September 21, 2009

 

Pork Commentary

By Jim Long President - CEO Genesus Inc.

What's There to Say? The Swine Market is Bad

Every week we look for positive things to give us hope that the financial losses we have been experiencing are coming to an end soon.  It's a challenge.  It is the proverbial "Little boy looking for the Pony in the Manure Pile".  Optimistic but hammered by the everyday reality of gushing financial losses.

   We hear stories daily of producers giving up - either running out of cash (capital), or desire (courage).  The attrition is daunting.  There is no easy exit strategy.  Good sow units are being offered for sale at less than $500 per sow when you take off land value.  We are in an industry where not only have there been cash losses of $5 billion over the last 2 years, but we face an infrastructure market value loss of almost equal amounts.  The truth is we are all marooned.  We stay and fight or we exit with nothing but our memories of what was once a good business.  There are few options.

 

Pork powerhouses

Last week successful farming released its annual list of pork powerhouses.  It showed a marked decrease.  The top 25 U.S. powerhouses have dropped year over year 200,899 sows.  In Canada the 5 largest two years ago had 280,395.  The same 5 companies in 2009 had decreased to 153,000.  One of the five two years ago Stomp Farms had 40,000, now they are out of business.

   The grim reality of the huge financial losses that our industry has encountered has not missed the powerhouses.  There has been no silver bullet.  From what we understand there are further reductions at some of the larger systems.  The ability to maintain cash flow is a challenge for us all.  Week upon week of $30 per head losses is draining $70 million a week from our industry.  It's not hard to do the arithmetic.  The number of sows of each powerhouse and how many hogs they should produce to come up with how bad this is.

U.S. Pork Powerhouse 2009
2009	Company Headquarters	2009	2008
1	Smithfield Foods/Smithmold,VA.	922,251	1,020,000
2	Triumph Foods/St. Joseph, MO.	371,500	396,000
3	Seaboard Foods/Shawnee Mission,KS.	213,800	213,800
4	Iowa Select Farms/Iowa Falls,IA.	152,900	160,000
5	The Pipestone System/Pipestone, MN.	132,000	143,600
6	The Maschhoffs/Calyle, IL.	130,000	130,000
7	Prostage Farms/Clinton, NC.	125,000	140,000
8	Cargill/Minneapolis, MN	116,000	116,000
9	The Carthage System/Carthage, IL.	85,000	90,250
10	AVMC Management Services/Audubon,IA	77,000	82,000
11	Maxwell Foods/Goldsboro, NC.	69,000	73,000
12	Hormel Foods/Austin, MN.	54,000	54,000
13	Progressive Swine Technology/Columbus, NE.	53,200	55,200
14	Tyson Foods/Springdale, AR.	52,000	70,000
15	Country View Family Farms/Hathold, PA.	46,500	43,700
16	Nebraska Pork Partnors/Columbus, NE.	44,500	50,000
17	Wakefield Pork/Gaylord, MN.	40,500	41,000
18	Holden Farms/Northfield, MN.	40,000	40,000
19	Texas Farm/Perryton, TX	40,000	39,000
20	TriOak Foods/Oakville, IA.	35,000	35,000
21	Schwartz Farms/Sleepy Eye, MN.	30,000	30,000
22	Coharlo Farms/Clinton, NC.	29,000	31,700
23	M2P2/Aimes, IA.	27,500	30,000
24	Swine Graphica Enterprises/Webster City, IA.	24,100	24,100
25	Coastal Plains Pork/Murrells, NC.	24,000	27,000
	TOTAL  Loans of 200,899 sows	2,934,251	3,135,150
2009	Western Canada Pork Powerhouses	2009	2008
1	Hytek, LaBroquerie, MB	58,000	60,000
2	Big Sky Farms, Humboldt, SK	42,000	47,800
3	Maple Leaf Agri - Farms, Landmark, MB	35,000	44,000
4	The Puratone Corporation, Niverville, MB	28,000	40,000
5	Sunterra Farms, LeRoy, SK.	13,000	13,000
	TOTAL Loans of 28,800 sows	176,000	204,800

 

230,000 fewer sows - Canada - U.S.A. in the pork powerhouses year over year will definitely decrease future hog supply.

 

Pork Farm to Retail

   U.S.A. Pork farm to retail price spread was $2.302 pounds, in August 2008 it was $1.939 pounds.  Thank you very much Mr. Retailer for filling your pockets while farmers are losing their farms.  Someone asked us last week why are retailers taking such a margin?  Our answer: "Because they can."  The one positive is pork is moving and not being put in storage despite retail pork prices that are far from discounted.  This indicates descent retail demand.  As pork supply diminishes, this should be positive for hog prices.

Feeder Pigs and Early Weans

   The cash prices for early weans and feeder pigs have come off the floor last week.  They increased, according to the U.S.D.A. report $4 - $7 each.  Seasonality is working in favor of continued price appreciation.  We expect cash early - weans to exceed $30 within four weeks.  Lower feed prices, stronger lean hog futures and the reality of more finisher barns then there are pigs all play into price appreciation.

 

Canada

• Cull sow shipments to the U.S.A. from Canada since the first of July are 37,000 higher than a year ago. This is a reflection of liquidation ongoing in Canada.
• Small pig shipments from Canada the last 8 weeks have averaged 90,000 per week. The week of August 22 at 85,000 was the smallest week since the winter of 2003. In 2008, Canada averaged 141,000 per week the decline to 90,000 the last weeks is a result of liquidation and some pigs staying in Canada. The end result is there are fewer pigs for U.S. finisher barns and packers. These numbers are fortunately quite accurate as they are based on U.S.A. government import numbers. Fewer pigs will be price enhancing.

Summary

   *This coming week we will be visiting Mexico and attending the Mexican Pork Exposition.  We will give a report next week.

   *This Friday the U.S.D.A. will release the September 1^st Hogs and Pigs Report.  Let's hope it shows significant herd liquidation. 

 

Genesus Genetics Announces its First Genetics Multiplier in Mexico

September 16th 2009: Genesus Genetics is pleased to announce its first genetic multiplier in Mexico.  DP Farm is a new 2400 sow facility on an isolated plateau in central Mexico.

 This state of the art biosecure operation will produce Genesus gilts for existing and new customers in Mexico.  Jim Long, President - CEO Genesus Inc "We have been sending breeding stock to Mexico for 15 years.  Current transportation costs and logistic issues made it necessary for us to find a Mexican location and facility that would meet Genesus' commitment of delivering top quality, healthy swine genetics to our customers. Mexican swine producers have been financially pressured, like many in other countries by H1N1, high feed prices, and financial losses. 

Genesus believes that the future success in swine production is the adaption of technology that maximizes productivity and producer returns.  Genesus' Mexican genetic production is our commitment and belief in the future of Mexico's swine industry."

 

 

For further information: 

Jim Long

President, Genesus Genetics