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Pork Commentary: Growth Rates Best Ever?

by 5m Editor
1 March 2011, at 11:01am

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

US market weights are at unprecedented levels despite corn around $7.00 a bushel. Last week’s Iowa – Minnesota market weights were 273.1 pounds, almost five pounds heavier than (268.1 pounds) a year ago. We expect a large amount of the weight difference is the unprecedented average daily gain we have seen the last few months. Case in point.

Last week, we spoke at the annual meeting in the Mid–west of a large Genesus Genetic user. At the meeting production data was given for the prior 12 to 14 months. Wean-to-finish average daily gain (ADG) on close–outs have jumped 0.15 per pound per day since last November.

The only reason gains had jumped so significantly was the improved quality of the corn crop in 2010 compared to 2009. A 0.15 ADG improvement would be a good 10 days quicker to market and/or a heavier market hog. In our opinion the higher quality corn helps explain the five pound heavier market hogs we are seeing year over year and we expect hogs are being pulled ahead. Such a rapid growth improvement could lead to USDA market inventory. March 1st that is smaller than many will expect.

Global Swine Prices

Market hogs in China are $1.10 US live weight per pound; in South Korea US$1.60 live weight per pound; in Mexico 80 US cents live weight per pound; and Russia US$1.10 live weight per pound. All are major consumers of pork; all major importers of pork. All prices reflect each countries supply and demand. All market hog price points are significantly higher than USA – Canada market hog prices and lean hog futures. Fifty per cent of global pork trade originates in US and Canada. We expect strong pork exports in the coming months. Hog prices will benefit greatly from this reality.

Bill Clinton

Former US President, Bill Clinton, spoke at the USDA’s Outlook Forum last week. Mr Clinton spoke of the need to have food balanced with energy needs regarding biofuels. “If you produce more biofuels and less food, will that mean food prices will be even higher and we’ll have more food riots?“ Mr Clinton said.

The corn ethanol debate is being engaged. We continue to expect as the year goes forward and food prices react higher due to the price of corn, wheat, etc… the discussion will become more intense. When you have Democratic Champions Clinton, Gore’s now questioning the wisdom of corn ethanol and a Republican Congress last week pulling financial support for corn ethanol expansion. You have to ask where will corn ethanol get its support in the coming months?

Chemical Castration

One of the issues not fully debated in our opinion as a danger to our domestic industry is the potential licensing of the Pfizer product (Improvac) to chemically castrate pigs from injection. In a time where as an industry we are being pressured on antibiotic use and the quest for more organic or natural products. We are having a hard time seeing how a chemical injection could be a positive to increase pork demand. It will be interesting if North American pork packers risk the marketing dilemma to explain this chemical manipulation of the pig consumers, retailers and restaurants. Another risk of potential use of Pfizer’s chemical castration product could be global restrictions on pork imports as countries reject pork from countries that approve its use as a trade barrier. When North America exports 25 per cent of all its pork a consequence that cannot be tolerated.

Summary

Iowa – Southern Minnesota lean hog prices averaged $81.33 a pound last Friday, while the USDA pork cut-outs averaged $92.08 per pound. The packer – farmer spread indicates packers making good money and pork demand is strong. Feed prices continue to increase pushing the cost of production higher. We still see no expansion underway. We expect lean hog prices will remain historically high through the summer 2012 with no significant supply increases and strong domestic and export pork demand.

Announcement

Genesus would like to announce that Stewart Watson has joined our sales team. Stewart lives in Lethbridge, Alberta, and has extensive experience and expertise in the swine genetics industry. Stewart joins Dave Borsboom in Alberta and together they will support Genesus clients and increase our presence in the Alberta, Montana and Saskatchewan markets.