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0 Comments | May 15, 2012

Jim Long Pork Commentary, U.S Pork Industry: Thank Goodness for Exports, May 15th 2012

By Jim Long, President and CEO Genesus Genetics

The results are in.  U.S Pork Exports in the first quarter of 2012 were 8% higher in volume (598,058 metric tons) and 20% higher in value than last year.  A record high for the first quarter.

U.S Pork Exports equate to 27.8% of total U.S. production.  Mexico, Japan, China, Hong Kong, Russia, South and Central America, South Korea and Canada were the major markets with Mexico leading in volume and Japan in value.

Thank goodness for these exports with U.S. hog prices languishing in the 70’s learn it doesn’t take much imagination to realize how miserable prices would be without the prospect of increased pork exports.  Makes us remember the packer executive who said and we paraphrase “Pork exports are like a drug, our industry has become addicted and dependent”.

In our opinion exports will stay strong through the summer as domestic swine prices in all the major importing countries have significantly higher prices then U.S. and Canada have currently.  For example China, though it’s market prices has declined some, they still are $80 –$100 per head higher then U.S. hog prices. (We will report more on China in next week’s commentary.  Currently we are in Beijing China and will be visiting several large Chinese swine production systems).

Our premise on exports is that the best indicator of where pork demand will be is looking at the prices in the importing countries.  We have little faith in the production statistics in many countries.  We have been to all these countries and just by the nature of the organization; we have little confidence that government statistics are accurate.  Hog prices are a true reflection of supply and demand.  When China’s hog prices are near $1.00/lb live weight it tells us supply is low and demand is good, especially when you consider demand is driven by disposable incomes 20% of the U.S. per capita.

CORN

The USDA last week reported that they expect the U.S. will harvest a record corn crop of 14.790 billion bushels up 2,432 billion bushels from last year.  An aggressive projection and much has to happen correct in the growing season to have it come to fruit.

The USDA is projecting around 166 bushels of corn per acre, a record level.  It’s amazing how the yield capacity of the corn crop has increased; 25 years ago the 10 year average yield per acre was 100 bushels.  That’s what you call a productivity increase.  Last summer we heard an executive from Monsanto speak and he talked about the global capacity of corn production, in that many countries are not using the technology (equipment, hybrid, corn, fertilizer, etc.) available.   His premise was as countries adopt tried and true technology, the jump in global corn production would be significant. The high corn prices we have now are this development.

The larger projected corn crop has affected prices.  December corn closed Friday at $5.05 a bushel, the lowest price in December 2012 yet.  We expect $5.00 is a magic number and could be hard to go under as livestock producers will use as a trigger point to buy corn.

OTHER STUFF

 

We are reading Genus Financial statements (owners of PIC), they are a public company on the London stock exchange, and they had a good year.  We found it interesting that the 39 page report we could not see the name PIC, Porcine was the name used.  We find it interesting that PIC was not referred to.  Wonder if soon we will see rebranding to Genus.  We would support a name change, if anybody was asking!

In regards to the hog market, we sense a real lack of optimism.  Hog prices in the 70’s are lower than we had almost expected at this time.  The industry is not making money, usually we see a seasonal upturn at this time but we haven’t seen it yet.  Hog weights are running a whopping 5lbs heavier than a year ago (271.7 – 276.7), much of it to do with great weather and better grains than a year ago but still 5lbs does not indicate a real current inventory.  We expect this hog market price shock (despite record exports); will put many sow expansion plans on hold.  We could still see a seasonal price rally, but it better get started soon.

Another Genesus Nucleus in China

Sichuan Giastar Group, a large feed manufacturer, breeding stock producer,
and integrator, was recently in Manitoba to purchase a nucleus herd from
Genesus. Genesus will offer ongoing technical support to Giastar, as they
work towards their goal of one million pigs produced. The Genesus nucleus
will replace a PIC unit and drive 7000 sows of GGP and GP production.

Pictured are Left to right – Lambert Houwen, GM Genesus, Xiang Gui You – Chief Veterinarian, Chendu Giastar Swine Husbandry Co. Ltd. Huang Li Hua – General Manager, Muyuan Stock Breeding Science and Technology Ltd. Tang Jie (Frank) – Vice General Manager, Chendu Giastar and Mike Van Schepdael VP Genesus.