At last year’s conference we spoke and addressed what we saw coming in the next 12 months. Below is what we predicted and what really happened.

Next Twelve Months

• Last July we projected little sow herd expansion – June 1, 2013 5.884 million; June 1, 2014 5.855 – sow herd is slightly down
• Pork exports remain similar – They were slightly higher
• Domestic Pork demand would be similar – In reality pork demand was better as reflected in stronger hog prices
• July last year corn was $7.00 per bushel. We predicted that feed prices would decrease from July $30 per head over the next twelve months – We believe the $30 per head ended up real close.
• We projected last July that the next twelve months would have an average of $20 per head profit farrow to finish. In reality profit was closer to $50 per head. This would be if you sold cash and didn’t get PED. Many producers got PED and lots of hogs were hedged lower than cash. Bottom-line: we are glad we were wrong at $20 per head profit. $50 range was beyond our wildest dreams. When you look at price points of hogs around the world we see continued strength in the US hog price for many months.
• Brazil a year ago producers were losing serious money getting only 45? per pound US live weight. Currently, a year later, Brazil’s hog price is approaching 90? per pound live weight. Producers are making good money. Brazil market hog numbers January – May are down year over year 9.8%. Brazil has less pork to export supporting Global prices.
• Korea, a major pork market with imports from USA up 37% year over year. PED has torn up Korean hog production. Currently Korean producers are receiving $430 US for a 240 pound hog or about $1.80 US per pound. The high price of Korean hogs guarantees continued strong US pork exports.
• Mexico is the US’s largest pork export market by volume their tonnage is up 16% year to date. PED has hit Mexico’s pork production herd. The current hog price is $1.09 USD per pound. Profits are about $100 per head. Mexico will expand some in 2015 but difficult to obtain credit and the ongoing disease challenge will limit expansion. There is no reason to believe Mexico’s pork imports will not stay strong in the next twelve months.
• Russia in recent weeks has had hog prices as high as $1.85 US per pound. Profits have been over $200 per head. The price has decreased recently to $1.45 US per pound but with feed costs similar to US. Profits are real strong. The high price in Russia reflects high demand relative to pork supply. Pork Market Access to Russia comes and goes but when it goes there will be a surge of imports.
• China is the world’s largest pork producer with about half of the world’s production and consumption. In the last few months the Chinese hog price and overall costs have led to periods of financial losses the worst in 15 years. These losses at times have reached $80 US per head. Subsequently there has been according to China’s Government a breeding herd liquidation of 3.5 million sows from April 2013 – April 2014. In the month of April, 2014 it is reported one million sows went out of production. The liquidation in May – June we don’t know but we expect it continues.

This huge liquidation has begun to stabilize prices with China now in the breakeven areas. The wild card as we see it is when the liquidation sow numbers hit the market hog numbers. We expect a breeding herd reduction of 4 – 5% overall. A production decrease at a minimum 60 million market hogs per year. We expect a decline of over a million market hogs per week (equal to half of US production) will give a major jolt to China’s hog price. It will soar to $1.20 - $1.30 US live weight per pound. Pork imports will grow. This will be a boost for US pork exports especially with Smithfield ownership by the Chinese WH Group. China in our opinion will be North America’s fail safe hog price support in 2015. This combined with still limited pork production increase in USA – Canada will support continued high profits for hog producers.

Summary

When we talk about the markets in many countries it’s from first-hand experience. We do business with Genesus in each country highlighted here, plus many more. Travelling, writing, and engaged in the day to day business of these many countries gives us an opportunity to see the big picture. What we see overall is strong Global Pork Demand for pork with high hog prices that should sustain strong profits in North America through 2015. We expect the 2014 – 2015 time period will go down in history as the Golden Age for Hog Producers – a once in a lifetime experience. In January of this year we called 2014 The Year of The Pig Farmer – now we think 2014 – 2015 The Years of the Pig Farmer.