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Jim Long Pork Commentary: CFAP 1 Top-Up

24 August 2021, at 2:00pm

As of August 15, 2021, USDA website shows payments of CFAP 1 Total Disbursed.

Cattle

$4.37 billion

Milk

$1.79 billion

Corn

$1.78 billion

Hogs

$ 624 million

Cattle, Milk, Corn, have all been paid the USDA promised CFAP 1 top-up. The hog industry languishes as a second-class citizen having not been paid top-up. The CFAP 1 top-up program was put in place to compensate, re USDA CFAP 1 website, “for producers of agricultural commodities marketed in 2020 who faced market disruptions due to Covid-19.” The CFAP 1 top-up was promised in January. As you see huge payments have been paid to Cattle. Milk and Corn as promised.

The CFAP 1 top-up was to match first CFAP 1 payments. It appears to us $624 million is the government USDA payment owing to producers. A lot of money that this industry could use to backfill the hole created by Covid crisis and market collapse in 2020 just as Cattle, Milk, and Corn received. You know what you got CFAP 1, best you fight for it.

We continue to wonder why NPPC Bureaucrats are not fully engaged to get the $624 million promised and owed. Obviously, the Cattle, Milk, and Corn groups have done their job to look after their industry. What can be more important than getting $624 million for your industry? Time to clean house at NPPC, the leadership is not getting the results of other industry groups. Hopefully, NPPC directors will take charge and stop the inmates from running the asylum. New energy, new direction, new ideas, and tangible results are the only option if we are going to have a body that represents, defends, and grows or industry.

Last week we highlighted a letter the Senators of Iowa and Minnesota sent asking USDA Secretary Vilsack where is the CFAP 1 top-up for Swine. If we want to get the money, we all need to engage continually Senators, Congressmen, and Secretary Vilsack. Call/ email over and over. They all need to see a concentrated effort of our industry saying “Where is the promised money you paid Cattle, Milk, and Corn, why not Hogs?” We are on our own, NPPC is MIA. It’s $624 million. Let’s get at it. Covid-19 smashed us as much if not more than the other commodities. The CFAP 1 top-up promise made should be a promise kept.

Other Observations

Marketed Hogs

July U.S. total commercial hog slaughter was 9.790 million, down from last year 11.224 million. The 13% decline compares to the year-over-year decrease of 2% that USDA projected. Last week the U.S. marketed 2.452 million, a year ago 2.625 million (-6.5%). The USDA June 1st inventory report was wrong. This overestimation of inventory hurts producers as it drives down lean hog futures by creating the perception of more supply than in reality.

Olymel Plant (Quebec) Strike

The strike at Olymel plant in Quebec continues as a Union vote rejected the company offer last week. The Valley–Junction plant which handles 37,000 market hogs a week has been on strike since April. The closure of the plant has put huge stress on Quebec and Ontario producers who have contracts to supply hogs, as they are forced to find other homes for their hogs. The Union wants a raise of 50% over three years.

The Olymel plant closing is leading to more small pigs and market hogs being sent to USA. Market hogs to USA the latest week data shows plus 14,000 year over year. Small pig exports the latest week plus 20,000 (+24%) year over year. The strike is not only a dilemma for producers but for Olymel as the sudden drop of pork supply creates issues with customers in retail, foodservice, and exports. Some of these customers will be supplied by U.S. packers grabbing customers with the Canadian pigs. When you lose a customer always a challenge to get back.

Total Federal inspected hog slaughter in Canada was -14% in the latest week year over year (-58,000). A real sign of the crisis the Olymel strike is putting on the Canadian hog industry.

China's Pork Industry in Red

China hog slaughter price continues to run around 15.56 RMB kg ($1,09 U.S. liveweight a lb). A price below China’s average cost of production ($11.00 bushel corn). The current China cash weaned pig price is 260 RMB ($40 U.S.), cost of production is $60 plus. 15 kg (33 lbs feeders) 350 RMB ($53 U.S.). In January 15 kg feeders were near $300. A huge difference.

China's pork industry is currently in red, losing lots. One of their largest publicly traded owned swine companies lost $500 million U.S. in the first half of 2021. Most estimates of loss per head of industry are at $35-$50 per head. 10-12 million heads per week marketed, a range of $350-$600 million a week loss in the industry. Not exactly conducive to continued expansion. We believe China is net liquidating now due to financial losses and continued ASF challenges. This liquidation continues to put more pork on the market and driving down prices. Just a matter of time when the dog hits the end of the chain and China hog prices jump. The billion-dollar question “When is that?”

Sow Value

A year ago, U.S. heavy sows were in the 25¢-30¢ lb. Last week sows over 500 lbs. we’re averaging 92¢ lb. with some bringing a $1.00 lb. Nice ring to it, 500 lbs. x $1.00 lb. = $500, $300 plus more than a year ago. Certainly, time to get rid of old sows and replace with gilts. As good as a sow revenue – gilt cost spread ever.

It also highlights the dilemma of dead sows. Every sow that dies costs you big money. Average industry sow mortality on databases is 14%, which means half industry is over 14% with many 17%-20%. It’s amazing our industry tolerates the failure of the Genetics that give these results. Prolapses, lames, fighting, feet structure, milked down in lactation, all factors eroding not only the loss sow value but dead sows don’t produce pigs. If you got sow mortality over 14% it’s your genetics, not your management. Time for a change.