Observations

• U.S. Pork Cut-outs closed $1.0996 on Friday.
• Year to date U.S. hog slaughter 10% less.
  • 2022 =14,846,000 vs
  • 2021=16,494,000.
  • We believe the USDA estimate of 4% less is overestimated. We won’t be surprised to see 8% less ongoing.
• Iowa – S. Minnesota weight
  • February 6, 2021 = 288.3 lbs
  • January 29, 2022 = 290.3 lbs
  • February 5, 2022 = 289.1 lbs
  • Current weight at levels that don’t denote back up of hogs.
• June lean hog futures closed Friday at 112.20, end of October they were 88¢ - a gain of $50 per hog.
• A real reflection of lack of supply to demand. USDA cash early weans averaged last week $83.47 while 40 lb. feeder pigs $112.10. Kind of what happens when there were four months of under $20 for 40 lb. feeder pigs in 2020. Surest cure to low prices is low prices.
• Iowa – S Minnesota lean hog price averaged Friday at $90.38. If pork cut-outs can stay near $110.00, as they were Friday, $1.00 lean hogs will be soon.

Less hogs, strong demand, all small pigs and market prices racing higher. No sign of expansion. The latest weekly sow slaughter is 62,000 which doesn’t indicate expansion. Cattle and Poultry prices strong. Pork is good value. 2022 is shaping up for a very good year. An industry damaged by Covid issues and abandoned by the USDA and NPPC on CFAP-1 top-up deserves a good run. It is here.

Other Observations

2021 was not a good year for many large producers in China. Their financial results are a combination of lower hog prices, higher feed costs, and productivity challenges from disease. Below are reported 2021 financial returns of Chinese Public Companies and the number of sows they report.

2021
Company	Yuan/RMB	U.S. Dollars	Number of Sows
Tianbang Group	-3.75 billion	-$590 million	380,000
New Hope	-9.1 billion	-$1.43 billion	1.0 million
Wens Group	-13.4 billion	-$2.11 billion	1.1 million
DBN	-340 million	-$53 million	230,000
Tecon	-680 million	-$107 million	120,000
TRS	-1.07 billion	-$168 million	120,000
AoNong	-1.18 billion	-$185 million	360,000
Zhengbang Group	-18.9 billion	-$2.97 billion	1.0 million
	Total	$7.613 billion	4.2 million

The list of Chinese Public Companies with about 4.2 million sows appears to have had losses in 2021 of $7.613 billion U.S. dollars. Our Farmer Arithmetic equates this to an average loss of $1,812 per sow. Let’s assume this is about 10% of China’s sow herd (inventory reported to be 42 million). Could country-wide this equate to $70 billion? You think there isn’t liquidation of the sow inventory?

Of note, China hog prices still are low and losses continue at this pace. Our premise, financial losses in hog production leads to less hogs. Big financial losses in hog production leads to even fewer hogs. We believe China has been liquidating sows since last July. We expect in quarter 2 to see China hog slaughter numbers begin to drop year over year and prices rise.

Tough Markets Not Only in China

Genus PLC is the owner of PIC. PIC is a major part of Genus plc. PIC is currently the world’s largest Swine Genetic Company. Since September, or over about the last 6 months Genus PLC, which is a listed public company (GNS) on the London Stock Exchange, has seen its shares decline from 6070 GBP ($8230) to 3490 GBP ($4730) last week wiping out 100’s of millions of dollars in market value. It appears the institutional shareholders who have owned a large percentage of shares have decided to cash out.

We won’t surmise why investors are leaving. There is little public news other than some reports of a weak China market and insiders selling shares. Must be tough times for management to explain collapse in value of 100’s of millions of dollars in market cap. Genus Chief Executive compensation 2,075,000 GBP ($2.7 million), shareholders, we expect, want their share value to stop bleeding.