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Pork Commentary: No Fun in Mudville?

by 5m Editor
17 July 2007, at 12:39am

CANADA - Last Friday, the Iowa-Minnesota lean price averaged 66.21 (49¢ liveweight). There is no fun in Mudville with hog prices at these levels in July. Too many hogs, too much pork, more beef and chicken is keeping the hog price under pressure. At current feed prices and slaughter prices, some producers will be losing money. Is there any good news? Maybe.

  • Lean hog futures on Friday, closed with August 73.45 and October 68.72. Both prices are higher than current cash markets. Obviously, there is a lot of money being bet in Chicago that prices are going to stay historically strong through the fall.

  • If the weather delivers normal rainfall (a big IF), there is no doubt that there will be lots of grain in North America.

    Planted Acreage
    (1,000 acres)

    2006 2007
    USA Corn 79,366 92,888
    Canada Corn 2,701 3,474
    Canada Barley 9,118 10,863
    Mexico Corn 20,450 25,525
    111,635 132,750


    If these numbers are correct, almost 21 million more acres planted into feed grain products this year in North America, compared to last. Talk about a market responding to higher prices. The good news for pork producers is that with this level of grain production increase, there will be plentiful feed available and feed prices should be manageable. All indications point to the rest of the world responding in similar fashion to high grain prices – more acres planted.

  • China is looking for pork – 100,000 metric tonnes. The Chinese are great negotiators. We expect they are smart enough not to show their real buying intentions. China slaughters about 2 million head per day. 100,000 metric tonnes is about 3 days US kill. Helpful to prices, but not a huge amount. Hog prices in China have reached high enough levels that led to meetings of the Chinese cabinet to discuss the crisis. Pork is the meat of choice in China. Hungry people are not happy people. If Chinese pork production has been hit as hard by disease as reported (20 million head dead) expect far greater amounts of pork being brought to China than 100,000 metric tonnes (less than ½ of a day Chinese pork consumption). The USA and Canada are in good position to fill the void, having supply, logistics and the packer capital to get it done. Do not be surprised if exports to Hong Kong increase substantially. This pork will then end up in Mainland China. Adversity creates opportunity. Disease in China (wonder if it’s Circo Virus) will support US-Canada prices for the next few months.

Other Items

The Multi-sponsored study of the hog industry structure released at the World Pork Expo had some interesting points

  • 27 operations control 43% of US hog production
  • 191 operations control 64% of US hog production
  • The 191 operations exceed 50,000 head
  • 1641 operations (plus 10,000 head) control 85% of US hog production
  • 90% of producers under 50,000 head per year produce corn

Obviously, consolidation has happened. If you produce 10,000 plus hogs, you are in the top 1641 operations in the US. With 90% of producers under 50,000 head growing corn, it makes this group somewhat insulated from the high price of grain in their cost of production.

Awards

Last week, we had the honour to award 25 plus weaned per year awards to 28 Genesus customers in Manitoba (60 Genesus award winners total in North America). It is an outstanding achievement for producers to reach this lofty target. It takes motivated personnel, proper nutrition, 365 day intensity and genetic capacity. 25 pigs plus is in the top 6% of producers.

Today, all producers are being challenged by increased costs, whether it be labour, energy, cost of pick up trucks, feed, equipment and building. Actually, we can not think of anything being cheaper. Everything is higher. Some things we cannot do anything about, but one of the best defenses against the wrath of higher costs is increased productivity.

The cost factor is a real bugaboo, while as a commodity industry; we are price takers, not price setters. Every week, we talk in this commentary about the markets, but its mostly guessing by us and every other guesser. The best security any producer can have against the market is high productivity. It lowers per unit cost of production and increases total revenue. We bet no one has ever gone broke weaning 25+ pigs per sow per year. It is the best risk management program available.

At the awards ceremony, we had the honour to present the first 30+ award ever in North America. It was awarded to WOODLAND, a 900+ sow farrow to finish operation. How extraordinary is 30 plus? Well, it’s harder to win than the Super Bowl. Only 32 teams vie for the NFL title. There are over 20,000 sow operations in Canada and the USA. No one has ever reached 30 before. It is a tremendous testimony to the perseverance, dedication and management of WOODLAND to reach this goal. We are proud that WOODLAND is our customer and benefiting from the genetic potential available.

High production is the best risk management program available. The 60 Genesus customers over 25 understand this fact of economic reality.

Markets, we do not control. Costs, we have little say. Productivity is our surest path to bulletproofing our destiny.

Quote:

‘You can accomplish anything in life, providing that you do not mind who gets the credit.’

- Harry S. Truman

2006 – 25 plus Awards

25 pigs weaned per mated female per year is a recognized benchmark of excellence throughout North America and indeed the world.

Genesus is proud to acknowledge and congratulate the 60 Genesus customers that exceeded this extraordinary milestone in 2006. With one Genesus herd over 30, 5 over 29, 11 over 28 the parameters of productivity are being pushed by Genesus customers. We know the achievement of 25 plus takes dedicated personnel. We salute the Genesus customers that have shown the persistence to accomplish such lofty goals. To all job well done.

Woodlands 30.02 Decker Acres 26.20
Prairie Home 29.50 Hillside 26.09
Fairhaven 29.10 Springfield (SK) 26.08
New Haven North 29.02 Bacon Acres 26.00
Camrose 29.00 Royal Pork 25.90
Suncrest 28.74 Brentwood West 25.90
New Haven South 28.52 Little Bow 25.90
Bluegrass 28.50 Sunset 25.81
Milltown 28.48 Willow Creek West 25.79
Clearview 28.30 Roadside 25.70
Evergreen 28.00 Fairholme 25.65
Glidden 27.50 Huron 25.64
Rosedale 27.30 Ashwood 25.60
OK 27.20 Ryan Ridge 25.57
Martin Farms 27.20 Willow Creek East 25.55
Seville 27.00 Clearwater 25.49
Brentwood East 26.86 Cascade 25.40
Riverview 26.70 Sunnysite 25.40
Elm Spring 26.50 LDL Pork 25.40
Shamrock 26.46 Hogs is Beautiful 25.40
Sundale 26.41 Gadsby South 25.40
Sage Creek 26.40 Gadsby North 25.40
Twin Hills 26.30 Whitetail 25.37
Clearfield 26.30 Parkview 25.30
Pontiex 26.30 Clear Wikner 25.30
Springfield (MB) 26.25 Rocky View 25.10
Beresford 26.20 Millerdale West 25.04
Grass River 26.20 Springdale 25.00
Good Hope 26.20 Norguay 25.00


5m Editor