Pork Commentary, July 31st
Jim Long President-CEO Genesus Inc.
European Road Trip
This past week we met producers from England, Netherlands and Germany. Our Observations:
Production holding steady at about 400,000 sows. About 40% of swine production is outdoor. That means field farrowing, just like America 30-35 years ago. Current Swine prices at £1.65 British pounds a carcass kilo ($1.00 U.S carcass a lb.), are record highs. Approximately 50% of British pork is imported from other European countries. British Pig Farms are making good money currently.
Indoor production has many rules, sows need to have the ability to wander around, meaning no fixed gestation crates. The weather is moderate (not cold, not hot) so many sows and pigs are in non-power ventilated buildings. Lots of straw in indoor buildings.
British producers are benefiting from a devaluation of the British Pound compared to the Euro since the Brexit vote by the British people to leave the EU. The devaluation has been over 30% and is making British pork more competitive relative to European pork.
Big question in Britain is what farm policy and imports of pork will be after Brexit. We were asked how did we see a potential free trade agreement with America affecting British Pork. Last week a major news story in Britain was U.S trade discussion and the fact the U.S uses chlorine in Chicken processing. Have to say didn’t even know chlorine was used; obviously the 310 million U.S consumers don’t see it as a news item.
British current price early weans £44.61 pounds each ($60 U.S), 60 lb. feeder pigs at £60 pounds ($80 U.S).There is no doubt America has a lower cost of production then either Britain or anywhere in Europe. We expect a big fight by British farmers to protect their market from imported Pork, Chicken etc. from America. If you farmed there you would too.
Profits are good. About €30 Euros per head ($36 U.S) As one producer said making good money but not optimistic for the future. The reason for the lack of optimism is new animal welfare and environmental rules.
In the Netherlands the government just put in place legislation that will put in place by 2022 air cleaning legislation for livestock barns. The cost approximately €500 Euros per sow or $600 U.S per sow. We are told banks are telling producers they won’t be making loans for this capital investment. Netherlands used to have about 1.2 million sows, now down to 900,000; producers tell us that this legislation will drive more producers out of the business.We were told in the Netherlands existing sow units with nurseries including inventory are selling (if you can find a buyer) €1,000 Euros per sow ($1,200 U.S). Recently there have been several swine farm fires.The cost of new sow units (no nursery) under new EU guidelines is €2,500 Euro’s per sow ($3,000 U.S), (no livestock or land).
New EU animal welfare guidelines specify that gestation crate for breeding will be same width as sow height. Gestation sows must have 6 sq. meters (60 sq. feet). Weaning age guidelines 28 days with minimum 21 day with veterinary permission. Farrowing areas will be 6 sq. meters (60 sq. feet).
Both German and Dutch producers told us they expect the new regulations will decrease existing space for sows barn capacity about 25%. They feel this will do two things:
1. Drive producers out of business
2. Cut sow herd capacity and decrease production.
All the above environmental and welfare costs are why the EU producers though making good money are not overly optimistic of the future. They know capacity is going down and costs going up. All these rules will make Europe’s pork production less competitive in global market. Genesus does business in other countries i.e. Russia, China. None of the above rules are being contemplated in either country!
There are ramifications of environmental and animal welfare laws. They increase cost of production but no one is sure any of it increases pork demand. Livestock production is under siege by special interests whether it’s environmental, vegetarians, animal welfare etc. We need to fight every step; capitulation appears to be just a domino effect. We get no respite with retreat. Compromise is not possible with lunatics.
Our tour is to visit Genesus customers. We are finding our Genetic program delivering excellent results. English and European producers telling us from what they used before that Genesus is easier pigs to manage, more pigs to sell, better temperament, lower gestation feed cost per pig, packer acceptance, better growth rate, better feet and legs, better tasting pork. Gratifying when we came to Europe a few years ago, we were told that there was no market for Durocs and no need for another maternal line. We have found quite the opposite. We believe there are no niche markets that are generally relevant. All producers everywhere are driven for genetics by the same production criteria and economic concerns. The tour continues as we head to France.
This post was written by Genesus