent.
As I stated at the same committee, if the government wants to tax the ‘urban warrior’ who wants to drive a gas-guzzling, oversized vehicle until the individual is forced to ride a bicycle… that’s great. But most farmers must drive pickup trucks. Most are obliged to use fossil fuels to heat barns where animals reside. They’re not the ones who should be taxed – at least not until there are clear, viable, scalable and affordable alternatives.
The government needs to realize that its policies must be adapted to the realities of the land we live on. What works in downtown Toronto may not work in rural Saskatchewan, and vice versa. Adapting policies will enable us to work together on the same objectives, while respecting the diversity that our wonderful country offers. We shouldn’t pit one region against another or urban versus rural.
AIC supports increased investments in both the research for alternative fuels and technology, as well as investments in the production of these technologies. We also encourage the government to invest in extension services to support farmers and develop easy-to-access incentives for their adoption. That’s how we’ll reduce our carbon footprint.
The carrot works better than the stick. There’s no need for aggravation and conflict as we strive to decarbonize our society. On the contrary, we should work together progressively and positively to adopt cleaner technologies.
Through Swine Innovation Porc (SIP), pork producers and industry partners in Canada have recognized the need for greater research, for more than a decade. Results of SIP projects have been published in the Canadian Hog Journal from the start, to be continued.
For the pork sector in Canada, research is like oxygen: if you don’t see its value, try living without it.
In an industry where margins are thin and profit is never assured, the one constant is the need for cutting-edge research to aid producers. Against that backdrop, Swine Innovation Porc (SIP) has been managing pork projects since 2010 and is set to continue that effort with its Cluster 4 studies over the next five years. The Swine Cluster is a collaborative research program managed by SIP, in partnership with the Canadian pork industry and Agriculture and Agri-Food Canada (AAFC).
During the last 12 years, SIP has overseen research investments totaling $51 million over 50 projects and counting. All told, their projects demonstrate the importance of coordination and management to leverage research dollars and make the most of producer funding.
“SIP brings industry and government partners together to advance research that’s aligned on key priorities,” said Daniel Ramage, who assumed the position of general manager, in August 2022. “These are large-scale projects with significant impacts. Our work ensures this research is developed and managed for the benefit of the industry and to maximize the impact of investments.”
To highlight that impact, SIP recently produced a report demonstrating the positive effects of its cluster research on the pork sector in Canada and the economy at large.
“Our report showed that the $30 million we invested in Cluster 1 and 2 led to a three-and-a-half per cent productivity increase in the sector,” said Ramage. “We are now completing Cluster 3 and are working towards launching Cluster 4 in spring 2023, so we can look forward to keeping up this momentum in the years ahead.”
Current examples of Cluster projects help illustrate the breadth and depth of SIP-funded research and the tangible benefits flowing from those studies, from animal health and welfare, to nutrition, new technologies, sustainability improvements and more.
Animal welfare: Transport distance impacts
Animal welfare in agriculture is a growing public trust issue. Research into best management practices for pigs can help reinforce how the sector is positively addressing concerns.
Animal transportation is a hot-button issue in livestock production. A project by Jennifer Brown, a research scientist with Prairie Swine Centre, assessed the response of weaner pigs under Canadian commercial transport conditions and found that weaners subjected to long-distance transportation lost more of their body weight, experienced more dehydration and spent more time feeding, drinking and sitting after the journey than weaners transported short distances. However, weaners transported shorter distances had more muscle injuries and higher indicators of physiological stress.
Result of this study have the potential to impact the timing of weaning and transportation events at the farm level, along with trailer design, which could include climate control mechanisms. More work needs to be done to refine this understanding, but the results are an important part of better addressing animal welfare concerns.
Animal health: Truck washing
As porcine epidemic diarrhea (PED) and other diseases have sparked a greater interest in biosecurity, a prime target for SIP research has been the trucking sector, where the risk of disease transfer is ever-present. To address this challenge, a comprehensive study was undertaken by Terry Fonstad, who is the associate dean for research and partnerships for the College of Engineering at the University of Saskatchewan.
One of the study’s key findings was that, while dry heating of pathogens for 15 minutes at 70 degrees-Celsius could inactivate most of them, greater intensity was needed to address PED. As a result, researchers now recommend heating trucks to 75 degrees-Celsius for 20 minutes in every section of the trailer.
At a time when disease threats are being closely monitored by the Canadian industry and global trading partners, this project will mean fewer losses for producers and greater welfare for their animals – truly a win-win.
Nutrition: Preventing diarrhea
Can pigs fed a less-expensive, low-complexity nursery diet stay healthy and grow well? Vahab Farzan, a research scientist with the University of Guelph, has found that pigs fed low-complexity diets for five weeks post-weaning experienced diarrhea more frequently.
While low-complexity diets are cheaper, this research has shown they may cause problems, but the underlying factor that warrants further investigation on-farm is whether pathogens like Streptococcus suis or E. coil could factor into the diarrhea equation.
As diarrhea may be symptomatic of various diseases of note – potentially creating problems for growth performance or even trade, farther along – understanding what causes it has received a lot of interest.
Quality: Classifying Canadian pork
New ways to assess pork quality are being closely considered in the highly competitive global pork marketplace, to build on Canada’s reputation and leadership in exports.
Manuel Juarez, a research scientist with Agriculture and Agri-Food Canada’s (AAFC) Lacombe Research and Development Centre, has been tasked with creating and commercially testing the viability of an updated pork quality classification system. This project is investigating cost estimates of different technologies and the development of new tools and approaches, in addition to the modification of existing technologies to support the development of quality classifications.
Looking ahead
Research and innovation are key ingredients in the recipe for growing pork supply and demand, through initiatives like the Canadian Pork Promotion and Research Agency (PPRA).
As these projects underline, SIP’s partnerships with the pork sector and stakeholders in government and academia enable innovation that unlocks progress around core priorities like production efficiency and animal health and welfare, along with food safety, product quality and environmental sustainability.
“Canada is a leader in pork research, thanks to the investments that have been made jointly by our collaborators over the years,” said Ramage. “Research has never been more important to the pork sector than it is today, as the industry responds to changing consumer and regulatory demands and navigates emerging issues.”
Just as producers must adapt to a fresh industry landscape, so too must organizations like SIP, to remain relevant and effective when needed most. Today, the funding appetite for research is shifting significantly. Government funding ratios for Cluster research have become less generous than they were when the program was first started, and the emphasis on sustainability has grown enormously.
“Looking forward, this means industry must play an even greater role in advancing its research interests, and it will take even stronger value chain collaboration to drive progress through research,” said Ramage. “This is a key role that SIP plays by bringing partners together and mobilizing resources around shared priorities.”
The recent creation of the Canadian Pork Promotion and Research Agency (PPRA) is seen as a prime example of value chain alignment to build new opportunities for advancing research that benefits business. It was created to support the development and implementation of the promotion and research necessary to increase the demand for pork.
“By leveraging these types of partnerships and coordinating to maximize impact, we can position the value chain to make the most of innovation,” said Ramage. “For SIP, this means forging research that builds on Canada’s competitiveness and brand as a global pork leader over the long term.”
Editor’s note: Banks Baker is Director, New Product Marketing, PIC. He can be contacted at banks.baker@genusplc.com.
Environmental, sustainability and governance (ESG) reporting is now the expectation for major businesses, including those in agri-food, like McDonald’s. Can hog farmers, working with genetics companies, be part of the solution?
Less than a year ago, I led protein sustainability at McDonald’s U.S. Now, I’m spearheading new product marketing for PIC: one of the world’s premier pig genetics companies.
PIC is on a mission to demonstrate how advanced breeding technologies that produce healthy, robust and efficient pigs can help stakeholders throughout the value chain reduce carbon emissions and meet ambitious greenhouse gas reduction goals.
Genetics play a significant role in a sustainable food system, and their positive impacts have been overlooked for far too long. PIC recently announced a partnership with the U.S. National Pork Board to create a framework that will provide a pathway for corporations and pork producers to claim the environmental impact of genetic improvements.
Let’s start from the beginning.
McDonald’s was the first global restaurant company to publicly announce a science-based target to lower greenhouse gas emissions. The company’s sustainability goals were ambitious, and my role was clear: work alongside suppliers – some of the world’s largest protein companies – to identify and implement strategies to reduce carbon emissions from the company’s supply chain.
Investors, environmental activists and consumers are pressuring corporations to minimize their environmental footprints. Even the most climate-forward companies can only eliminate so much carbon from their operations. It requires close collaboration with partners to achieve further reductions.
That’s where pork producers come in.
The role of genetics in environmental sustainability
Improving genetics means less feed and water are consumed by pigs, which lowers the carbon footprint of pig production and saves farmers money.
Traditionally, pork producers have relied on strategies like manure management or changing how feed is grown to lower greenhouse gas emissions. PIC is working the other end of the equation; we’ve set out to quantify the environmental benefits of using advanced genetics and genetic improvements.
Choosing the right genetics produces more efficient and resilient pigs that use less water, require less feed, have less need for antibiotics and reach market weight sooner. This allows farmers to mitigate emissions before they happen – unlike many popular carbon-reduction strategies that sequester or offset emissions. Mitigating emissions is also easier to monitor, report and verify. But, to date, corporate climate reduction strategies have overlooked genetic improvements as a viable intervention opportunity to cut emissions.
Creating a credible, quantifiable framework
PIC and the National Pork Board are teaming up to create a framework that will demonstrate how genetic improvements are an effective way to lower greenhouse gas emissions. The details are still being developed, but the final framework will define what stakeholders must do to credibly quantify and show an intervention occurred within their supply chains.
The quantifiable metrics will be based on PIC’s life cycle assessment (LCA) conducted by Greg Thoma from Resilience Services PLLC. An LCA – also known as a life cycle analysis or cradle-to-grave analysis – is a method of assessing environmental impacts associated with all stages of a product’s life. Thoma is the primary investigator on several LCAs and sustainability initiatives in agriculture. He will apply his expertise and key learnings from his body of work to analyze how genetic improvements – including step-changes forward in the health of a production system achieved through gene editing technology – provide environmental benefits.
As corporations continue searching for opportunities to address climate change and reduce emissions from their supply chains, we need genetic improvements, even gene editing, to meet ambitious sustainability and climate action goals.
A win across the value chain
Country music star Luke Bryan has also recently team up with the U.S. National Pork Board to spread the word about how modern hog production is defying deeply held, often incorrect stereotypes.
PIC and National Pork Board’s framework is an investment in the long-term success of the pork industry. The framework will create shared value for stakeholders across the food supply chain. Regardless of where companies sit, removing carbon from production systems increases efficiency and profitability. The framework’s intent is for genetics companies and pork producers – big and small – who meet the criteria outlined in the final framework to be able to claim a genetic improvement as a greenhouse gas reduction, and their supply chain partners can claim this reduction in their environmental, sustainability and governance (ESG) reporting.
What does this mean for pork producers? Advanced genetics increase the overall productivity of your herd and your bottom line while helping animals consume feed and water more efficiently, which reduces waste and your overall input costs. That, in turn, helps make farms and pork production more sustainable. Furthermore, emerging technologies like gene editing will enable significant improvements in health to further accelerate these benefits.
It also presents an opportunity for pork producers to capture value from carbon markets. The end goal is to generate new revenue streams for producers based on the genetics they choose.
A framework like this takes time to develop, but the process is currently underway. PIC and National Pork Board hope the framework will be ready to share with industry partners in late 2023. We are currently searching for restaurant and food retail partners in the U.S. that are willing to join us on this journey and pilot-test the framework.
PIC recognizes the connectedness of the global pork market. The framework development is part of PIC’s continued commitment to supporting pork producers around the world. The intent is to first pilot-test the framework in the U.S. and create a model that can be replicated and customized in other priority markets, including Canada, allowing more producers to capture and share the value of genetic improvements.
Pork Commentary Jim Long President – CEO Genesus Inc. February 13, 2023
Spain is the largest producer of pigs in Europe with about 2.6 million sows. Last week Spain set a new record hog market price of 1.795 Euros/kg liveweight. About 87¢ lb. U.S. Like North America no one in Spain expects high prices in February, it is counter-seasonal.
There is only one main reason Spain’s price has reached a record level. The decrease of hogs for slaughter in Spain and throughout Europe. We started writing about our expectations of Europe’s potential herd liquidation after our visit to Europe in the fall of 2021. Since then the European sow herd continued to decline while new rules in regard to animal welfare and antibiotic use have led to greater pig mortalities.
Spain probably is the only country in Europe that hasn’t decreased their sow herd significantly. The challenge for Spain is the increase in sow mortality which was below 10% and is now over 14%. At the same time, wean to finish mortality has gone from under 10% to now 14%. Some industry data indicates pigs sold per sow have decreased from 2020 to 2022 by 1.8 pigs sold per sow per year. That is about 4 million fewer market hogs per year. Less hogs to market increases prices while increasing the cost to produce hogs.
Other Observations
Latest data from Poland; 2020 sow inventory 810,000, end of 2022 at 592,600.
The June breeding inventory in Great Britain indicated an 18% decrease from the year before. Recent weekly slaughter is down 18%. Last week a new record hog price was reached in Great Britain.
Germany the second largest swine herd in Europe hog slaughter in 2022 down 10%. We expect when December stats are released their smallest sow herd probably be on record.
At the end of 2022, Denmark’s sow herd is down 9% from a year ago. Total pigs in inventory are down 10%. The 11.9 million pigs are the lowest in 22 years.
We don’t have data from many countries in Europe for the end of 2022 but when released we expect to see further erosion of the sow herds and pig inventories. There are definitely less pigs in Europe. There will be even higher prices yet to come. There will be less pork for Europe to export. The current price spread of a market hog in Spain vs. USA is about $90 per head. This will lead to greater U.S. – Canada exports. We expect at some point soon U.S. – Canada prices will push higher and fast.
The recent U.S. Retail Pork Price average is $4.78 lb. The five-year average is $4.11 lb. Hogs are 75¢lb. carcass pork cut-outs – 80¢ lb. Seems retailers are the only winner in the current pork chain scenario. The only good thing in our mind is the retail price is high enough to absorb any rapid cut-out and hog price increases.
Summary
Record hog prices in Spain, the UK, and other countries in Europe approaching a new record price. Less hogs in Europe will lead to less Pork for export. We expect hog prices in the U.S. to start increasing soon and still expect prices to reach $1.20 lean this year.
Pork Commentary Jim Long President-CEO Genesus Inc. February 6, 2023
The U.S. hog market continues to struggle with prices below breakeven and a general lack of market enthusiasm.
Some Observations
Iowa – S. Minnesota hog weights declined weekly from 289.1 lbs. to 286.8 lbs. (-2.3 lbs.). Weights are 3.5 lbs. lower than the same time a year ago.
Last week U.S. slaughter was 2.575 million head. A year ago, same week 2.436 million. We believe the only way these high slaughter numbers can be achieved is by pulling weights down and pulling hogs ahead. The aggressive slaughter numbers by packers indicate to us relative demand despite a lack of market enthusiasm. We would not be surprised to see further aggressive weight decline in hogs. You only kill them once and at some point, the dog hits the end of the chain and weekly hog numbers decline pushing prices higher.
Last week the USDA released the January Cattle Inventory Report.
Cattle January 1(1,000 head)
2022
2023
% of Previous Year
Beef Cows
29,983.1
28,917.9
96%
Heifers for Beef Cow Replacement
5,481.5
5,163.7
94%
Total Beef Cows plus Heifer Replacements
35,464.6
34,161.6
96%
Inventory of Beef Cows and Replacements is down over 1.3 million from a year ago. Drought and lack of profitability cutting U.S. Beef herd. This is the lowest Beef Herd inventory since 1962. Put in context of U.S. population there were 186.4 million people in the U.S. in 1962 and in 2022 there were 333.3 million. A lot more people to eat about the same amount of Beef. We will see record Beef prices. This will be supportive for Hog prices and makes current low hog futures a joke. Beef cut-outs 3.5 times Pork currently, you sure would hope this in itself would push Pork demand. Unfortunately, hope is not necessarily a good business plan, producing Pork that has taste that chases Beef maybe is a plan.
Last week we had Spanish producers – packers – processors visit Genesus. Spain with 2.6 million sows is the largest producer in Europe. The visitors were buoyed by the news that Spain’s market hog price hit a new record high last week of 1.750 Euro/kg liveweight. The Euro = 1.08 U.S. dollar. 1.89 U.S./kg liveweight or 86¢ U.S. lb. liveweight. Spain hog price about 30¢ lb. higher than U.S. or over $80 per head. Huge difference. You would think this would lead to increased U.S. pork exports as buyers look for lower priced product.
Spain has high feed costs like the rest of Europe. Break evens are higher than the U.S. but the new record prices have producers in position to make money. The Spanish break evens are challenged by higher mortality due to aggressive PRRS and removal of copper sulfate and many antibiotics. The national record keeping system that has over 50% of the national herd reporting is indicating the average sow mortality 14% and average combined nursery-finishing mortality 14% up from 9.3% in 2020. Both sow, nursery, finisher mortality is climbing just as in the U.S. Unfortunately for producers some genetics seem to be bred to die easy. Dead pigs don’t get to market.
Spain’s record high hog price is being pushed by the lower hog numbers in Europe we have been predicting for the last 18 months. The latest hog slaughter numbers from Europe are from October with 19.29 million hogs marketed down 6.1% from October last year. The decline just over 1 million market hogs in the month. Less hogs always lead to higher prices. We expect further hog price increase in Europe as the sow herd liquidation of 2022 leads to even fewer hogs in 2023.
Summary
For U.S. producers it’s hard to see light when you are losing money. Our observation. U.S. has less hogs, there will be significantly less Beef, Europe the major Pork export competitor will have less Pork to export and at this point significantly more expensive Pork. We expect U.S. lean hogs to push to $1.20 lean this summer. It did last year, and we have less Pork and Beef in 2023.
Pork Commentary Jim Long President-CEO Genesus Inc. Jan 30, 2023
Last week was the annual Iowa Pork Congress held in Des Moines. The largest of the state shows befitting the state with the most pigs in the U.S.
Our Observations
It appeared to us there were as many exhibitors as in the last few years.
Many thought attendance was lower than last year. We don’t know the facts but it certainly didn’t have aisles full of people. At the end of the day less producers all the time.
There were several seminars. Attendance we understand was limited in numbers.
The producers we talked to were not bullish. They can see the possibility of higher hog prices but when with the current market hog losing up to $30 per head. It’s hard to think it’s all peaches and cream.
A large producer told us the losses the last few weeks have set him back many multiple months.
We heard some of the larger operations who have in the past bought small pigs to fill empty barns this time of the year are leaving them empty. Not hard to figure there must be empty barns, the recent December 1 USDA Hogs and Pigs Inventory indicated 5 million fewer pigs than two years ago. All pigs were in barns then and are now, simple farmer arithmetic must be 5 million empty spaces. Also means less hogs are coming. Fewer hogs always mean higher prices.
At the Iowa Pork Congress, one product that seemed to be in demand is equipment for loose housing. The push of Prop 12 and other market factors are happening. The loose housing is also a plus for Genesus as our female works well in that type of production. As temperament, structure, feet & legs become even more important than in gestation stalls.
We spoke to several regular readers of the commentary. Many concur with our observation about the spread of the Pork Carcass cut-out vs. Beef Carcass cut-out. Beef over 3.5 times Pork. Many see the need for our industry to close the price gap. To develop sustainable profits and increase pork demand. We must have taste. The what comes first the chicken or the egg is our industry’s dilemma. Producers tell us they don’t get paid by Packers to produce better Pork. Some Packers are not sure if they can sell better Pork for more money. The truth is you can’t sell better Pork for more money until you have it to sell. It’s obvious with Beef prices are 3.5 times Pork consumers will pay for a better-tasting product. Unfortunately, The Other White Meat program and the race to produce ever leaner pork devoid of marbling has not enhanced pork demand. We need to look at what marbling has done for Beef demand and chase that obvious market price indication.
At the Pork Congress, we had conversations about the current record mortality level with nursery-finisher (9% plus) and sow mortality (14%). More pigs are dying than ever before. Some thought genetics with a lack of disease resilience, more aggressive viruses, cannibalism, the revival of aggressive APP, PRRS, PED, lower stockmanship abilities, and shortage of labor.
In the sow prolapses being encountered by the major genetic supplier, some of the customers told us this is up to 30-35% of their total sow mortality. Also, genetics that need toe clipping leads to more cripples and dead’s.
In the U.S. every 1% increase in combined nursery-finish mortality cuts 1.3 million pigs out of production per year. Value a nursery-market hog at $100? $130 million total loss for each 1%. MetaFarms – SMS estimates a dead sow in lost opportunity of at least $1,000. The economic attrition is real.
Summary
Higher Nursery-Finisher-Sow Mortality means less pigs coming. The only upside less pigs mean higher hog prices.
The current U.S. hog price is leading to significant financial losses. Our sense from the dialogue we had with industry participants is that hog numbers are lower and getting lower. We still expect summer hog prices to surge to $1.20 U.S. lean a lb. a combination of lower pork supply, lower beef supply, and steady pork exports.
Editor’s note: Frank Mitloehner is Director of theClarity and Leadership for Environmental Awareness and Research (CLEAR) Center at the University of California, Davis. He can be contacted at fmmitloehner@ucdavis.edu.
A steer moves outside the cattle feedlot at the University of California, Davis, where renowned researcher Frank Mitloehner works to reduce greenhouse gases and other emissions from livestock.
There’s a shocking revelation out there, and I am at the heart of it. Are you prepared for this?
Animal scientists work with animal agriculture. That’s it. That’s the exposé – the conspiracy that so many activists and journalists want to share with you.
Oh, if you want more, try this on for size: agriculturists work together to be more sustainable.
If you work in agriculture, these statements probably aren’t surprising. In fact, it would likely be concerning if that were not the case. Sustainability issues are too big to be tackled in in silos – metaphorically speaking, of course. One way the sector has come together to further sustainability is through the CLEAR Center.
As we’ve stated on our website, the CLEAR Center receives funding from IFEEDER, which is the public charity arm of the American Feed Industry Association. We also have an advisory board made up of representatives from organizations across the industry, including Elanco, Cargill and Zoetis. It is unique to have a group such as this engaged in sustainability efforts. This board allows us to share our research and extension work directly with the companies that can use the solutions and information. It also allows the work done in my lab to go beyond journals, the classroom and academia, and actually reduce emissions. We also collaborate with individual ranchers and farmers, often conducting research directly on farms.
I am transparent about my collaboration with the livestock industry. My research lab receives grants to conduct research for the agricultural sector, as well as the public sector. If you follow me on Twitter, you know that I engage with the people I’m working to help become more sustainable. It’s no secret – nor should it be.
The work I’m contracted to do by government agencies typically is centered around quantifying emissions from various sources or technologies. We recently completed a project funded by the California Air Resources Board in which we investigated how various manure management technologies on dairies can reduce methane emissions. If we are asked to look at innovative solutions such as feed additives, those projects are usually sponsored by the private sector. Funding for the CLEAR Center has largely supported our extension efforts to share science with the animal agriculture sector, government and the public. If we are unable to tell people about our work, then it will not have any impact.
I’m proud to work with farmers, ranchers and organizations that feed us, just as I’m proud to say that I have a role in bettering the environmental impact of the food they produce. I can’t help but be sensitive to the fact that those in agriculture are portrayed as bad guys in many articles criticizing industry efforts aimed at sustainability. Producing food is tough work, and producing animal-sourced food is an impressive feat.
Mitloehner works with gas analyzers at the UC Davis feedlot, in preparation of a research study to measure greenhouse gases and nitrogen emissions from cattle.
I don’t think our farmers and ranchers deserve to be harassed for their efforts. They are one per cent of the population in the U.S., but they provide food for 99 per cent of the population. I also don’t believe the best way to help them become more sustainable is to bash them for providing food. Maybe that is what our critics would like from us – to denounce animal agriculture as a lost cause. However, this integral part of the agricultural sector provides necessary nutrient-dense foods for most of the global population.
My job as a professor and cooperative extension air quality specialist is to work with members of the industry to improve the environmental performance of the food they grow. I don’t mean that figuratively; it’s written in my job description.
This past summer, I received public records requests from Greenpeace on my funding and communication with IFEEDER. We understand the perspective Greenpeace has on animal agriculture, and, regardless, gave them what they requested without hesitation. However, I was surprised to see that The New York Times found out about the request and sought the same public records. Clearly, the activist organization is well-connected.
As a result, The Times and Greenpeace published coordinated hit pieces on me and the CLEAR Center. I can’t describe it any other way. It is not surprising that the usual cast of animal agriculture and CLEAR Center naysayers are quoted. Unsurprisingly, there is a lack of agriculture researchers quoted.
Most of our harshest critics have never met me or spoken to me. They don’t know the members of our small team. They know precious little – if anything – about the work we are doing. They are simply people who delight in making the assumption that cooperating with members of a sector must spell dishonesty and a breach of ethics. I wonder if the same is true of those who are invested in veganism.
While people are taking shots at us, we’re pleased to be doing the work and conducting the research to reduce emissions and increase the food supply we need to sustain an exploding global population. We’re so much more than keyboard warriors shouting on social media, but we are all too often taken hostage by their attacks and their demands.
In late October, The New York Times took issue with Mitloehner’s work – or at least his character – in the absence of trying to understand what he does, from a position of goodwill.
I find it disheartening to be accused of wrongdoing by working with the livestock sector. Who else is supposed to fund research to mitigate emissions from animal agriculture? If Greenpeace’s leaders are interested in that, I’d love to talk about it, but I don’t think it will happen. In the meantime, I’ll continue to work with the sector to help reduce its environmental footprint.
We have so much good and promising news to share, and yet, our objective isn’t to get good press. People want us to go on record that animal agriculture should fade away or be significantly reduced, but that’s not our charge or our place. Our mission is simply to reduce animal agriculture’s impact on our climate and environment, and to do that, we must work with the people who are raising the food that feeds us all.
So, while the stories are churned out, we’re making progress improving the environmental impact of animal agriculture, in large part because we have many seats at our table. I’m unapologetic about that. Even more, I’m proud of it.
If I get weary, it’s because I continue to answer the same questions for the story that keeps getting written. The New York Times is simply the latest in a long and steady stream of media outlets that think they’re on to something.
To them I say: come and visit us. See the lab. Meet our students and colleagues. Talk to the farmers and try to understand – as we do – how committed they are to the important role they play in simultaneously feeding the world and safeguarding our planet.
I think you would be surprised by what you see and hear.
I think you would find a new and better story to tell.
Prairie Livestock Expo’s carcass quality competition is a unique and highly anticipated attraction at the event, which was just held for the first time, since 2019.
Following a three-year hiatus due to COVID-19, Prairie Livestock Expo returned to Winnipeg on Dec. 14, with University of Manitoba researchers headlining the information sessions. The show was opened this year with remarks from Cam Dahl, General Manager, Manitoba Pork.
Prairie Livestock Expo is a multi-species livestock show featuring hogs, beef and dairy cattle, sheep, poultry, bison and goats, with nearly 140 exhibitors on-hand. The event is free to attend and includes a full day of presentations and networking.
But it was the hog carcass competition that generated the most excitement among producers and exhibitors in attendance.
Carcass quality impresses guests
Along the rear wall of the exhibition space, 10 carcasses hung in a cooler. None had competitors’ names on them, but three sported ribbons indicating they were the top-three carcasses. Throughout the day, producers and exhibitors alike wandered past the windowed refrigeration unit discussing the merits of each and guessing which breeder would take top honours. The judging was done by Jason Care, Manager & Auditor, Manitoba Hog Grading, Manitoba Pork.
“We consider it to be the largest pork quality competition in Canada, maybe North America, maybe the world,” said Dennis Stevenson, General Manager, Premier SHP Veterinary Corporation, who served as emcee.
Stevenson said the hog carcass competition began in 1996 and, since then, has raised over $442,000 from sponsors. The money is awarded to the winners of the competition. They, in turn, donate it to charities of their choice across Manitoba and around Canada.
Starlight Colony’s 101-point hog – the highest score ever received in the competition – won first place and $5,000 for the colony’s preferred charity.
“We can’t thank the colonies enough for their cash donations to charity and generous donations of over 152,000 pounds of pork to Siloam Mission, Winnipeg Harvest and other food distribution entities, just in time for Christmas, when many families are most in need,” said Stevenson.
This year, 12 farms submitted 24 carcasses to be judged. Ten of them received cash prizes ranging from $1,000 to $2,000 for the charity of their choice. In third place, Boundary Lanes Colony earned $3,000, while Woodlands Colony followed in second place, winning the title of 2022 Reserve Grand Champion and $4,000 for their charity, Portage Hospital Foundation.
Top honours and the title of 2022 Grand Champion, with a $5,000 prize donated to Heart of Truth, went to Starlight Colony for a carcass that weighed in at 96.8 kilograms and garnered 101 points on the quality rating scale. Stevenson said this was the highest score ever achieved on the 111-point scale, beating the previous record of 100 points.
The winning pig was chosen by Trevor Hofer. He said he picked the pig out of the herd in November, when it was about 115 days old. When asked why he chose that particular pig to groom for the hog competition: “It had the widest back, and it was the perfect weight.”
And, just to be clear, Hofer isn’t about to sit on his laurels; he’s already planning to enter the competition again next year.
Disease concerns continue to linger in Manitoba
While presentations focused on disease issues, processors Maple Leaf Foods and HyLife Foods collaborated with Family Foods to demonstrate ways to display pork at retail. About 120 kilograms of meat were used and donated to local food banks, following the event.
While excitement and voices in the exhibition area were rising as attendees squeezed between displays covering everything from animal nutrition to retractable doors and slotted flooring, there was a quieter space up the hall and around the corner where Jenelle Hamblin, Manager, Swine Heath, Manitoba Pork, and researchers from the Department of Agriculture at the University of Manitoba, were sharing their stories.
Hamblin began the morning session with an overview of porcine epidemic diarrhea (PED) in Manitoba. She said there were 128 confirmed cases of PED in the past year, with the majority of cases found in finisher hogs.
Even more important than the numbers she presented were the coping mechanisms she suggested. Producers can be active participants in the prevention of disease spread.
According to Hamblin, Manitoba Pork commissioned the Western College of Veterinary Medicine (WCVM) at the University of Saskatchewan to come up with recommendations for farmers facing swine disease in their barns or on neighbouring farms.
They suggested the first step in disease prevention is to minimize or eliminate gilt exposure to disease by avoiding over-crowding or too much handling, and making sure the animals receive vaccines that are available.
The long-term goal is to eliminate 96 per cent of PED outbreaks by 2027. It’s a realistic goal, Hamblin said, because, knowing the disease won’t be completely eradicated, there’s a margin for outbreaks on up to 10 Manitoba farms per year.
So, the way to achieve this goal is to manage the ongoing risk by employing a rapid and aggressive response by limiting the interactions with infected animals and surfaces. But keeping animals safe has proven to be a challenge during COVID-19, Hamblin admitted, with labour shortages being especially problematic.
Hamblin suggested every barn should have its own biosecurity plan based on the risk of disease spread for that particular building. Space plays an important role in this plan, as the more crowded the barn is, the more likely disease will spread rapidly.
Presently, the Canadian Pork Council (CPC) is working on a national strategy for disease prevention. A national strategy for the control of swine diseases such as Seneca Valley Virus (SVA) and African Swine Fever (ASF) will be helpful for existing and future trade deals between countries, as evidenced by an outbreak of SVA in Manitoba this past summer, prompting the U.S. Department of Agriculture (USDA) to express concerns about shipments of Canadian pigs arriving at the international border.
“The USDA didn’t want SVA-diagnosed hogs in the U.S. system, especially in slaughter facilities and assembly yards,” said Hamblin.
In the case of an outbreak of ASF, the Canadian Food Inspection Agency (CFIA) has a critical role to play when handling public, government, producer and stakeholder communications. They also negotiate with international partners, whenever necessary, to re-establish trade after an outbreak of disease has occurred.
Researcher Qiang Zhang talked swine disease, which has been a problem in Manitoba this year, related to PED and SVA.
Qiang Zhang, a research scientist from the University of Manitoba, pointed out just how hard it is to contain the viruses that plague the pork industry.
“Viruses don’t just get into the air on their own,” he said. “They travel by direct contact and indirect contact: touching an object that a sick animal has previously touched. Then there’s the problem of airborne transmission of viruses. COVID-19 in humans is a good example.”
Zhang provided some examples of airborne animal viruses, which travel much more widely than viruses spread by either direct or indirect contact. One instance is Foot-and-Mouth Disease (FMD), which travels even farther than the Porcine Reproductive and Respiratory Syndrome (PRRS) virus, which has been shown to travel up to nine kilometres through the air, hitching a ride on a water molecule or dust particle smaller than five microns, completely undetectable by the human eye.
Zhang noted that PED has been shown to travel at least the same distance as PRRS and can conceivably travel from one barn to another on dust or moisture expelled by an air ventilation fan and taken in by a fresh air intake at another barn.
The problem with this airborne transmission is it is impossible to filter, as the density of an air filter that could contain the airborne virus will also interfere with ventilation required for healthy air in the barn. The problem with filters is that they require regular maintenance to remain effective and they are costly, according to Zhang.
Is Arbitrage Underway?
Pork Commentary
Jim Long President – CEO Genesus Inc.
Feb 27, 2023
We have been pointing out for the last few weeks the record price difference between Europe’s and the United States prices of market hogs. Last week Spain (largest producer in Europe) market hog price set a new record at 1.89 Euros/kg live – 92¢ U.S./lb. live. Current U.S. price is 59¢ lb. liveweight. The Spain – U.S. price spread on a 280 lb. market hog is $92 U.S. The biggest difference ever.
If arbitrage is happening it is logical to expect an increase of pork exports from USA as foreign buyers look to purchase pork at a lower cost than Europe. The latest U.S. exports weekly sales data indicates 51,920 metric tonnes sold, the week before 45,000 metric tonnes. Export weekly sales have been running in the 30,000-tonne area. Obviously the last two weeks sales are showing a big jump. So far exports shipped have not increased from the 30,000-tonne range. As there is time lag from orders to shipping. The big jump in sales might be indicating orders pulled forward making the sales increase misleading but if sales continue to average well over 30,000 tonnes a week it will be true indicator of bigger exports and we will see stronger hog prices as the pork leaves North America supporting domestic prices.
It appears the European Breeding Herd is down about 600,000 in the last year and about 1 million in the last two years. It’s not complicated people lose money, and you end up with fewer sows and pigs. Massively cut pig production and prices got to record levels. We expect even lower European market hog numbers in coming months as liquidation cuts supply and mortalities stay high from the removal of copper sulfate and limited antibiotic use leads to further attrition. We expect more upside to Europe than downside to Europe’s hog prices due to supply being cut. Their continued high European prices should push U.S. – Canada prices higher as exports increase cutting domestic supply. Arbitrage.
Other Observations
Wholestone had announced previously they were going to build a new slaughter plant in Sioux Falls, South Dakota and double shift their Nebraska plant. Prestage is a newer plant. We understand it has the capacity to process more hogs per day than they are currently.
Finally
Last week the USDA came out with a projection that total red meat and poultry production will be lower in 2023 than 2022. This is the first time since 2014 of a decline from the year before. We all remember that 2014 was one of the most profitable in history for the swine sector (PED year cutting production). We continue to believe lean hog futures are undervaluing the potential prices in a near future. Less meat protein in both USA and Europe will lift prices as domestic and export buyers bid to purchase from lower supply.