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Pork Commentary: USDA Confirms No Expansion

28 September 2010
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.

CANADA - This week's North American Pork Commentary from Jim Long.

The USDA released the 1 September Hogs and Pigs Report last Friday. It confirmed what most rational people would have surmised – NO EXPANSION! There are fewer sows, fewer market hogs, fewer sows farrowing, and a smaller pig crop. The relentless financial losses that producers had over thirty months have not been replenished by four months of profits. Only the Ag – economists who never owned a pig, but are experts on the market have been predicting expansion. News flash – Wrong Again. The same Ag – economists who predicted summer markets of 68 cents lean last January (out by up to $40 per hog), were the same wizards saw expansion. Have any of them ever talked to a real producer on banks general attitude on swine? There will be no expansion without bank support. Right or wrong bank support is next to non - existent. Why would there be if sow farms are valued currently a fraction of what they cost to build. The only interest of anyone to buy one is at around 20 cents on the dollar. Sow barns, are a lot of work – staffing, pig health concerns, proper size of the facility, etc... These all play into the no expansion scenario.

Until sow units that sit empty start to be bought or refilled there will be no expansion. New sow units? Not until next year, but only if feed prices allow a profit margin. In the meantime small pigs will bring strong prices.

USDA Hogs and Pigs Report
1 September 2010
- 2009 2010 Per cent of 2009
KEPT FOR BREEDING 5875 5770 97
MARKET 60842 59221 97
PIG CROP JUNE – AUGUST 28718 28507 -
SOWS FARROWING JUNE – AUGUST 2959 2905 -
PROJECTION September - November 2915 2881 -

The reality of the Hogs and Pigs Report is that the production base in place on September 1st means that it will be biologically impossible to increase production before the end of next summer. Throw in $5.00 a bushel corn combined with bankers sentiments we are not aware of any scenario that will not have lean hogs above 80 cents for the next year. 90 cents lean plus next summer is a strong possibility. What we see globally is high feed prices, tight credit, and no sow herd expansion. Next year we see a finite pork supply with an ongoing global clamor for meat protein. All triggers for continuing strong prices.

We have been criticized in the past for being “Jim Long Optimistic” by our economist friends. Maybe we are but when we see the reality of production and demand in the countries we do business with and travel to – Brazil, Mexico, Russia, China, USA, Canada, etc… we see nothing but strong prices for the next twelve months.

This coming week we will be in Mexico. We will report our Market Observations.

Author: Jim Long, President & CEO, Genesus Genetics

To find out more about Genesus Genetics,
please take the time to visit their website at
www.genesus.com.

The opinions expressed in this commentary are entirely those of the author and can not taken to represent the views of ThePigSite.com, its owners or its management.



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