Pork Commentary: No Fun at These Prices

CANADA - This weeks North American Pork Commentary from Jim Long.
calendar icon 9 January 2007
clock icon 4 minute read

The Iowa-Minnesota markets averaged 55.18 lean lb. last Friday (41¢ live weight) while all terminal markets were below 40¢ per lb live weight. We estimate average farrow to finish breakevens are, give or take, 48¢ per lb live weight. Even relentless bulls like us have a hard time figuring how this hog price works.

The effect of plenty of hogs and slaughter plants closed for Christmas and New Year puts pressure on hog flow. Unfortunately, once again, holidays (with closed plants) eat into producers’ returns.

One consolation is pork cut-outs at the end of last week were 64¢ lean, almost 9¢ per lb higher than the Iowa-Minnesota price. The spread could narrow quickly, with hogs quickly getting back to 60¢ lean. Iowa Barrow and Gilts in the latest reports (269.8 lb) indicate weights 0.9¢ per lb lower than a year ago. Its hard to believe that hogs are anything but current or pulled ahead. In the next few weeks, as slaughter plants begin to operate full weekly shifts, we expect hog weight differentials year over year will get greater. High feed prices, plentiful slaughter capacity and seasonal decrease in hog availability will not only push prices higher but pull hogs ahead.

Vegetarians – Not Really

If you thought Americans were becoming vegetarian, the facts won’t bear it out. The USDA estimates total boneless meat and poultry per person in 2006 was 201 lbs with the US government estimating 202.2 lbs in 2007, which would be the highest yearly consumption in history.

Per Capita Consumption Meat and Poultry
(Pounds per person, boneless)

When you look at this data, it’s easy to see the relentless growth in meat and poultry consumption through the decades, with the only major consumption decline, experienced in the great depression era of the 1930’s.

Meat and Poultry in 2007 will be almost double, per capita, of the 1930’s. As disposal incomes increased with the standard of living, so did meat and poultry consumption. Meat protein consumption obviously rises with income.

Today, when we look around the world, and see the rising disposable incomes in China, Russia, etc it gives us confidence in the future demand for meat and pork. These countries, like America, will increase meat (pork) consumption with their rising incomes. US pork exports were up 11% in 2006. We expect to see similar demand in 2007. This will auger well for hog prices. Why?

  • The US population increases 1% per year, even with static per capita pork consumption; this still translates into 1% more total pork consumed.

  • The world economy is strong and pork will be in demand. US packers have the volume and quality of product, with the economic resources to service and finance the exports. They also have the will and expertise.

  • Higher feed prices work to the US industry’s advantage on cost of production compared to countries that have to import even more expensive feed grains.

Functional Food Value We had heard of natural and organic pork, but we’ve never heard of functional food value, until we were talking to Willy Hoffman, the driving force behind the Prairie Orchard label.

Prairie Orchard Pork contracts with producers (primarily Genesus customers) to produce pork high in Omega 3. This is done with special feed rations. The functional food value concept takes a traditional product like pork and then enhances its traditional value for the consumer.

Are organic, natural and now functional food values the future, or niches?; We do not know.; The good thing is any way to meet consumers need and wants is a way to help pork demand.; Demand enhances prices.

Written by Jim Long, Genesus Genetics / Keystone Pig Advancement Inc. - 9th January 2007 - Reproduced courtesy Farms.com

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