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Pork Commentary: Huge US Corn and Soybean Crop

by 5m Editor
16 September 2009, at 10:24am

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

The USDA released their estimates for the USA. corn and soybean crop. US corn is predicted to be the second largest in history (13 billion bushels), soybeans at 3.25 billion bushels – the largest in US history. Bountiful US feed grain supplies are a huge plus for the swine industry in our pursuit of keeping feed costs down from the ridiculous prices we have seen in the last twelve plus months. It’s not just hog prices that drive our profitability potentials but the cost of our major input feed. Unfortunately, even with lower current feed prices the hog to corn ratio is only 11.5 which is well below the feed ratio for hog breakevens. Last year in the quarter June – August, the US liquidated 70,000 sows. The US sow slaughter this year has certainly ramped up in August and all indications are gilt retention this June – August quarter this year is running significantly less than last year. We expect the September USDA hogs and pigs report to indicate a decrease of at least 100,000 sows from 1 June when it is released later this month. The financial losses that have brutally hammered our industry the last 2 years are leading to a real decrease in the breeding herd.

We believe the hog growing conditions this summer have been extraordinary. This has pulled hogs ahead. If we are correct, the 1 September market inventory will be significantly lower than a year ago. We expect the US market inventory will indicate approximately 2.3million fewer market hogs compared to a year ago. This is manifested by a combination of not only rapid growth, but sow liquidation and fewer pigs coming from Canada. If we are correct that the market numbers are down approximately 2.3 million this will be significant enough to push positive psychology.

Other Observations

  • China’s hog price has risen for 13 straight weeks, going from 64.5 cents a US pound on 6 May to 79 cents a US pound. Reports from China indicate some liquidation and less fear on H1N1 has given market support. Whatever the reason, higher prices are always a combination of better supply – demand scenarios. Higher hog prices in China may lead to US pork export opportunities.

  • Reports from the field tell us there are some major Pork Powerhouses liquidating sows. It’s supposed to stay hush – hush so everyone won’t get bullish. As if that alone will get bullish fever happening!

  • It appears Canada’s Government announced a plan to fund sow herd liquidation and guarantee loans for producers is not getting off to a roaring start. There was the big bang announcement a month ago but still at writing no policy or rules in place. We understand one of the big sticking points is the per centage of producer loans the government will guarantee. The Government wanted to do 50 per cent, the banks want 90 per cent plus. Imagine, it will be near 90 at the end or there will be little or no bank participation in new loans. Too bad the Government couldn’t get their stuff together before they made the initial announcement.

  • US Ag Secretary Vilsack must be back from holidays. He chastised the media last week for continuing to use Swine Flu terminology instead of H1N1. We’re glad he did it, unfortunately it is six months too late. Too bad President Obama didn’t do it he’s promoted giving millions to Wall Street and the car industry for the recession. The swine industry has gotten a pittance for pork purchases. The President has the bully pulpit. Our industry is losing millions and a few words about H1N1 versus swine flu from the President could help us immensely and at no cost to taxpayers. He’s working on a health program we need and some help to make our industry healthy.

  • I had an interesting call from one of the Pork Powerhouse people last week. Their data says hogs are ahead 2 weeks. A combination of cool weather, more space in barns, and good health. Their premise was that we will market 2 weeks more production in 2009 then we should have (4 million hogs). They believe we will see no drop off in marketing’s this fall because the better growth will continue. If the growth rate is this extraordinarily (or near it), we will see a significantly lower year over year US market inventory in 1 September USDA report.

Conclusions

Liquidation continues. Sow marketing’s the last three weeks average 70,000 which are well above equilibrium. Feed supplies and prices should be satisfactory. Feeder pig and early wean prices are coming off the floor. Canada’s small pigs to USA. are running about 60,000 a week less than a year ago (145,000 – 85,000) with no supply to replace these for US finishers. There will be significantly less hogs in the future. The challenge when you’re gassing $30.00 per head for what seems like forever will it be soon enough? When you’re out of cash – you’re broke.

Genesus Annouces its First Genetics Mulitplier in Mexico

16 September 2009: Genesus Genetics is pleased to announce its first genetic multiplier in Mexico. DP Farm is a new 2400 sow facility on an isolated plateau in central Mexico.

This state of the art biosecure operation will produce Genesus gilts for existing and new customers in Mexico. Jim Long, President – CEO Genesus Inc, "We have been sending breeding stock to Mexico for 15 years. Current transportation costs and logistic issues made it necessary for us to find a Mexican location and facility that would meet Genesus’ commitment of delivering top quality, healthy swine genetics to our customers. Mexican swine producers have been financially pressured, like many in other countries by H1N1, high feed prices, and financial losses.

Genesus believes that the future success in swine production is the adaption of technology that maximizes productivity and producer returns. Genesus’ Mexican genetic production is our commitment and belief in the future of Mexico’s swine industry."

For further information:
Jim Long
President, Genesus Genetics
E-mail:[email protected]