Pork Commentary

 

Jim Long President-CEO Genesus Inc.

August 12th, 2019

 

Topsy Turvy Week

 

Last week was another topsy turvy week for the Swine Industry. Our observations.

 

Lean hogs average

 

Last Thursday 53-54% U.S. lean hogs averaged 82.84˘ lb. The week of July 20th they were 71˘ lb. a year ago 60.02˘ lb. For some reason the hog market seems disappointed but if you compare to a year ago it’s $45 per head higher. That’s a big difference.

 

Barrow + Gilt weights report

 

Iowa-Minnesota Barrow + Gilt weights report last week indicated an average of 276.4 lbs. A year ago same time 278.4 lbs. This tells us hogs are more current then a year ago.

 

Lean hog futures

 

Last week Lean hog futures gained back some of their collapse from the previous week. The market had overreacted to news that China was not going to buy U.S. ag products. Reality is U.S. pork is still going to China with contracts of over 100 million tonnes in place yet to fill (3-4 months at current export level). After that anyone’s guess what could happen.

 

USDA pork cut-outs

 

On Friday USDA pork cut-outs closed at 90.44˘ lb.One of the highest prices of this year. Pork cut-outs going up means demand is strong relative to supply. It absolutely baffles us the lunacy of the lean hog future collapse in the face of pork cut-outs increasing.

 

Weans and feeder pigs

 

Last week early weans and feeder pig prices cratered in a reaction to the big drop in lean futures the previous week. Early weans averaged $20 and 40 lb. feeder pigs $35. Of note we sold feeder pigs last week in Spain for 71 Euros (20kg -45lb) or $80 U.S. It appears location does matter. We expect the U.S. small pig market will recover over the next few weeks.

 

U.S. pork is still going to China.

 

We reiterate U.S. pork is still going to China. U.S. pork cut-outs over 90˘ lb. 53-54% lean hogs are bringing $45 more a head then a year ago. U.S. pork Exports in June were +9.3% over last June. All is not bad.

 

Few if any new sow barns being built in U.S.

 

Our observation is few if any new sow barns being built in U.S. We think this reflects market uncertainty and general lack of profits.

 

Price of corn in China

 

As of August 8, the price of corn in China was 2008/yuan/ton ($284 U.S. ton or $7.95 U.S. bushel) the China national average hog price was 27.08/yuan/kg ($3.12 U.S. kg or $1.42 U.S. liveweight a lb). This has led to a pig grain ratio of about 11.00 to 1. According to China government policy when the pig to grain ratio is higher than 9.5 to 1, the China National Development and Reform Commission takes the lead in consultation with other ministries to increase the sales of frozen pork reserve and other measures to prevent price fluctuations.

 

Pork and other meats import to China

 

The $1.42 U.S. prices last week is the highest yet since the ASF break a year ago. The price was $1.00 a lb. the first of June 80˘ lb. in February. The highest price in China last week was in Guangdong province at 27.27 yuan/kg ($1.74 U.S. lb. liveweight) a reflection of the cratering of pork supply. This will be increasing pressure for China to import more pork and other meats. China in first half of 2019 imported 819,000 tons of pork an increase of 26.4% over same time period 2018. We expect more pork to be imported the second half of 2019 and even more in 2020 pushing global pork prices higher.

 

The push to better tasting pork

 

The push to better tasting pork we are seeing in the marketplace. Packers are getting requests from retailers, food service and exporters for pork that has more taste-flavour. That comes from red pork with more marbling, higher pH, and tenderness. The push to marbling of over 3 score we expect to continue. Duroc will be the breed of choice. The reality is all Durocs are not the same, just like all Yorkshires are not the same or Landraces are not the same. Some companies call Boars Durocs and they aren’t even red! Fortunately, the U.S. National Swine Registry had the foresight to register the word Duroc in the U.S. meat case. Only registered and true Durocs have the legal right to use the Duroc trademark in the meat case.  

 

genesus.com