Pork Commentary: Iowa Pork Congress Report03 February 2016
US - This past week we were at the Iowa Pork Congress in Des Moines, Iowa, writes Jim Long President – CEO Genesus Inc.
- Iowa is the largest hog producing state with about 25% of all US swine production.
- The Iowa Pork Congress is the major state show with the largest attendance and the most exhibitors.
- The Iowa Pork Congress is a well-run smooth operation. Our congratulations to Doug Fricke and the rest of the Iowa Pork Congress team.
- This past week was interesting with the US Presidential Iowa Caucuses going on. Our hotel had Democrat Hillary Clinton in it and most of Fox news team. The Iowa Event Center where the Pork Congress was held also was the home of last Thursday night’s Republican Debate. All day Presidential candidates were at the pork show, along with secret service and their sniffing dogs. It was truly a day for Pork.
- At Iowa Pork Congress there was, as usual, much discussion of sow herd expansion. We continued to challenge whoever we spoke to, in order to confirm names and places where barn construction is currently ongoing. We still continue to find next to no current new sow barn construction. Anything started this spring will mean market hogs late 2017. All of 2016’s hog production will be bred in the next 30 days. Then it’s on to breeding for 2017 market hogs.
- As we all know, packers have been making good money for the last few months. Profits are leading to expansion. New hog plants in Iowa, Michigan, Minnesota and Missouri, plus the strong rumour of a major pork powerhouse building their own plant are pushing potential new shackle space to 10 million per year. We see no indication that by 2017 there will be anything close to a 500,000 sow herd expansion that could fill these shackles. We see a war brewing between packers to lock up production, to hold market share and supply their customers. Strong packer margins will be a thing of the past in 2017, maybe sooner. The old adage “the surest cure for high prices is high prices” comes to mind.
- There was much talk of continued PRRS and PED breaks coupled with the AI Extender issue cutting production was the best indicator of supply and demand cash early wean prices of $65 and feeder pigs $75. There are definitely less pigs around with supposed full system farrow to finish groups buying small pigs to fill holes in their supply.
- Extender issue is rumoured to have hit 50 AI studs. The company that had issue reportedly had over 50% of US extender business. Not anything close to that anymore as AI studs flee to other suppliers. We think the AI issue could have cut production more than one million pigs.
- When PRRS hits many are looking for a simple solution. Discussions this past week at the Iowa Pork Congress on Genus-Pic research on gene editing of pigs that could alleviate PRRS issues. Of note, some packers already concerned about consumer acceptance of gene-edited pigs. Packers and producers are already dealing with animal welfare and antibiotic discussions with consumers. Can the industry explain this as sound science or will it play into the Frankerfood scenario? If it can’t be explained simply it puts our industry on the defensive, marketing playing defense is never a sounds strategy. It could decrease pork demand. On the flip side, there is a good chance vaccine companies will implement similar technology; vaccines are seen to be consumer acceptable relative to social-moral-safety question of gene editing. Genus-Pic is extremely brave to invest up to $100 million in a technology that has no guarantee of packer or consumer acceptance. It’s almost guaranteed the European Union, which doesn’t accept Genetic Modified Grain will not accept such a product in their 12 million-sow population. Time will tell. Let’s hope the pursuit of gene editing pigs does not destroy consumer confidence in pork and hit us all more economically than PRRS ever has.
- China – Genesus personnel in China report feeder pigs $155 US this past week. A real reflection of lack of supply and good demand. We are still bullish pork exports to China.
- At Iowa Pork Congress talking to Europeans visiting, they tell us producers losing $25-50 per head. Many have hit the end of financial resources and this is heading to liquidation. Could be up to 1 million sows going out of production. If this happens, Europe will have less pork to export.
- On the genetic company front, it appears that some genetic companies have been hit hard by disease in their multiplication herds and this is cutting high health supply. As usual, this leads to market hogs being promoted as breeding stock. Beware check your sources. Some genetic companies are in financial difficulty and desperate times lead to desperate actions.
We are still seeing a lag in sow herd expansion. New sow units are not net expansion there is still sow units going out of business due to a variety of reasons not the least of which is obsolescence. In our opinion 60,000-100,000 new sow places need to be added a year to meet the going out of production scenarios. Our sense from the shows and the cash price of small pigs is that summer hogs pushing beyond $0.85 to $0.90 is certainly not out of the question.
|Author: Jim Long, President & CEO, Genesus Genetics|
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