November 16, 2009
Pork Commentary
By Jim Long President - CEO Genesus Inc.
Government controlled Big Sky Farms seeks Creditor Protection
Last week the World's largest Government owned swine operation Big Sky Farms applied for creditor and court protection. Big Sky is considered to be Canada's second largest swine operation and is owned 63% - 70% by the Saskatchewan Provincial Government. The President and CEO Casey Smit of Big Sky said the company is reorganizing so it can access Canada's federal loan program. What a joke! A government controlled entity reorganizing to get more government money! Big Sky has failed and now government upon more government money is being chased to prop up an organization that goes from failure to failure. The whole idea of the Canadian Federal Government loan and transition program is to put the Canadian Swine Industry on a sustainable footing. Further funding of a government owned farm of over 40,000 sows like Big Sky is a slap in the face of all Canadian hog farmers. It's wrong that a socialist aberration created by the former socialist government of Saskatchewan is being sustained in competition with independent producers. No Government needs to own hog farms. Close them, shut them down. Big Sky Farms creditor protection and Hytek (Canada's largest hog producer) supposed huge reduction in their sow herd, are a reflection of the challenges our industry face.
We expect several other large entities in Canada and the U.S.A. are deeply feeling the harsh reality of financial losses our industry has encountered the last two years.
Tell us it ain't so Mr. Myer
Steve Myer an economist writing in the National Hog Farmer Weekly Preview last week offended us as Pork Producers. Writing about H1N1 which he referred to as swine flu he wrote about producers ‘You can whine and wallow in self pity and martyrdom or pick yourself up, dust yourself off and get on with life.'
Sorry Mr. Myer, we have a hard time taking your lecture. We are not sure you own any hogs? How much skin do you have in the game? Taking lectures from an economist is hard for an industry and people who have lost billions with many losing their farms and livelihood. In fact Mr. Myer, we took your comments as condescending. Why? Producers are not whiners, wallowing in self pity. Far from it. Producers are proud, independent entrepreneurs who have borrowed money and given their soul to this industry. Producers live in reality; it's not an academic exercise. Mr. Myer, an apology is warranted to all producers.
Other Observations
We were reading the U.S. National Agriculture Statistics Service statistics. Some observations:
- The U.S. average pigs per breeding animal per year was 10 per year in 1980, 17.5 in 2005, and 18.7 in 2008. In about thirty years, 1980 to 2008 an almost doubling of efficiency. In the three years from 2005 to 2008, a jump of 1.3 pigs per year. There has been a definite increase in efficiency. The increase has helped the cost of production to be lower but the extra hogs being produced is increasing pork supply.
- In 1980 the United States had a 10 million head breeding herd. In 1982 it had dropped to 8 million. 2 million sows down that was real liquidation. This happened because sows 30 years ago were mostly outside. Capital was invested in inventory not buildings and equipment. It was a lot easier to cut inventories fast.
- The hog to corn ratio has been running over the last two years near 10:1. In 1998. 1999, 2001, and 2002 years considered to be unprofitable, we had hog to corn ratio over 15:1. Is it any wonder? It has been so hard.
Corn
The corn crop is late being harvested. There are reports of serious vomitoxins. All efforts will be made to not feed toxins to hogs. There is a good chance vomitoxin corn will still get fed. There will be breeding and some growth problems. 1% effect on each would be market positive.
U.S. Dollar
The continual decline in the U.S. dollar is positive for pork exports and price enhancing for U.S. pork producers. Expect continually strong pork exports especially if access to China and Russia markets is available.
Summary
We are in tough times. Losses still reach over $20 per head. Hanging on is the name of the game. There is light at the end of the tunnel. Hog supply will be lower going forward. The breeding herd continues to get smaller. Pork exports are strong and will be aided by a weaker U.S. dollar. Global grain and soybean supplies are good aiding our cost of production. As H1N1 (swine flu) dissipates, it will be positive for pork demand and market psychology. We expect 2010 lean hog futures have upside of over $5.00 their current level.
Genesus Awards Woodland
First herd in North America 3 years over 30 pigs weaned
Left to Right are Terry Hofer, Michael Hofer, Jack Hofer (manager), Andy Gross and Jim Long, President of Genesus
Last week Genesus honoured several of its 66 customers who weaned over 25 pigs in the last calendar year. Genesus is fortunate to have such an excellent group of high achieving producers. It takes diligence and 365 days of intensity to achieve production in the top 8% of all producers.
We congratulate all Genesus 25+ award winners.
Also receiving recognition was Woodland Colony the first herd in North America to reach 30 pigs per sow and now the first in North America to reach 30 pigs per sow for three consecutive years. This in turn has led to an astounding 28.5 hogs marketed per sow per year. Top Producer, Top Result. Genesus congratulates Woodland for these industry leading results.
