Pork Commentary

Jim Long President – CEO Genesus Inc.

info@genesus.com November 2, 2014

US Hog Market Prices Continue to Decline

This past week we have seen, US lean hogs drop further, decreasing $20.00 per head. In the past three weeks, lean hogs have gone down from 109 to 90 or about $40.00 per head. Obviously, profits have decreased the same amount. Market hog numbers approaching 2.2 million a week is increasing supply relative to demand. The good thing is, despite lower lean hogs, profits are still near $40.00 per head. A year ago farrow to finish producers were losing $10 per head. $40.00 per head profit is excellent in any fourth quarter as historically large fourth quarter supplies usually lead to negative farrow to finish margins.

Small Pig Prices

Last week the USDA reported cash early wean pigs were $67.34 and 40 lb. cash feeder pigs $83. A year ago, cash feeder pigs were averaging $73. We believe cash small pig prices are similar to the canary in the coalmine. Currently both cash early weans and feeder pigs are approaching historically high price for this time of the year. The strong prices in our opinion reflect a strong demand relative to supply. There obviously are buyers with facilities who believe there is profit in purchasing the small pigs. These strong small pig prices tell us supply of hogs are still tight in the coming months. Early weans are April Market Hogs.

Choice

Congratulations to Choice Genetics for exiting bankruptcy! The new Chinese owner in collaboration with the original French Groupe Grimaud have successfully negotiated a settlement with Scidera, which they owed just over 11 million dollars. The new Chinese – French shareholders of Choice were able to pay all vendors in full. A restructuring of management has happened and a new CEO has been put in place. His challenge will be to rebuild a brand damaged by bankruptcy with the support of the Chinese – French shareholders.

New Technology

There has been much interest in 24-hour supervision of farrowing in order to lower pre–weaning mortality. As we all know, labour is a challenge and hard to get in an 8 hour day, let alone 24/7 in a sow barn. One of our Genesus customers has put in lift farrowing crates. When the sow in the farrowing crate stands up the area under the sow floor lifts creating an approximate one foot height above the baby pigs. The idea is when the sow sits down the floor slowly descends and she won’t lay on baby pigs. As we all know, most of pre–weaning mortality is lay-ons is the first three days. The pre–weaning mortality of our Genesus customer is 3.8% year to date. Extraordinarily low. The barn is staffed nine hours a day. No one is in farrowing the other 15 hours a day. The farm is running 31.6 pigs weaned per sow per year to date. What we see in the lift area for the sow works well. It is built by Crystal Springs Equipment. The cost is about $600 per farrowing crate.

Let’s do the arithmetic:

Assumptions:

Normal pre – weaning mortality 12%
Born Alive 14
Lift Farrowing Crate pre – weaning mortality 4%
An 8% improvement or 1.1 pigs.
Let’s assume 13 farrowings per crate a year. X 1.1 = 14.3 pigs/sow
At an early wean value of $50 x 14.3 pigs = $715.
Extra cost of Lift Farrowing Crate $600.

Scenario Extra Labour 24/7

Same Assumptions decrease mortality 8% gain 1.1 pigs.
Cost of Extra Labour = Extra 15 hours x $13/hour = $195 per day x 365 days = $71,175 per year.
Let’s Assume 2500 sow unit 480 farrowing.
Crate – Extra cost lift crate $600 x 480 farrow crates = $288,000
24/7 Farrowing labour per year extra cost $71,175 x 10 year = $711,175.
Lift farrowing Crates $288,000 = difference over $400,000.

Seems to us like this is something very hard to ignore. 24/7 labour at today’s labour cost $711,175/ten years, Lift Farrowing crates $288,000 = a difference of over $400,000. www.gromaster.com/pdf/CS_SowLift_Lit.pdf We observe pre–weaning under 4% in lift farrowing crates. We actually doubt if 24/7 labour can get it that low. There has been little new swine equipment technology over the last few years that has done much to improve productivity. In our opinion, if you were considering a new farrowing barn it would be wise to consider the proven technology of the Crystal Spring lift farrowing crate. 24/7 labour will always be a challenge.

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