Jim Long Pork Commentary – July 30, 2019

U.S. Hog Price Makes Strong Move

Last week the average 53-54% lean market hog in USA went from 71.79 to 77.96¢ lb. A 6¢ lb. increase or $12.00 per head. Certainly, going in the right direction. We expect to see the average price in the 80’s by the end of this week. Nice to see the industry could use making some money.

At the end of last week, the average of the next twelve months lean hog futures are 84¢ lb. A profitable scenario.

China Hog Price Evolution
Week of
Jan 30, 2019	12.23 CNY kg	82¢ U.S. liveweight lb.
May 22, 2019	14.96 CNY kg	$1.00 U.S. liveweight lb.
July 17, 2019	17.84 CNY kg	$1.20 U.S. liveweight lb.
July 29, 2019	19.06 CNY kg	$1.28 U.S. liveweight lb.

It’s not hard to see the increase in China hog prices. A 250 lb. hog is now almost $120 per head higher than the end of January. Since the end of May $70 head higher. We expect the China hog price to continue to go up over the coming weeks. $1.50 U.S. a lb. is not out of the question. The $120 per head increase is obviously an indication of lower pork supply.

Other Observations

Got some push back on our concern in last week’s commentary that Gene Editing – GMO could hurt pork demand. Some passionate readers that don’t agree. They believe technology will trump consumer reluctance. Maybe but we wouldn’t bet the farm on it. Just give our business to plant-based meat products?
More Chlamydia in gilt stories last week. Now hearing of gilts not only not breeding but being blind. Some experts speculate it could be more than just Chlamydia, it appears there is little consensus on what solution other then maybe de-pop. Some are speculating could be genetic. Whatever the case getting blind gilts that don’t come into heat is a big problem. Not exactly the recipe for high production.
Wonder how China hog price can go. June 10, 2016 China Average Price was 20.80 CNY/kg. That is $1.40 U.S. liveweight a lb. Obviously China consumers have paid high prices for pork before.
We were in China’s Sichuan province in Mid-May at that time the province had seen little ASF. Since then the province that produced 67 million pigs in 2018 (half of US production) had hell break loose. Some estimated the pig inventory of Sichuan has declined 70% since May. The 19.06 CNY/kg ($1.28 U.S. lb.) national price has much upside.
U.S. Gross Packer Margins to the positive are next to non-existent. Business cycle is alive and well. Packers have gone from the best margins in their history to not having any fun. High Profits expanded packer capacity beyond hog supply. Packer Margin decrease has led to more money for producers.
Beyond Meats (fake meats) announced a loss in there second quarter of $9.4 million on sales of $67.3 million. Beyond Meats yesterday also saw its shares drop from last Friday’s stock value of $239.71 to $192.61 a drop of over 20%. Is Beyond Meats the bitcoin (fake money) of the fake meat industry? Also, yesterday some of the executives of Beyond Meat announced they were selling a significant number of shares? Why?
To put in context despite all the media hype, Beyond Meats is weanie compared to Tyson Foods who did approximately $10 billion sales a quarter. Beyond Meats is of 1% in revenue of Tyson. Also, Tyson makes over $750 million a quarter while Beyond loses money. Time will tell what shareholders selling out at Beyond Meats sure indicates there great belief in the great Beyond. Below are some real good perspectives on Fake Meat. Send them to everyone you know.

wellness.consumerfreedom.com
C hemicals Lurking in Plant Based Meats

Summary

Cash Hog Market showing strength. Lean Hog Futures showing positive gains. China Hog Market highest price since 2016. We expect to see continued China price appreciation. Won’t be surprised to see highest hog price globally ever before dust settles.

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