Other observations.

• Year to date US hog marketings are the same as last year. Actually 32,000 head less. Talk about static. Remember the talk about the big expansion? Certainly hasn’t shown up in hog marketings.

• USDA Pork cut outs are 88¢ lb. For producers to get much of a further increase in lean hog prices US cut-outs need to increase.

• There was significant discussion of a large increase in chicken production coming this year. Not seeing it. Chick placements have increased very little. This is supportive for pork prices

• Feed costs are taking a hit. July corn closed the highest in 11 months Friday ($4.37). Soybeans just south of $12 a bushel. Speculation is that dry conditions and heat could short US crop. Maybe.

There is lots of money in the world today. There is very little return from bank interest. Lots of money chasing bigger returns. Speculators looking at weather models guessing on a drought is pushing this market. We wonder if anyone factors the 11 million sows that went out of production in China. Double U.S Hog Production gone. You would need about 2 billion bushels of corn plus lots of soymeal to feed the 11 million lost sow production. That demand is gone. Corn in China has dropped from about $10.50 US a bushel to $5.50. Cause and effect?

• CN agri reports that the gap between Chinese production and consumption in 2016 is likely to be in the order of 110 million head, with total production of 640 million head. This means that import will represent 12-13% of the market against 1% in recent times. Recovering is likely to be slow due to environmental and capital constraints and driven by the largest concerns.

WOW, short 110 million hogs, that’s basically all the hog production of the US The Europeans have captured most of the pork shortfall so far. We expect that North America will gain in the coming months in China exports, as we get rid of paylean.

We believe re building China will take time as environmental and land constraints hurt locations for modern facilities. The 11 million sow liquidation wiped out many small producers and we don’t expect many of these to come back in production. We expect China to continue with very high prices for well over a year. Currently China’s hog price is 20.80 rmb/kg or $1.43 US liveweight a lb. A 260 lb. hog is bringing $371 per head. We expect China profits per head are ranging from $150 to $200. With 12 million head a week to market, China producers probably are making $1.8 billion to $2.4 billion US a week. Yippe Ki Oh. Should be good for us in the Global breeding stock business. As a big integrator in China recently told us. There are no swine genetics in China worth buying.

It will be even better for producers that are in countries where they export pork to China. The huge shortfall in China hog production and high hog prices will pull pork at unprecedented levels.
China is and will remain a market price stabilizer for American hog markets.