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Pork Commentary: Market Anticipation Building

by 5m Editor
13 April 2010, at 11:14am

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

After 30 months of our industry losing money, the anticipation for market hog prices to push through $80.00 lean is quite prevalent. Producers have been pounded down financially and there is a real fear that something like last year’s Swine Flu (H1N1) could jump up and wreck the party. It’s a logical feeling when you consider that our Government is bent on driving our costs higher with the boondoggle of corn ethanol, a domestic and global financial crisis, our industry playing defense versus environmentalists and animal rights proponents. Then, there is the curse of having H1N1 called Swine Flu. Roll it together and we have a $6 billion loss for the US swine industry over the last 30 months. Throw in a billion plus loss in Canada, and a billion in Mexico. The carnage has been real and devastating. Is there any wonder hog producers are waiting for the next rock to land on their head?!

The apprehension in the anticipation is a real feeling but we see strong indicators that it is our turn as an industry to make some money.

  • Domestic and Global economy improving. The GDP in both the USA and Canada is out performing the expert’s predictions (maybe they’re not experts they are economists).
  • Feed prices appear to be manageable for hog producers despite corn ethanol. Thankfully the rest of the world has not jumped on the burn your food bandwagon and this is cutting US corn exports.
  • Not much positive on the animal rights or environmental front other than meat and poultry per capita consumption is remaining near historical highs. That means relative constant demand for meat despite ongoing attacks on our industry by the double environmental and animal welfare whammy!!
  • A year ago Iowa – Minnesota lean hogs were $57 per pound. They now are $20 per pound higher. That’s $40 per head more. We have had a few less hogs but not enough to justify a $40 per head difference. It’s demand domestically and globally that has triggered the increase.
  • Greater meat demand can be seen in the US cattle market with steers tickling $1.00 per pound live weight. This is up from last year’s 85 cents per pound. That is about $125 more per head. Beef production is down only about 1 per cent year to date. Obviously beef demand, like hogs is up.
  • US chicken year to date is up 3.5 per cent, but chickens are 85 cents per pound, up 10 cents per pound from last year.

The Bottom line: Hogs, beef, and chicken prices are significantly higher compared to a year ago reflecting stronger domestic and global demand. This augers well for the summer as higher prices in beef, and chickens helps create a scenario where higher hog prices are easier to achieve. We continue to expect as we have for months to see 90 cent lean hogs this summer.

Market What Matters

Last week we went to a presentation where the speaker talked about branding Canadian Pork as Canadian to drive demand in the Canadian market. All the producer discussion in the meeting was supportive of this idea. As maybe usual – we disagree. Certainly there has been little indication that US Country of Origin Labeling of U.S pork has been a demand driver for US consumers. We have heard Canadian consumers profiling where, when asked, the consumer prefers Canadian pork. Big deal! Ask if they prefer anything Canadian made, whether it is cars, food, clothes, etc… they will say ‘yes’. The reality is many who say yes drive foreign cars, eat foreign food, and don’t give a rat’s behind where their clothes are from. They don’t care for the most part if it’s US or Canadian pork. They’re both safe and nutritious. 6 million Canadian pigs go to the US each year, big deal if the equivalent pork comes back to Canada.

We believe building a country brand misses the point, whether it is Canada or the USA. The same surveys that say consumers prefer their National Pork also indicate consumers want taste, color, texture, flavor, convenience, etc… It is foolish for us to build a brand based on country of origin. Our industry marketing must focus on meeting consumer’s real desire. A ‘good eating experience’. To do this we must go beyond lip service and develop genetics that have taste, and flavor. That means enough intramuscular fat. We need as an industry to stop using any genetics with Pietrain. They are too lean and meat fails most if not all taste tests. If as an industry we wish to build demand we must step back and ask why are bellies (bacon) and ribs, the two fattest products, now pushing to the top of pricing in carcass cutout values. It’s demand. The consumers vote with their money. If we want to drive demand, we need to step back and develop a product and marketing program beyond slogans and nationalism.