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Pork Commentary: Hog Prices Stay Strong

by 5m Editor
23 September 2008, at 8:50am

CANADA - This week's North American Pork Commentary from Jim Long.

Last week, despite weekly U.S. marketings of 2.335 million, the Iowa-Minnesota lean hog price last Friday averaged 69.72. A year ago with weekly marketings about 100,000 fewer, the Iowa-Minnesota price was just over 60¢ lean. More hogs … stronger prices. Just as significantly, the U.S.D.A. pork cut-out last Thursday was 76.95; a year ago it was around 67¢. Thank goodness for export demand.

USDA Projects Decrease in U.S. Per Capita Pork Consumption

USDA released it’s latest pork estimates on September 12.

USDA projects that pork output is to be 1.533 billion pounds larger than the previous year, but all of the increase will be absorbed by export markets with U.S. pork exports in 2008 expected to be up 2.3 million pounds or 73%. Per capita pork consumption this year is currently expected to be 5.7% lower than a year ago and is currently forecast to decline another 1.3% in 2009.

So what we have is USDA projecting a 7% decline in per capita pork consumption over two years. Not because of lack of supply as we are going to produce 1.533 billion more pounds of pork in 2008. An approximate 3.5 lb per capita (7%) consumption drop is about one billion lbs of pork; the equivalent of 2 weeks slaughter that will have to find export market homes.

We remember Larry Pope, CEO of Smithfield Foods, speaking at the Lake of the Ozarks conference three years ago. Obviously we are paraphrasing, but the just of his statement: “Pork exports are like heroin, we become dependent. Unfortunately, there is a myriad of risks to global trade.“ High dependence on exports increase price risk and volatility.

A couple of weeks ago we wrote about the ineffectiveness of the Other White Meat marketing program. We pointed out there has been one billion dollars invested in check off by pork producers over the last two decades. Pork consumption and market share has decreased every year. On the flip side, global pork consumption is increasing. We reiterate our opinion that the Other White Meat program is an unmitigated failure. A billion dollars spent and continual pork consumption decreases. The USDA indication of a 7% decline in per capita pork consumption in 2008-2009 only magnifies the situation.

We believe in check off. We do not believe in hiding from the facts. The National Pork Board is proving itself delusionary beyond comprehension when it’s continually spinning that the Other White Meat program is working. Unfortunately, the Pork Board has its head in the sand (or maybe somewhere else). A billion dollars of our money gone with negative results. Heads should roll.

We are in tough times. Most producers have been losing $20 per head for a year. Every dollar we spend must maximize value. Many of us have our life’s savings invested in the pork industry. We are not bystanders. We want and need results. We must have results from our check off dollars beyond buying steak dinners for Pork Board Directors. U.S. pork consumption is decreasing; this is a crisis that affects the long term viability of our investments in our businesses.

Other Observations

  • If you want to solve the world oil supply issue, put farmers in charge. In two years we would have over-production and prices would collapse. Nature of the beast.
  • The collapse of Lehman Brothers, AIG and the myriad of bailout programs just add to the business difficulty we all face. We already had a hog price, energy and feed volatility, now add the concern for credit availability. It’s not a stable time.
  • Sow price is sure holding up with heavy sows bringing over $300 a piece. This despite sow slaughter over 70,000 a week. A heck of a lot better than in June when heavy sows hovered around $100.
  • Sow price is sure holding up with heavy sows bringing over $300 a piece. This despite sow slaughter over 70,000 a week. A heck of a lot better than in June when heavy sows hovered around $100.
  • We continue to be optimistic that supply levels in 2009 will be such to push cash prices above breakeven. We still see June 2009 over $1.00 lean.
  • Why? We see domestic and global cutbacks to cattle (last week U.S. cattle on feed – 3%), poultry (egg and chick sets – 3%+), and as we all know, there will be fewer hogs in 2009. Less total meat is very bullish for prices. 2009 will see stronger hog prices. No doubt.

Appointment

Genesus is pleased to announce that Tony Mould will become our General Manager.

Tony Moulds

Tony studied at Bishop Burton College in Britain, and then managed a nucleus unit for Newsham Hybrids, before moving to National Pig Development, where he worked in the export department for 11 years. In this role, Tony gained experience of pig production in North and South America, Africa, Asia and Europe.

He moved to Canada to manage National Pig Development (NPD) Canadian multiplication system. In 1997 established Partners in Genetics, a distributor of Genex (NPD) breeding stock.

Tony was instrumental in developing the concept of a co-ordinate group of independent producers, negotiating long term contracts and establishing Rocky Mountain Pork in 2000. In 2001 Tony and partners formed Danbred Canada. As president he was involved in the first importation of Danbred to Canada. Subsequently nucleuses, multiplication, marketing and sales were established. For a time Tony was responsible for Danbred sales and marketing in Canada and USA.

We are pleased Tony has taken the General Manager position in our company. His experience, knowledge, industry contacts and entrepreneurial drive will enhance our team domestically and internationally.