Pork Commentary

 

Jim Long, President-CEO, Genesus Inc.

October 12th, 2021

 

Pork – Observations In Not Any Particular Order

 

No Chicken

 

While we were in Spain it was interesting that there was virtually no chicken on restaurant menus. Seems to us a good plan.

 

U.S. Pork exports to Mexico continue at record pace.

 

Year to date 487,571 mt vs. 378,716 mt last year. The pace really accelerated in the second quarter. A week ago, 14,550 mt. Our Farmer Arithmetic says 14,550 is equal to 170,000 hogs. The Mexican market has really supported U.S. prices as it can take carcass parts that Packers in the U.S. don’t have labor to cut as they would want.

 

Mortality

 

A report by MetaFarms, a major U.S. swine data system, indicates that Finishing mortality in their database of 10 million hogs (5,951 closeouts) has in the first eight months of 2021 been the highest mortality in the last ten years at 5.15%. Worse than even in the PED year of 2014 of 4.66%. We expect that PRRS 144, further use of weak genetics, and continued lack of labor is leading to less stockmanship with all points contributing to the record finishing mortality.

 

Of note the MetaFarms average performance of finishing with 6% plus mortality in 2021 48.4 lbs. to 282.73 lbs., ADG 1.84 lbs., FCR 2.97, ADFI 5.48 lbs., Full value 88%. The proceeding numbers would be indicative of millions of hogs, finished to date in 2021, and shows the ongoing challenges in our industry.

 

Sow Mortality at record levels, finishing mortality at record levels. Dead sows don’t produce pigs and dead finishers cost with no revenue. Lots of opportunities to make improvements.

 

China’s swine industry is in free fall financially.

 

Most estimates put the cost of production farrow to finish at 21 RMB kg ($1.51 U.S. lb.). Hog Market in some areas is 11 RMB (88¢ U.S lb.). Farmer Arithmetic - a loss of 71¢ lb. times 260 lbs. market hog = $184 U.S. per head loss. Even if this is higher than reality, it’s not hard to believe losses above $100 per head everywhere. We don’t believe there has ever been a market that’s had such high losses.

 

All indications are there is massive liquidation underway. Why wouldn’t there be? Imagine our industry losing $100 plus per head? We were told this past week that China liquidated over 4 million sows in September. Who knows if is right but not hard to imagine. In some areas of China, the sow cull price is 2 RMB kg (less than 20¢ lb) while market hogs 80¢ lb. This sow price is a reflection of big supply. The sow liquidation in China is putting huge amounts of Pork on the market. A China observer joked this past week “Pork is cheaper than cabbage”. The old adage, the higher the high the lower the low, is manifested in China. Record profits begot record losses. The longer the liquidation continues in China, the less Pork in the future. When price recovers expect strong prices and a large increase in Pork imports. There is the hog cycle, then there is China’s Super Hog Cycle,, Huge Highs - Huge Lows.

 

Denmark

 

When we were at Figan show in Spain we heard about the problems the CEO of Danbred was having. Below are reports from the Danish newspaper (links) describing the issue (in Danish Language).

 

Danbred Case Explained (English)

 

CEO of Danbred Accused of Sexual Harassment (Danish)

Board of Directors Kicked Out (Danish)

New Chairman of the Board (Danish)

Director for L&F resigns (Danish)

CEO Fired Did Not Resign (Danish)

New CEO in Danbred (Danish)

 

Summary

 

·         Danbred CEO accused of sexual harassment. 3 women were involved; they were offered financial compensation. One woman was paid 700,000 DKK.

·         The Board of Directors apologized to the women and let the CEO continue on the job with a warning, then newspaper articles came out describing the situation.

·         That day CEO was fired.

·         3 days later Board of Directors all left.

·         Now new Board of Directors was appointed and new CEO was appointed with having to replace several employees that had quit.

 

Newspaper article reports Danish experts see latest episode as very serious for Danbred – to lose CEO and entire Board of Directors all in same week – it will be huge challenge to re-establish confidence in Danbred.

 

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