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Pork Commentary: Fortune of Hog Industry Tied to Corn Market

16 April 2013
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.

US & CANADA - Jim Long, President and CEO of Genesus Inc., provides his observations on the current US and Canadian hog market.

The following are some observations:

  • US & Canada Corn crop planting is being delayed by cool weather and moisture. Widespread rain and snow in many areas including the driest area of the western corn belt. It appears from all indication it can “still rain”.
  • Corn Market prices went up due to perceived corn planting delays. In our opinion rain in drought areas (proving it can rain) trumps delayed plantings. It appears the fortunes of the hog industry are totally tied to the corn market. $5.00 or under corn - Good; over $5.00 - bad.
  • Brazil's corn and soybean harvest has been in full swing with record production. At Rondonópolis Brazil Cash Bin Corn last week was $2.78 USD a bushel, Soybeans $10.55 a bushel. In other areas of Brazil prices are higher but the Rondonópolis prices indicates what a good crop can do.
  • In the category we can’t believe it... Canadian statistics for swine breeding herd show that the breeding herd in Canada did not decrease from July to 1 January significantly (8,000) despite 6 months of near record losses in the swine sector. From our own observations and discussions with others in the industry, we can’t find anyone who doesn’t believe that Canada’s herd has not gotten significantly smaller.
  • Example: Manitoba – where Genesus has significant customers. Statistics Canada indicates 200 fewer breeding animals (316,400 versus 316,200). We believe the decrease was at least 20,000. Time will tell if we are correct but it’s what we see and believe. If we are correct come June there will be fewer hogs than most pundits and official inventories project. We might be “Tilting at Windmills” but can’t say what we don’t believe.
  • This past week we attended two large meetings with a number of producers and industry people. We get a sense that many wonder where the market is going relative to profitability. All are hoping for cheaper feed. Many are all in counting on it to happen. At the same time there appears a real concern if our industry can and will be profitable. You get a sense many wonder “what’s the end game?”.
  • The reality for producers is many of us are trapped in the business. The only exit strategy for the most part is quitting. Fixed assets values of sow units are next to nothing. Finishers are another story, but the quest to find someone to own the pigs and assume the risk while you sit back and collect monthly cheques is getting challenging in some areas. Risk at some point needs to be rewarded. The credit squeeze by banks, feed companies etc. make risk taking harder and harder to stay in the game.
  • Last of the Mohicans - We were at a genetic meeting this past week with a number of other genetic companies. It was there we realized Genesus is the only North American privately owned registered purebred genetic company left. The Last of the Mohicans. There was a time North America had many dynamic swine genetic companies, but as the time went on heavily subsidized European Union Genetic groups have come to infiltrate the market. E.g. PIC (England), JSR (England), Danbred (Denmark), Newsham (France), Topigs (Holland), Hypor (Holland), Fast (Japan). Foreign Capital has done much to alter the North American Genetic Market. Competition has pushed the envelope to increase productivity. In many ways it is irrelevant to a purchaser of swine genetics which country their supplier gets their instructions form or where the leadership is bred, it matters more if they supply genetics that give you the most value and profitability. Indeed we are not wrapping ourselves in a flag, that is a shallow and a loser mentality. We know the Global Innovation Index and Productivity Index puts USA-Canada on top of the Global heap. Genesus is part of this culture and we are saying “bring it on” foreign competitors. We might be the Last of the Mohicans but we are engaged to use the resources, innovation productivity and spirit of North American “Can Do” spirit to lead and not follow in the swine genetic industry.

Summary

The Market is challenging. Losses per head are running in the $30 per head range. Is there the proverbial light at the end of the tunnel? Hopefully it’s not a train coming towards us? We do believe that as cattle supply decreases, hog supply decreases. We will see a good rebound in hog prices. We have got four months of crop watching as we continue to be tied to the whims of feed prices. Hopefully we are rational on the market, luck could help some people in our industry! Others are at the point they need a miracle! Luck won’t be enough.

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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