Jim Long Pork Commentary: Random observations in a challenging pork industry

Genesus' Jim Long shares his thoughts on the global pig industry
calendar icon 26 September 2023
clock icon 3 minute read
  • Last week USDA estimated Red Meat Production down 5.4% from last year -57 million lbs. (in context the 57 million lbs. is about the same tonnage of U.S. weekly pork exports).
  • For week Beef Production -7.2%, Pork -3.5% compared to a year ago.
  • USDA estimates Hog Weights 278 lbs. last week, a year ago 285 lbs.
  • Observation – less Beef, Less Pork and hog weights 7 lbs. lighter year over year.
  • The lower hog weight makes us believe that market hog inventory is very current.
  • Cattle on feed report released last Friday indicates further cattle inventory reduction with September down 2% year over year.
  • The Chicken industry has had significant financial challenges. Latest weekly Chicken placements down 3% from a year ago. Latest weekly Chicken slaughter down 3.5 million year over year. Less Beef, Less Pork, Less Chicken. The only way to ration less supply is higher prices.
  • Choice Beef cut-outs Friday was $3.04 lb. Pork cut-outs 98¢ lb. Consumers continue to spend significantly more money for Beef than Pork. Why? We suspect they prefer the taste. As an industry we must address this taste challenge. If Pork could get to half of Beef’s current cut-out or $1.52 lb. our world would be so different. Instead of sucking air for lack of profitability we would be receiving good returns. We must get over a good eating experience is a niche product but a total industry quest to increase demand.
  • In China a major news story this past week was a feed mill being fined for using GMO Corn and other companies being charged. Becoming a story in China mass media could be a signal of desire of China government to have to lower corn imports. If GMO Corn is being fined, how do you think GMO – Gene Edited Pork will fair?
  • Official U.S. sow slaughter in August was 293,800 up 20,000 from August last year. Year to date end of August U.S. sow slaughter is 94,000 higher than a year ago with most of the increase in last four months. Increased sow slaughter continued higher sow mortality and lower gilt retention is decreasing the breeding herd. Less sows – always means less pigs to market.
  • At Leman Conference last week, a presentation by a major producer showed that their sow mortality had gone in six years from 5.4% to 18.2% (5.4%, 7.2%, 9.2%, 9.6%, 12.9%, 14.2%, 18.2%). In our opinion an honest reflection of what we all see in many situations with increasing prevalence of weak legged females, aggressive temperaments, and death from ever increasing prolapses. When we review year over year sow slaughter the reality of so many more dead sows make comparisons a challenge. Dead sows not only don’t give pigs but lose salvage. SMS projects the loss values of a sow are about $1,000 (pig loss, salvage, replacement, etc.). On a 2,500-sow unit 10% mortality difference is 250 sows a year or $250,000. Real Money.
  • Hog breakevens are improving with cash corn around $4.50 bushel (in June it touched $6.70). Cash early weans averaged $19.46 still a disaster price for producers but up $3.00 on the week. We suspect the price will continue to strengthen seasonally and from lower supply due to sow liquidation. Wouldn’t be surprised to see $50 per pig plus in December.

Summary

We continue to see less beef, less pork, less chicken. We expect next week the September 1 USDA Hogs and Pigs Report will show lower sow and pig inventory year over year. We believe current U.S. futures for 2024 are significantly undervalued compared to when the market will be when hogs go to market in those months.

Jim Long

President - CEO at Genesus Genetics
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