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Pork Commentary: Trade Show Reports

10 February 2015
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.

GLOBAL - This past week, Genesus participated in the Manitoba Swine Seminar, the Illinois Pork Congress, and Agrofarm in Moscow, and have several meetings in China, reports Jim Long, CEO of Genesus.

A summary of our observations:

At the Manitoba Swine Seminar held in Winnipeg, there was a very good turn-out of producers and industry.

  • Many independent producer numbers were augmented by the attendance of employees of major hog producers. One company had 65-plus show up. Compared to many events, the number of in-barn people was high.

  • Manitoba producers are wondering why the price of hogs have been in free-fall. There is a certain nervousness where the market is headed.

  • Maple Leaf Foods, the major packer in Manitoba has gone Paylean free. This was done to get access to the China market, a wise move. Pork now going to China and Canada is not having shipping problems like the US is having at shipping ports.

  • Producers we talked to are surprised their days to market have not gone up after removing Paylean. Backfat has slightly increased about 1 to 2mm.

  • There is no sow herd expansion in Manitoba.

  • Producers in Manitoba are benefiting from the weaker Canadian dollar now at a 25 per cent discount to the US dollar. Certainly helps margin and softens the impact of lower hog prices, which always adjusts to the US basis.

At the Illinois Pork Congress, attendance was not overwhelming.

  • There are producers looking at expanding. Some independents but the Carthage and Maschhoff production systems based in Illinois are very aggressive. They continually expand and grow.

  • Illinois benefits from some of the best farmland in the world, excellent crop yields and multiple generational land ownership that has led to real wealth at current farmland values. This in itself leads to capital for investment for the swine industry.

  • Illinois part of the Eastern US Corn Belt had the feed, packer capacity, and producer wealth to expand. The question is whether current lean hogs in the 60s at or near break-even will slow down expansion.

At the Agrofarm Exhibit in Moscow this past week, many of Russia’s largest swine producing groups attended.

  • While sanctions are in place preventing pork from the European Union and North America to come to Russia, pork prices are good, despite the devastation of the Ruble. Profits in the range of US$40 per head are keeping a positive attitude.

  • Russia still receives pork from sanction free Brazil.

  • Russia is pork-deficient – approximately 30 per cent of its production. Producers would like to expand to fill the void. Current challenge is to get bank financing with the drop of oil and the ruble, bank credit is hard to get with currency reserves depleted.

  • So Russians don’t expect a quick solution to allow pork imports. African Swine Fever in several European countries, PEDV in Ukraine and the political coolness due to the Ukraine issue will probably keep pork imports out for a while.

In China:

  • The Genesus team reports the liquidation of 6.5 million sows is a reflection on how tough the markets have been with weekly marketings of 12 million head, when there were losses of up to $70 per head during some weeks at 12 million market hogs, it adds up to a financial debacle over US$500 million a week. No wonder China liquidated so many sows.

  • Markets are starting to recover but the need for imported pork is just the beginning. US–Canada plants that can deliver Paylean-free accredited pork will be in the driver seat.

  • Feed costs in China are still extremely high with corn a bushel at over US$9.50 – no way are prices cost of production competitive with North American pork.

  • Despite the low profits, some new sow projects are advancing but nowhere close to what went out of business as the rural small farmers liquidate.

  • Genesus was fortunate to sell 36 per cent of all the swine breeding stock to China imported from the whole world in 2014.

Summary

The markets are in flex – low margins in North America and China. Russia is dealing with a low Ruble. All very different from in the past. The hog industry is volatile throughout the world. In adversity, there is opportunity.

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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