Jim Long Pork Commentary: Future not as shiny as it should be?

With the decrease in U.S. lean hog futures this past week and increased feed costs projected profits using lean hog futures and grain costs show near a breakeven farrow to finish for the next year.
calendar icon 18 November 2020
clock icon 4 minute read

We believe lean hog futures are underestimating prices in the coming months. Why? (The only thing we know about the future is that it will be different – Peter Drucker.)

We expect supply of hogs to drop below previous year’s numbers in the coming weeks with the gap widening as we go further into 2021.

We are now marketing hogs born in April-May. Sow slaughter last year averaged 57,500 a week. Since the first of 2020 the sow slaughter has run over 8,000 head more a week. The latest weeks data was 67,166. Less sows mean fewer hogs and less pork.

We will send out a challenge. If you know of a new sow unit in USA stocked in summer or under construction now let us know. Send us the location and size. We will put a list next week in commentary. Our premise: if you are not adding you're just subtracting: [email protected]

With ASF in Germany continuing to grow in discoveries (150) the likelihood of Germany staying more than a year out of Asia export markets grows. This will lead to export opportunities for other countries: Spain, USA, Canada, Brazil, etc.

US pork export sales last week were 42,500 metric tonnes. We believe that’s a good number, probably equivalent to near 500,000 hogs. China sales were over 21,000 metric tonnes. The lean hog future market analysts called these numbers negative?

US chicken egg sets, chick placements and slaughter are now below year ago levels by up to 3%. At the first of 2020 they were running year over year higher. It appears that lower chicken prices year over year and higher feed prices have cut production. Some year over weeks have been 8 million plus chickens lower. Less chicken means less protein on market and that’s supportive to pork prices.

China is expanding, high hog prices will do that. China’s hog price will contract in 2021 but when it does China's lower pork price will be increasing per capita consumption of 1.4 billion Chinese. This will slow price decline and in turn, keep Chinese pork imports up through 2021.

The one thing we continue to struggle with is the lack of industry strategy to increase US domestic consumption. Our industry continues to produce pork that is too lean and doesn’t deliver maximum taste and flavor. Bellies, Ribs, Shoulders all more marbled products continue to lead the cut-out prices. Leaner Loins and Hams languish. It's obvious marbling adds flavor, consumers pay for flavor-taste (Bellies, Ribs, Shoulders). It’s so obvious it’s sad we can’t see the forest for the trees. Some Packers see Durocs as answer. It’s a fallacy. Some so-called Durocs have no more marbling then synthetic breeds that produced Pork like Chicken. It’s not the process (Duroc) it’s the results that meet the consumer desire. The consumers are voting with their money. Loins and Hams used to lead cut-outs (and are 50% of carcass).

The folly of the "other white meat" program was we made pork more like chicken – taking away taste-flavor consumers took notice. Time to respond. It’s how to drive real demand in a domestic market that is dependable and is here.

Jim Long

President - CEO at Genesus Genetics
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