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Pork Commentary: Banff Pork Seminars Report

by 5m Editor
27 January 2010, at 9:06am

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

Last week we attended the 39th annual Banff Pork Seminars. Banff is a tourist resort town nestled in the Rocky Mountains of Alberta. Approximately 600 people attended the conference from primarily Canada and the USA Of the 600 pork industry participants, we would estimate the vast majority were people who make a living selling or servicing the hog industry.

The general mood of conference attendees was one of cautious optimism. There is no doubt that all people in the hog industry have been hurt by the month upon months of producers losing money.

Other Observations

  • The speaker from Canada’s Disease surveillance centre talked about H1N1. Listening to him was about as fascinating as getting a root canal. As director of the centre he showed up to talk to 600 people dressed like what he must of thought was farmer garb. The jist of his talk was Canada should search out diseases before we know they exist. This strategy in our mind is bordering on the hilarious as the bureaucrat would have our government search for diseases that could ultimately destroy our livestock industry. The most frightening statement in our culture “We are from the Government we are here to help you.“

  • The second speaker, another Government bureaucrat and also an economist. He explained that H1N1 (swine flu) had hurt the hog industry to the tune of about $20 per head or about $1.5 billion dollars. Unfortunately his humor was lame. He joked it was only a billion plus dollars that the industry lost. We always like the economist’s sensitivity to the plight of producers. We were sitting beside a producer who is on the verge of losing his farm. He reckoned the $20 per head cost him one million dollars. The H1N1 lost was the extra loss that put him over the edge. He wasn’t pleased by the joker. His life has been turned upside down.

  • Rabobank had one of their analysts based in China speak on the China pork industry. They expected China will continue to modernize its swine industry. One interesting statistic is 35 per cent of China’s hogs are slaughtered illegally (more than the total US kill). With already 46 per cent of all the worlds pigs, China is expected to continue growing hog production. Rabobankdoes not believe that there will be significant growth in pork imports. China will do everything possible to be self sufficient. Our own experience in China would confirm this sentiment. One other thing about China: it is illegal to make corn ethanol. Corn is for the people and animal agriculture.

  • One major topic of discussion was John Morrell’s decision to close their Sioux City slaughter plant by the end of April. There was some concern about the decrease of slaughter capacity. In our opinion, it is a wise preemptive move by Morrell and parent company Smithfield. By May there will be thousands of shackles spaces empty every day industry wide. The closing of Sioux City is an early testament to the lack of hogs coming in the next few months. The closing is also a casualty of (COOL) Country Of Origin Labeling. John Morrell was the major importer of market hogs from Canada. Now with that flow of hogs next to nonexistent. There is a supply issue. Casualty one: the workers of Sioux City John Morrell.

  • Douglas Porter, an economist from the Bank of Montreal spoke about the economy. Last year the world’s GDP dropped 1 per cent, the first decline since the early 1950’s. All indicators he acknowledged are showing a global economic recovery. As the Rabobank analyst explained meat protein consumption is directly tied to personal income. The recovering domestic and global economy will increase pork demand, something we are already seeing with a continual if not straight line increase in pork prices since August.

We talked to several bankers at the seminars. They were trying to figure out where the market is going. We get the feeling they see owning hog farms as a last resort. Several of them told us they read our commentary. They said they need optimistic fodder for their credit department. Glad we can help.

Markets

The best news this past week was USDA pork cut–outs, which on Thursday averaged 77.35, up from the previous weeks 73.05. The Iowa – Minnesota lean hog prices on Friday was 66.16, down $3.00 from the previous Friday. If cut – outs hold, cash will rise. Packers with a $10 spread can’t stand the prosperity and will bid up hogs. In the coming weeks hog supply will continue to drop. The large sow liquidations of June – August will hit the point where the hogs from these units will be all gone. We stand by our belief that there is a scenario of lean hogs reaching and surpassing 90 cents this summer. This industry needs some breaks it has been too hard too long.

Iowa Pork Congress

This coming week we will be at the Genesus Exhibit at the Iowa Pork Congress. On the Wednesday night you are invited to join us at the Holiday Inn downtown (across from the Exhibit Centre) for a celebration of Genesus placing its one millionth gilt globally. The reception is from 5 pm right after the Pork Congress closes and we are serving drinks and appetizers. All are welcome!