Pork Commentary

Jim Long President – CEO Genesus Inc.

June 2, 2014

On The Way to World Pork Expo

As we write, we are on our annual pilgrimage to the World Pork Expo in Des Moines Iowa. Never missed it and we hope we never will! It’s funny what a year can bring. Last year about this time corn was about $2.00 a bushel higher and market hogs about 20₵ per pound lower. In our simple world, that’s $20 lower cost per hog for corn and at least $40 more for a hog. $60 total to the better year over year. Our industry needed the margin increase. A year ago US cash early weans were $27.00 each compared to about $70 currently. A world in flux, last fall we had expected and predicted $1.10 lean hogs this summer, we never saw $1.25 coming and to some extent are not sure it is real other than you can book them, so they are. A year ago at the Expo the first reports of PED were being circulated. Since then all hell has broken loose. Probably seven – nine million dead pigs from PED over the last year. Pushing hog prices to record levels as reality and fear of pork supply decreases has enhanced pork demand. We will be at Expo at the Genesus tent. Last Expo there was Genetiporc, Danbred, and Choice Genetics in the swine genetic business exhibiting at the Expo. A year later Genetiporc bought and gone, Danbred franchise quit and morphed into DNA, and Choice Genetics is in bankruptcy, not exactly a testament to prosperity. It’s like musical chairs, with fewer chairs all the time as consolidation continues. Genesus is the only North American owned Global Swine Genetic Company left. All the rest have corporate ownership in Europe or Asia. There used to be at the Expo Dekalb, Mossanto, Genetiporc, Farmers Hybrid, etc. Major North American owned genetic companies. Now they are gone. Like all businesses you adapt or die. Your home address is no guarantee of survival.

Hillshire

It appears two feed giants Pilgrim’s Pride and Tyson are in major bidding war for Hillshire Farms Food Company. Hillshire brands include Jimmy Dean Sausage. The two bidders have offered multi-billion dollar packages. More consolidation is coming in all sectors of the swine industry. Feed, packing, production, genetics, equipment, etc. This leads to fewer and fewer exhibitors at the World Pork Expo every year. The ones that move the fastest have the capital and have strong products seem to gobble up the weaker players of our industry. Every year fewer suppliers and producers.

Quality Meats

Quality Meats of Toronto Canada, a packer of about 30,000 head per week as gone into bankruptcy. Now there are reports equipment and assets being sold. There is no chance of recovery if the reports are correct. Plant will be dismantled. Got to love their story that PED did them in. As if?! Canada has had only a handful of PED cases, only a small amount of pigs have died in Canada from PED. Sure hog prices surged but so did pork prices. As if Pilgrim Pride and Tyson are looking at Hillshire Farms if there is no margin in the pork processing business? PED is an excuse for management that didn’t evolve and adapt. What is real sweet is the almost $10 million that farmers didn’t get paid for hogs. As if the pork wasn’t sold. Where did the money go? Having strong Packers who pay their bills is worth a lot to producers.