Pork Commentary

 

Jim Long, President-CEO, Genesus Inc.

July 27th, 2020

 

U.S. Sow Slaughter Continues to Accelerate

 

June U.S. Sow Slaughter was 294,500, up from last year's 241,900 - that’s 52,000 more sows gone to market in June compared to a year ago. Year to date U.S. sow slaughter (Jan-June) is 1,678,600, up from last year's 1,498,810. - year to date 180,000 more. For those who think the sow number this year is being inflated by overweight market hogs, we offer this year average slaughter weight, Jan-June 304 lbs, last year’s same time frame 304 lbs.

 

From Dec 1 to June 1 the USDA breeding inventory showed a decline of 152,000 sows. We believe that what is ongoing is a further reduction of the sow herd. The financial losses of many producers are unprecedented. Current losses of $40 per head on top of already many months of losses are accelerating herd decreases.

 

Compound that we are in summer when mortality increases due to high temperatures, while gilt replacements have slowed. All these factors lead us to believe sow herd is decreasing significantly at this time. Fewer sows mean fewer pigs.

 

U.S. hog slaughter last week was 2,589,000, up from last year's 2,359,000. Packers have good margins to motivate them to keep slaughter numbers up. Saturday was 231,000 head, a year ago 12,000. We need to work into whatever hogs are backed up and it appears it's happening.

 

U.S. pork cut-outs held last week closing Friday at $70.53. This despite more hogs being harvested.

 

U.S. pork in cold storage at the end of June was 464,373 compared to 619,454 a year ago. A huge difference. Despite record low seasonal prices, Pork has not gone into storage. Good news if we get any momentum in the market cold storage levels will not slow down a rebound.

 

Rabobank as the world’s largest agriculture lender has a good handle on what’s going on in the global swine market. Last week they reported that they expect Global Pork Production to decline 8%. “The biggest year-over-year declines are expected in China (-17%), the Philippines (-9%) and Vietnam (-8-11%).”

 

We would agree with these observations. Genesus has Genetic sales and production in each of these three countries and the decline in production from ASF related issues is significant. If anything, we question if both Vietnam and the Philippines might have even greater declines they observe.

 

 Rabobank reports “In the United States, live hog prices have dropped 41% year-over-year in early July, as meatpackers continue to work through a backlog of animals that could take months to process. Analysts said market prices for hogs are well below breakeven and could cause some producers to trim their herds or exit the business.”

 

We note 52,000 more sows in June (180,000+ YTD) to slaughter than a year ago would indicate “trimming”.

 

Seems bizarre to us with projected 8% less pork in the world, why the North American Industry is sucking air. Even more bizarre that the 8% decline includes a 1.5% increase in the United States. At the rate things are going with the rapid decline of the breeding herd accompanied by euthanized pigs there will be less U.S. pork in the not so distant future.

 

“The great thing about rock bottom is that you cannot sink deeper”

- Winston Churchill

 

genesus.com