Jim Long, President-CEO, Genesus Inc.
U.S. Hog Market Disappoints
There’s no doubt the current U.S. cash hog situation is a disappointment.
- The Lean hog price of 79₵ lb. for 53-54% hogs is the same as a year ago. We expected much stronger prices at this time.
- Since the dropping of Mexico’s tariffs on U.S. pork all we have seen is a continued decline in U.S. cash hog prices.
- Far different than the prediction that NPPC and their ag-economist calculated of a $12 per head benefit to eliminating Mexican Pork Tariff.
- To have higher hog prices in our opinion we will need U.S.D.A. pork cut-outs to go higher. They have been in the low 80’s for several weeks.
- Packers Gross Margins have been far from good recently. This despite daily hog marketing’s close to packer capacity.
- To see higher cash hog prices we need to see U.S.D.A pork cut-outs improve. That means we need to see a combination of greater demand and/or lower pork supply.
Year to date the temperatures in most of the hog producing areas have been cool. Consequently hogs have been growing well and there has been no heat to slow down growth rates and lower carcass weights.
The weather has been cool. Not exactly great barbecue weather. This has not been supportive to demand.
Demand China has not aggressively come into global import markets yet. We still expect this to happen. Our expectation this will occur to a greater extent in the last half of the year.
Why? China hog supply will decline further due to ongoing herd liquidations (last month down 700,000). Many Chinese expect their hog prices to appreciate 50%. From current level of about $1.00 U.S. liveweight a lb. to close to $1.50 lb. (i.e. up $100-$125 per head).
Chinese are natural capitalists. They will figure how to buy pork and make it a profit and this in itself will drive global pork demand.
A reflection of Chinese expected need of pork is ongoing discussions between Russia-China re pork.
Currently due to African Swine Fever (ASF) in Russia, China will not import Russia pork. The ongoing discussions on importing pork from Russia despite ASF is an obvious sign of China’s pork needs.
“Beyond Meat” a pretend meat just did an IPO. It has been quite successful. Its share price tripled the first day of trading. This reflects the expectation of the perceived future demand of pretend meat products.
Large meat companies – Maple Leaf Foods and Tyson Foods are also developing pretend meat products. Their responsibility is to their shareholders not the greater meat industry.
We see the pretend meat industry as a threat to the pork and meat industry.
It’s a disruptive event. We would suggest our industry should get legislation that prevents the pretend meat industry from using meat terminology like sausage, burger, steak etc. from being used in anything but a true meat product. It can be pushed federally and state wide.
In Europe legislation has already been adopted to protect the integrity of meat industry terms- pretend meat companies are banned from using real meat terms.
If the pretend meat companies want to produce a new product, so be it, but don’t use confusing, misleading terms, create their own.
This post was written by Genesus