Canadian Pork Producers:

[mikey]

Tuesday, August 31, 2010
Increased Alley Width in Swine Barns Recommended
CANADA - A researcher with the Prairie Swine Centre is recommending increasing the alley width in modern swine barns to reduce stress and make the loading of near market pigs faster and easier, writes Bruce Cochrane.





Farm-Scape is sponsored by
Manitoba Pork Council and Sask Pork

FarmScape is a Wonderworks Canada production and is distributed courtesy of Manitoba Pork Council
and Sask Pork. 
The Prairie Swine Centre in Saskatoon has completed a study which examined the impact of various alley widths when moving different sized groups of pigs on stress and on the amount of time required to move the animals.

Dr Harold Gonyou, a research scientist in animal behavior, says the standard 60 centimetre alley width, the width of two pigs 10 to 15 years ago when producers were marketing slightly smaller pigs, is no longer sufficient.

Dr Harold Gonyou-Prairie Swine Centre
Now 60 centimetres isn't wide enough for two pigs to walk down side by side.

They tend to have difficulty doing that so it becomes difficult to handle them in that narrow of a space so we looked at some wider alleys to see if they would move better.

We found that 90 centimetres was a good alley width.

We also went as high as 2.4 metres which is quite a wide alley but we were also looking at moving groups of up to 20 pigs in a group.

We looked at group size, just four pigs which is the standard recommendation.

It's recommended that, if you're moving pigs to load onto a truck, that you should move them in groups of four to six.

We looked at four, we looked at eight, 12 and 20 and looking at these wider alleys to see if they would still move fairly well in those alleys.

90 centimetres actually worked quite well with all the group sizes that we were working with.

You could move 20 pigs fairly effectively in an alley width of 90 centimetres.

You did have some trouble with blocking etcetera with the larger groups.

If you went to large groups such as 20 pigs moving at once we would probably recommend that you build for 1.2 metres wide in your alleyway so that they would continue to move well.

Dr Gonyou suggests, to reduce stress and speed up the movement of pigs we have to increase the recommendation from 60 centimetres to 90 centimetres or more.

[mikey]

Stability in Canadian Swine Inventory
CANADA - The Saskatchewan Pork Development Board reports, following an across the board decline in hog numbers since this time last year, western Canada's swine population has started to stabilise, according to Bruce Cochrane.





Farm-Scape is sponsored by
Manitoba Pork Council and Sask Pork

FarmScape is a Wonderworks Canada production and is distributed courtesy of Manitoba Pork Council
and Sask Pork. 
The latest figures from Statistics Canada reveal that, as of 1 July, the total Canadian pig inventory fell by 2.3 per cent while the breeding stock inventory fell by 4.8 per cent since this time last year but since 1 April the breeding herd has increased slightly.

Saskatchewan Pork Development Board industry and policy analyst Mark Ferguson says while the year over year numbers have declined, things appear to have stabilized since the last quarter.

Mark Ferguson-Saskatchewan Pork Development Board
I think what the numbers are showing is that it's clear there's going to be fewer animals available for slaughter.

This is leading to tighter supplies of hogs which in turn leads to tighter supplies of meat and hopefully in the end this is going to translate into higher prices for both meat and hogs and I think it is translating into higher prices for meat and hogs and a situation where both farmers and packers can be profitable.

As of 30 July the stocks of pork in cold storage are at their lowest level since 2004 and they're down five percent since last month so the amount of pork we have in cold storage continues to come down.

Also the cutout values which attempt to estimate the meat value of the carcass have also hit record highs over the past couple of weeks.

If you convert that to Canadian dollars and kilograms the value of a carcass is well over 200 dollars per 100 kilograms so the shorter supplies of hogs and meat are definitely having an impact on the market and it's translated into good hog pricing.

Mr Ferguson says, with the index 100 hog price running at about 150 dollars per 100 kilograms most producers would be above their cost of production.

 

[mikey]

Pork Commentary: Eastern Europe Road Trip Week 2
GLOBAL - "This past week we continued our tour of Eastern Europe ending our trip in Russia and then travelling to the Czech Republic, Austria, and then to Ukraine," writes Jim Long in this week's Pork Commentary.

Jim Long is President &
CEO of Genesus Genetics.
Our Observations
The drought in Russia is for real. We saw thousands of acres (hectares) of crop land decimated by high temperatures and minimal rainfall.


In the entire country of Russia the wheat crop is projected to be down 30 – 35 per cent. Wheat is Russia’s number one crop. The effect of higher wheat prices is not only pushing bread prices higher but also feed prices. Last fall Russian wheat was US $2.50 per bushel, now it is depending on the region wheat is between US $4 - $5.50 per bushel. Wheat is the number one staple in Russia pig feeds. We expect the resulting higher cost of production will slow net Russian swine herd expansion. Of course a Russia hog price at almost $300 per head softens the economic blow.


When we travelled to the Czech Republic and Austria we immediately saw the relative small scale of farming. Fields of a few acres dot the countryside. In Russia thousands of acres in single blocks were normal. The contrast was riveting. It hit home to us the reason Russians who see scale like America are frustrated with the production practices they are being exposed to from European Union countries. Russians think big build big. Production design and training by countries who’s norm is 100 sows does not replicate real well in multiple thousand sow set ups.


In Ukraine we visited the eastern area, quite close to the Russia border. In the city of Dnepropetrovsk we learned until about twenty years ago it was a closed entry, no foreigners were allowed. For Dnepropetrovsk was the major center for Russian rocket construction and nuclear war heads. The rocket factories have evolved into other businesses over the last twenty years.


In Eastern Ukraine the crop land is quite good. 27 per cent of the World’s Black Earth is in Ukraine. Fortunately for them, the wheat harvest was completed before the drought hit hard. The company we visited harvested over 100 bushels per acre. The drought will affect sunflower and corn crops not yet harvested.


Hog prices are strong in Ukraine with market hogs bringing over $1.00 US live weight per pound. Hog production and Inventory is about 35 per cent of twenty years ago. Significant amounts of pork are imported to this country of 45 million people. 22 kg feeder pigs were costing $100 per head delivered to the farm from EU countries.


Ukraine like Russia is dotted by ruins of livestock facilities abandoned in the recent past. Most were collective farms that failed. It is hard to explain but the sight of one after another of abandoned livestock complexes is compelling.


Ukraine, like Russia has the land, grain, and internal market for increased pork production. In Ukraine, capital is harder to get than in Russia. Ukraine does not have the large exports of gas and oil to drive its economy. There is no question in our opinion that there is an excellent opportunity for swine production in Ukraine.
Summary
As I wrote last week I was travelling with my 13 year old son - 14 flights in 16 days. He started calling it the Amazing Race. We did some business – that is why we went. It was successful. Of course it is easy selling a competitive product in a demand driven market.

In the end, the most special part was seeing my 13 year old son wide eyed going through small rural villages with little apparent changes from the time of czars (except satellite dishes). We visited the Soviet Union second world museum in Kiev, this is a huge complex and very well done. It was eerie seeing the story and artifacts of a war that cost 25 million Russian people lives. It was a hard history lesson. It seems to make selling pigs kind of trivial.


Author: Jim Long, President & CEO, Genesus Genetics 

[mikey]

GM Pork a Step Closer to Dinner Tables
CANADA - Genetically engineered pigs are one step closer to becoming meat on Canadian kitchen tables with the federal government poised to declare that they do not harm the environment.



Canwest News Service has learned Environment Canada has determined that Yorkshire pigs developed at the University of Guelph are not toxic to the environment under the Canadian Environmental Protection Act. The official declaration will be made tomorrow.

The Vancouver Sun reports that this is the first regulatory hurdle to get the pigs to market, which will be a first in the country if Health Canada approves Guelph's pending application, submitted last year, seeking a government declaration that its transgenic pig is fit for human consumption.

The so-called "Enviropigs," the world's first transgenic animal created to solve an environmental problem, were created in 1999 with a snippet of mouse DNA introduced into their chromosomes.

The pigs produce low-phosphorus feces.

The Guelph scientists were able to reduce phosphorus pollution by creating a special composite gene that enables digestion of a normally unavailable form of phosphorus. This allows the pigs to produce manure that is 30 to 65 per cent lower in phosphorus than found in the manure of regular pigs — blamed for polluting surface and groundwater when raised in intensive livestock operations.

"The university has successfully satisfied the requirements to allow the line of transgenic pigs to be produced and farmed using appropriate containment procedures. So that's the step we're at right now," said Steven Liss, associate vice-president for research at the University of Guelph.

"As part of an overall goal, I think it's fair to say, yes, absolutely, the university researchers involved were very driven and passionate about addressing an important environmental problem at the same time supporting production of food stock and to bring forward a more sustainable and environmentally friendly option to do that."

Mr Liss declined to speculate how long it will take Health Canada and the Food and Drug Administration in the United States to consider the university's submissions seeking approval for human food consumption and subsequent commercialization.

"It's not only a learning process to the university, but it's also a learning process for the regulatory bodies that are, for the first time, really dealing with these novel technologies and the development and approval of transgenic animals," said Mr Liss. br>
Patricia Howard, a biotechnology and public policy expert at Simon Fraser University, doesn't think Health Canada is up to the job — nor does she think the Canadian public is ready to embrace transgenic pork on their dinner plates anytime soon.

"If you were to start talking about genetically modified pigs entering the food supply, I think eyebrows would go up. A lot of people would have a lot of questions," she said.

"I imagine most people would applaud the idea of trying to create a pig whose manure wouldn't be as serious a contaminant to the environment. However, a lot of people who have concerns about pig production will raise the question, 'Well, aren't you just trying to find another way to continue to produce pigs in these enormous confinement facilities?'"

Ms Howard added there's a bigger problem than consumer confidence.

"My own assessment of Canada's ability to assess is that Health Canada is not in the right shape to be able to do this kind of assessment. I'm not impressed at all," she said, pointing to the way genetically modified crops have been given the green light.

"Health assessments weren't done. Health Canada simply read the reports of the companies, but then they say whether they think it was adequately done," said Mr Howard.

Currently, there are no products derived from genetically engineered animals approved for food or feed use in Canada or anywhere else in the world.

In a joint statement issued Thursday to Canwest News Service, Health Canada, Environment Canada, and the Canadian Food Inspection Agency, which is charged with considering applications of genetically engineered products for use as animal feed, said all applications are "subject to a rigorous, science-based review process" before being approved for use in food or feed or for release into the environment.

And should the Enviropig "receive full regulatory approval in the future, other essential considerations such as consumer and market acceptance have to be made before deciding if commercialization should proceed."

Guelph's Enviropig research project has received funding from both industry and government, including Ontario Pork, the Ontario Ministry of Agriculture and Agriculture Canada.

In the United States, the Food and Drug Administration last year paved the way for Americans to eat genetically engineered meat and fish when the regulator ruled that transgenic animals will be considered as an "animal drug" — and held to the same requirements already existing for conventionally bred animals treated with hormones or antibiotics.

[mikey]

Pork Commentary: Brazil - PorkExpo 2010
BRAZIL - This past week we were at PorkExpo 2010 in Curitiba Brazil, writes Jim Long.

Jim Long is President &
CEO of Genesus Genetics.
Our Observations
Brazil’s hog prices are profitable with slaughter hog prices at 69¢ US a lb, and cost of production 60 ¢ US a lb. One large producer told us they were making $21 US per market hog. Brazil is one of the major pork exporting countries.


Feed prices are similar to the USA and have gone up about 20 per cent in the last two months, just like the rest of the world.


PorkExpo 2010 was a professional well organized exhibition. There was an extensive list of speakers from around the world. The exhibits were big with some companies at the top end probably burning through $200,000 US in space, exhibit, personnel, hospitality, and hotels. This is big time outlay.


At PorkExpo 2010 there was very few swine equipment companies. Taxes on imported hog equipment are around 50 per cent and then there are domestic taxes. Some industry people told us imported swine feeding equipment ends up at almost double in price when all taxes and tariffs are accounted.


The high domestic tax on equipment leads to many producers making their own gestation stalls, penning, etc...


Brazil’s producers are finding it increasingly challenging to find swine production workers. We were told that in farrow to finish operations labour costs are almost 15 per cent of the total production costs when all costs are calculated. This is very similar to North America. On a go forward basis Brazil will increasingly move to greater barn automation. The high taxes on pig equipment and technology (almost 100 per cent) makes the pay back definitely longer. This is certainly a disadvantage for Brazil’s producers.


In Brazil the highest hog prices are in October – November the complete opposite of North America which usually has the lowest yearly price in October – November. The seasonal effect of hot summer months are totally opposite in the Northern Hemisphere (United States) compared to the Southern Hemisphere (Brazil). This is a positive for prices in the world’s export market. In the next few weeks as North America’s hog supply increases seasonally Brazil is going down. The current tightness of supply in Brazil was reflected in stories we heard of hogs being marketed down to 200 pounds or 90 kg. We expect the lower hog numbers in Brazil will be price supportive in the coming weeks for not only Brazil but the rest of the world as Brazil will have less pork to export.


Brazil from what we can observe is not expanding its sow herd yet. Like North American producers they lost money for two years plus. There is lots of healing needs to be done.


For what it’s worth we observed that there were no swine barn construction companies at Pork Expo 2010.


At Agriness, a pig record keeping system gave out its awards for top producers and also averages on their system.
Agriness 2009 – 2010 July – June
311 farms 180,500 females
  AGRINESS AVERAGE AGRINESS TOP 10%
Total born litter 12.73 14.36
Born alive litter 11.73 13.23
Litters per sow per year 2.37 2.49
Pre–weaning mortality 8.68 6.43
Weaned pigs sow per year 25.42 30.85

Agriness’ average of 25.42 pigs weaned per sow reflects the intense and capable production of Brazil’s producers. The low pre weaning mortality of 8.68 per cent is significantly better than North America’s average of near 12 per cent. Many sow units in Brazil have 24 hour staffing in their farrowing rooms. This decreases stillborns and pre weaning mortality.


From a personal perspective we are quite excited about the potential for Genesus in Brazil. The record breaking genetic potential of Genesus and the production intensity in Brazil will push weaned pigs per sow over 33 in the near future. Our major competitors in Brazil are PIC and Dan bred. Other companies are there but they are not competitive.


Feed prices in Brazil like North America and the rest of the world have jumped dramatically in the last 60 days. This will slow expansion plans in the hog industry. On the crop side its spring time in Brazil (Southern Hemisphere) and with grain prices jumping higher. They expect maximum plantings to be undertaken.
Summary
Brazil is and will be a major competitor in Global Pork Markets. Their productivity, land, and grain resources combined with a can do attitude makes a formidable combination.


Author: Jim Long, President & CEO, Genesus Genetics 

[mikey]

Pork Commentary: USDA Confirms No Expansion
CANADA - This week's North American Pork Commentary from Jim Long.

Jim Long is President &
CEO of Genesus Genetics.
The USDA released the 1 September Hogs and Pigs Report last Friday. It confirmed what most rational people would have surmised – NO EXPANSION! There are fewer sows, fewer market hogs, fewer sows farrowing, and a smaller pig crop. The relentless financial losses that producers had over thirty months have not been replenished by four months of profits. Only the Ag – economists who never owned a pig, but are experts on the market have been predicting expansion. News flash – Wrong Again. The same Ag – economists who predicted summer markets of 68 cents lean last January (out by up to $40 per hog), were the same wizards saw expansion. Have any of them ever talked to a real producer on banks general attitude on swine? There will be no expansion without bank support. Right or wrong bank support is next to non - existent. Why would there be if sow farms are valued currently a fraction of what they cost to build. The only interest of anyone to buy one is at around 20 cents on the dollar. Sow barns, are a lot of work – staffing, pig health concerns, proper size of the facility, etc... These all play into the no expansion scenario.

Until sow units that sit empty start to be bought or refilled there will be no expansion. New sow units? Not until next year, but only if feed prices allow a profit margin. In the meantime small pigs will bring strong prices.

USDA Hogs and Pigs Report
1 September 2010
- 2009 2010 Per cent of 2009
KEPT FOR BREEDING 5875 5770 97
MARKET 60842 59221 97
PIG CROP JUNE – AUGUST 28718 28507 -
SOWS FARROWING JUNE – AUGUST 2959 2905 -
PROJECTION September - November 2915 2881 -

The reality of the Hogs and Pigs Report is that the production base in place on September 1st means that it will be biologically impossible to increase production before the end of next summer. Throw in $5.00 a bushel corn combined with bankers sentiments we are not aware of any scenario that will not have lean hogs above 80 cents for the next year. 90 cents lean plus next summer is a strong possibility. What we see globally is high feed prices, tight credit, and no sow herd expansion. Next year we see a finite pork supply with an ongoing global clamor for meat protein. All triggers for continuing strong prices.

We have been criticized in the past for being “Jim Long Optimistic” by our economist friends. Maybe we are but when we see the reality of production and demand in the countries we do business with and travel to – Brazil, Mexico, Russia, China, USA, Canada, etc… we see nothing but strong prices for the next twelve months.

This coming week we will be in Mexico. We will report our Market Observations.


Author: Jim Long, President & CEO, Genesus Genetics 

[mikey]

Pork Product Exports Up Despite Output Decline
CANADA - Exports of Canada's pork products have managed to hold steady and even climb despite live hog output in the country continuing to decline.



The ability to maintain exports of Canada's pork products also comes as domestic production of those products begins to decline, reports AgCanada.com.

"Considering that Canada's live hog production is about 25 per cent smaller than it was five years ago, the level of pork product exports have been holding steady and in some cases have been a bit higher," said Martin Rice, executive director of the Canadian Pork Council in Ottawa.

Canada's live hog exports have declined significantly, but Canada's pork processing sector has been producing at a steady pace, he said.

"We are going to start seeing lower processed pork numbers in Canada, but that is not likely to impact our export of those products," Mr Rice said, explaining that sales of pork products into the domestic market will drop in order to maintain the export sector.

Production of Canada's pork products were seen declining in the range of two to three per cent on a yearly basis, he said.

"However, because the processors are selling less of their production into Canada they are hoping to maintain export customers, if not gain a few extra," he said. "This is a trend which we have seen over the past several years."

Japan is expected to remain Canada's highest-value market for pork products despite the US being Canada's highest tonnage outlet, Mr Rice said.

In calendar year 2009, Canada shipped 226,866 tonnes of pork products to Japan worth C$865 million while in 2009, Canada shipped 329,000 tonnes of pork products to the US worth C$834 million.

Japan was expected to remain an important customer of Canada during 2010, Mr Rice said.

"Canada has been doing very well to keep Japan as a key customer of its pork products, while some countries have been seeing their pork sales to Japan going down," Mr Rice said, noting the US is one of those countries.

On a year-to-year basis, Canada's sales of pork to Japan were expected to increase in 2010.

"Through to the end of July in 2010, Canada had shipped 63.6 per cent of what it shipped during 2009 at the same time," he said. Canada had exported 144,296 tonnes of pork products to Japan at the end of July 2010.

Shipments of Canadian pork products to the US at the end of July 2010 totalled 186,911 tonnes.

The Russian federation has also been an important destination for Canada's pork products, Mr Rice said, and it appears shipments in 2010 will easily surpass the 2009 level.

At the end of July 2010, Canada had exported 53,179 tonnes of pork products to the Russian Federation, which almost matches the 58,872 tons shipped in all of 2009.

The Russian Federation is a highly variable market, However, Mr Rice expected Canadian shipments to that part of the world in 2010 to be double the 2009 level.

Mr Rice said there were also a number of other countries in which it appears Canada's pork product sales will surpass the previous year's level.

Those countries include, Mexico, the Philippines and Singapore, where Canadian pork product sales were already 50 per cent ahead of the year-ago level, Mr Rice said.

There were a few locations, he said, in which Canada's pork product sales were running behind from the year-ago pace, including Australia, Hong Kong, South Korea, China and New Zealand.

"Sales of Canadian pork products to those areas were running about 10 per cent or a bit more behind the previous year's pace," Mr Rice said.

Canadian pork product sales during calendar year 2009 to all global destinations totalled 1.075 million tonnes, compared with 1.094 million in 2008. At the end of July in 2010, Canadian pork product sales to all destinations were 633,525 tonnes.


 

[mikey]

Pork Commentary: Corn Price Shock
CANADA - This week's North American Pork Commentary from Jim Long.

Jim Long is President &
CEO of Genesus Genetics.
It was the Canadian Thanksgiving this past weekend. There were lots to be thankful for, but one item that as hog producers we did not feel thankful for was the USDA Corn Crop estimate that was released last Friday.

The USDA forecasted US corn production at 12.664 billion bushels, down 3.8 per cent from 13.16 billion production forecast last month. The average expert guess was 12.95 billion bushels prior to the report. Corn a bushel by Monday afternoon had gone up to $5.60 a bushel with talk of $7.00 a bushel being put out there by the corn bulls.

The USDA is now projecting the ending US corn inventory at 902 million bushels. The USDA is now forecasting for this market year an average cash price of around $5.00 bushel – up 60 cents from last month’s forecast.

The corn price move over the lasts couple months higher has increased swine cost of production approximately $15.00 per head which is a real margin implosion.


It will be interesting if higher feed prices put downward pressure on slaughter weights. In our opinion, this might lower weights slightly but when packer grids continue to encourage heavier weights there will be little buyer encouragement.


We expect these higher feed prices will be a major factor in curtailing much thought of sow herd expansion. Bankers already reluctant to lend money to swine production will see this jump in feed prices as a great reason to keep the brakes on funding swine projects.


When grain producers see $5.00 corn it makes them less interested in feeding hogs. This will take the edge off small pig demand unless lean hog futures push over $90 which is not inconceivable when June lean hogs Monday were $86.50 per pound. With $5.00 corn breakevens are approaching 80 cents lean per pound.


The corn ethanol subsidization by the US government continues to be a testament to government policy gone astray. A policy of burning our food to fuel our cars is continuing to disrupt the global food network with little environmental benefit. It will be interesting how $5.00 corn works in corn ethanol production. Last time there was a corn price spike some corn ethanol producers went broke and failed to pay their farmers for their corn.
In the coming weeks the Southern Hemisphere crops will be planted. Strong grain prices will certainly encourage plantings. You wonder at what point the USDA will stop funding land not to be planted. It’s a rich society that subsidizes corn ethanol at the same time it pays for millions of acres of land not to be planted. In the coming weeks we expect wild gyrations in grain prices as Chicago traders get their Christmas early.


Author: Jim Long, President & CEO, Genesus Genetics

[mikey]

Canada: Where We've Been; Where We Might be Going
CANADA - Canada like the rest of North America and several other pork exporting nations in the world has had extreme pressure on its pork industry in the last three years, writes Bob Fraser from Sales and Service at Genesus Ontario.

 

Many factors have contributed to this not the least of which has been the extended period of low equity draining prices. However this is been greatly exasperated by the weakened access to the US market due their MCOOL (mandatory country of origin legislation) but most importantly by the rapid appreciation of the Canadian Dollar.

In the period depicted in the chart below the Canadian Dollar has been below sixty five cents US till rising quite rapidly to par and beyond for a period till hovering just under par with the US dollar today. To put this another way the common transfer price and long term average cash price of $32 US for a SEW goes from $50 CDN to $32 CDN in this scenario. Even a Canadian Dollar at eighty cents US where we’ve been for extended periods results in the $32 US – SEW converting to $40 CDN. Although market access (MCOOL), the misnamed “swine flu” and greatly higher grain prices aided and aggravated the decline in the Canadian swine since its peak in the first quarter of 2005 the changes in our exchange rate to the US explains the most of it. Also it is highly debatable other than magnitude whether the scenario depicted in the graph would have been appreciably different in the absence of any of these other factors. The Canadian exchange rate has been and remains a huge driver for better or worse to the Canadian swine industry.


So given this what is the Canadian swine industry to do? Same message given to T. Rex (and apparently not listened to), “Adapt or Die”. The Canadian swine producer’s history shows him quite good at doing just that. His early embrace of quality genetics, high health, along with other technology long gave him an enviable production advantage over many other producers in the world particularly the US. No longer! The greatly improved communication and technology transfer globally has resulted in any technical competitive advantage to at best be fleeting.

Many Canadian swine industry leaders suggest our salvation comes from highlighting our quality pork and garnering a slight premium for it. A laudable goal for sure, but carving a niche for an entire nation’s swine industry is a big niche indeed. Perhaps a better path is for the Canadian industry to align its costs with the American producer. As a colleague says correctly “if we can’t compete with the Americans at par we can’t compete with them at all”. A deflated currency makes us all smarter but also often leads to taking one’s eye off the ball. Costs are important, but particularly benefits to costs. More pigs per sow are a tremendous driver in lowering costs and achievable through superior genetics coupled with sound management and nutrition. As with growing corn if you can figure out how to get 200 bushels per acre rather 150 bushels things tend to work out better.

We are seeing this move by the survivors of the Canadian industry to aligning their costs by demanding true demonstrable cost effective benefits to genetics, nutrition and all their other inputs. They are looking at acquisition of devalued assets to lower their cost structure. They are also reviewing structures that served them well in the past but went through a period of less favour. Farrow to finish, land based units although by no means the only model have proved quite resilient in these trying times. The “original integrators” of pigs to manure to land to crops and back again have seen their model vindicated and now appear at the forefront of sustainable agriculture.

The Canadian swine industry remains bright to those who are adaptable, innovative and resourceful. Probably the same skill set that has always propelled the success of the industry.




 

[mikey]

Pork Commentary: Nasty Week for Hog Prices
CANADA - This week's North American Pork Commentary from Jim Long.
 

Jim Long is President &
CEO of Genesus Genetics.
This past week lean hog prices took a pounding with Iowa – South Minnesota averaging 64.11 on Friday. With the double whammy of higher feed prices there are few if any producers that can turn a profit at these hog prices.

Other Observations
UDSA Pork cut outs were $81.07 per pound last Thursday, lean hogs were 64.11. That is a 15 cent per pound spread or about $30.00 per head. There is no doubt it is better to be a packer than a producer these days.


Last week’s US marketing’s of 2.263 million head was large – down only 30,000 from the same week last year. In the coming weeks expect weekly marketing’s over 2.2 million.


The chicken industry after showing restraint for several months is now ramping up production 4 – 5 per cent year over year (10 million more chickens per week). The last time corn went over $5.00 per bushel the largest chicken company Pilgrim’s Pride went broke. Now increasing chicken production in the face of raising feed prices? It makes you wonder the wisdom of this plan. Hopefully financial danger signs bring some sanity to the chicken cowboys.


We understand $5.00 plus corn does not work to produce corn ethanol when oil is around $80.00 per barrel. BOO HOO!! We can only hope lots of losses can shut down corn ethanol production. It is an industry that is wrong for society ethically, economically, socially, morally, and environmentally.


We are aware of producers who have decided to pull the plug on their sow units in the last ten days. The new high feed prices were the proverbial straw that broke the camel’s back. We are not sure the degree of total liquidation triggered but is sure is making a dent in any expansion plans.


The industries perception of next fall’s hog supply is indicated by next October lean hog futures hitting life of contract highs last Friday of 76.60 up from 70 cents lean on 4 October. It takes a real optimistic person to see $5.00 corn making more hogs domestically or globally.


The US dollar has depreciated compared to the Euro about 15 per cent since June (15 October - .71, 8 June - .837). The weaker US dollar is making US products more price competitive against European products. The lower US dollar will be positive for US pork exports in the coming months as Europe is the next largest global pork exporter. World Pork Exports: USA 35 per cent, Europe – 27 25 per cent, Canada 19.4 per cent, Brazil 10.5 per cent. USA – Canada account for 55 per cent of all of the world’s pork exports.


US pork exports in August were less than 1 per cent lower than last year. The total US pork production was lower in August by 6 per cent. A slight decrease in exports should not have been unsuspected. In August hog prices were up $60.00 a head from a year ago and lower pork supply, not only made exports more expensive but also lowered pork availability. Currently the lower US dollar, increased pork supply and lower hog prices will in our opinion trigger greater pork exports.
Summary
It was a nasty week for hog prices. Most producers will be below break even. We have to get through the heavy seasonal marketing’s of the next few weeks before we see much price recovery. $5.00 corn is going to make fewer hogs next summer and fall. Expect lean hog futures the summer of 2011 on to strengthen.


Author: Jim Long, President & CEO, Genesus Genetics 

[mikey]

Pork Commentary: New Corn and Seasonal Supply Surge
CANADA - This week's North American Pork Commentary from Jim Long.

Jim Long is President &
CEO of Genesus Genetics.
The hog prices in the USA and Canada continues to languish as compared to the high prices of two months ago. Last Friday Iowa – Minnesota averaged $64.28 lean per pound which is probably at least $20.00 per head below breakeven. Last week’s US marketing’s were 2.331 million, up slightly from the same week last year 2.323 million. It’s been a long time since weekly marketing’s have exceeded the previous year.

Other Observations
Hogs are growing fast. New crop corn has higher test weights, better protein, and probably less vomitoxin compared to last year’s crop. The explosion in growth is giving the power to the packers. The fast hog growth coupled with the usual seasonal increase in hog supply is leading producers to calling packers to move hogs to get space and keep hog flow’s reasonably current. The old line: “Who’s calling who?” is a very apt description. Producers are calling and in some cases pleading for packers to take their heavy hogs. Packers can help them out, but human nature encourages it being done at a discount. This leads to lower hog prices while USDA cut – outs remain at a level that facilitates strong margins for packers (last Thursday USDA cut – outs 76.76 per pound). The good news despite marketing’s of over 2.3 million pork demand is such that it allows wholesale pork prices to stay strong. As supply declines in the coming months expect a real cash price rebound.


The surge in feed prices the last few weeks has certainly put a huge dent in expectations for next summer’s hog supply. Summer lean hog futures hit life of contract highs last Friday. We expect to see further strength in 2011 summer and fall lean hog futures. Continued high feed prices will soon begin to affect 2012 hog supply not only in North America but the rest of the world.


Real paradox on corn supply and use. Price is real strong but there is so much corn piled throughout the Midwest it makes you wonder about actual supply – demand equations. What will corn exports be with $5.00 corn? How will corn ethanol producers cope with $5.00 corn and $80.00/barrel oil? Oil companies don’t produce ethanol. We never can figure out why they have any great incentive to sell ethanol in their retail chains. It was the CEO of Exxon who said he saw little future with what he called moonshine!
Think Tank Warns of Global Food Crisis
The Humboldt forum on food and agriculture is warning a food crisis could hit the world in ten years.

The Institute claims more than one billion people are malnourished, and 16,000 children die every day due to malnourished related disease.


Humboldt believes that sustained higher feed prices will not lead to food riots as in 2007 – 2008 but also to increased migration away from food – insecure regions of the world.


Humboldt’s premise is there must be re – investment in agricultural education and infrastructure in both developed and developing countries and farmers in the latter parts of the world must be given access to agricultural technology and bio technology.
Our Thoughts
People are starving and malnourished and we are burning our food making corn ethanol? I wouldn’t want to be a policy maker or secretary of agriculture trying to explain this insanity to a starving child. This year 35 – 60 per cent of the US corn crop will go into fuel to power vehicles.


We have travelled much of the globe selling Swine Genetics. We have observed the world needs technology. Genetics with better productivity for feed conversion, litter size, growth, carcass yields, and health are a necessity to feed on every growing world population. The spread in productivity between modern genetics and swine genetics of just a few years ago is not only financially challenging but just as importantly is not producing the food required.


The need for ever better agriculture technology is real. Research and Development costs for agriculture should not and cannot be financed by the private section. It’s an obligation and need of society to support SR+ED projects of universities, private sector, and government. To push to productivity levels needed for the future. Investments are required.

Author: Jim Long, President & CEO, Genesus Genetics 

[mikey]

Pork Commentary: Bullish US/Canadian Inventory Report
CANADA - This week's North American Pork Commentary from Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
We haven’t had much good news the last few weeks in the hog industry with prices under challenge and a spike in feed prices. Last week some welcome news came with the combined USA – Canada Swine Inventory Report. USA – Canada breeding herd at 7.07 million down 2 per cent from a year ago, and market hog inventory at 69.8 million was down 2 per cent from last year. The pig crop was down 2 per cent as well as sows farrowed. The bottom line is 2 per cent less sows, 2 per cent less market hogs, 2 per cent less farrowings, and 2 per cent less pigs born. All in all 2 per cent less everything. This is bullish as we move forward. This summer we had hogs in the mid 80’s. It is hard to believe 2 per cent less won’t result in even stronger prices as we go forward.

Canada Hogs on Farms
Quarterly Report (thousands of head)
YEAR The Downward Trend Continues All Market Hogs
2005 1619 13585
2006 1582 13317
2007 1543 12816
2008 1417 11327
2009 1349 10605
2010 1298 10555

The Canadian Swine Industry continues to contract with breeding herd down 51,000 from last year and 321,000 lower than five years ago (-20 per cent). The Canadian market hog inventory is down year over year 50,000 while its dropped 3 million in the last five years (-24 per cent).

Canada’s hog producers have been hit hard by a higher Canadian dollar, country of origin labeling, and the general financial situation all hog producers have faced over the last five years in North America. The current par dollar Canada has with the US coupled with current hog prices and feed costs will in our opinion lead to a further contraction of Canada’s hog industry. Some producers will come to the conclusion that having hogs is not having fun.

Other Items
The USDA cut – outs were 73.68 last Thursday. The National Base price 53 – 54 per cent lean hogs were $65.78 the same day. We have seen a $30.00 per head price drop in the last three weeks. Prices keep declining – where’s the bottom? We believe in the next ten days.


Chicken producers are doing their part to limit meat protein production? Egg sets up 10 million a week, chick placements up 10 million (+7 per cent) year over year. Maybe they know something nobody else knows. $5.00 plus corn and expand chicken production? The last time the chicken genius’ tried this the largest company Pilgrim Pride went broke. Chicken prices are 80 cents per pound, last year they were 72 cents. Time will tell how all this plays out but it appears the poultry companies are playing a game of chicken with each other. Probably one of them will crash.


Hog slaughter weights have exploded hitting record levels. New crop corn has pushed growth and it’s been extraordinary. The Iowa – Minnesota live weights released last week averaged 275.3 pounds, the week before they were 274 pounds, a year ago 269.9 pounds. Year over year 5.4 pounds heavier, this year these larger carcasses are putting more pork on the market and pushing hog prices lower. Packers have the hammer – lots of hogs, lots of heavy hogs and producers calling them to sell. The old adage ‘who’s calling who’ is reflected in the $30.00 per head price decline in the last three weeks.


National Direct Cash Early Weans averaged $37.90 last week and 40 pound feeder pigs $50.71. High feed prices have pushed these prices lower over the last few weeks. The good news for small pig sellers is the space pendulum is going in their favor. The seasonal of small pig supply is for it to begin to contract just as finisher space opens up seasonally with the boost of new crop corn. Therefore fewer pigs available will be being chased by a greater number of finishing spaces.
Summary
The USA – Canada combined inventory 2 per cent less sows, 2 per cent less market hogs, 2 per cent less farrowings, and 2 per cent smaller pig crop. Everything is 2 per cent less. Tough hog markets currently but supply will decline seasonally year over year. Work through the next few weeks and prices will rebound.


Author: Jim Long, President & CEO, Genesus Genetics

[mikey]

Research Shines Light on Pigs' Secrets
CANADA - Which are the best pieces of pork, what their texture is, how moist they are – the secrets pigs keep from even the most skilled butchers – are about to be revealed, thanks to a sophisticated new technique that has been developed by McGill University researchers in conjunction with Agriculture Canada and the pork industry.



“This is about giving industry workers better tools to do their job,” explained Dr Michael Ngadi of McGill’s Department of Bioresource Engineering.

“Computer-aided analysis of meat will result in higher-quality jobs, optimal production, and exports that fit more closely with the target markets.”

The technology involves spectroscopy, a technique based on the analysis of the wavelengths of visible and invisible light produced by matter.

By measuring the wavelengths of reflected light that pork cuts release, the researchers discovered they could easily determine the colour, texture and exudation (water release) of the meat.

The technique is revolutionary, as previous laboratory techniques had involved destroying the testing sample.

“The technique enables production workers to conduct objective and scientific analysis of the meat very quickly on the production line,” Dr Ngadi said.

It means the meat can be more accurately sorted according to the quality demanded by different export markets.

The research is not far from leaving the laboratory and entering factories, according to Dr Ngadi.

“We are currently looking for partners who will work with us to build a ready-to-use device for a commercial production line,” he said.

The researchers are also looking to extend the technique for the evaluation of other aspects of meat quality, such as marbling and fat content.

This study was part of a project supported by funding from the Natural Science and Engineering Council of Canada and le Fonds québécois de la recherche sur la nature et les technologies.

[mikey]

, November 09, 2010
Pork Commentary: New Highs for CME Hogs
CANADA - This week's North American Pork Commentary from Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
The hog industry had some interesting developments this past week.

Our observations:

Lean hog futures for the last half of 2011 at the CME reached new life of contract highs. Last week August 86.55, October closed at 80.05, and December at 77. These are excellent prices for the fall months. It makes one wonder about hedging fall 2011. There could be an upside, yet on the futures for October – December but 80 cents is a lot better than the 60 cent lean prices we are getting currently. There are always more hogs seasonally in the fall.


The National Base Lean weights for the 4 days last week averaged 207.5 pounds the week before the average weight was 208.44. There appears to be a drop in weights, this is quite positive after we have seen several weeks of relentless weight increases. In our opinion the only way weights could be dropping is a more current inventory. Weather, grain, finishing space for hogs has not changed. Pulling weights down will support prices as it is a reflection on hog supply and will cut pork tonnage. The CME reflects this confidence with December Friday closing at 67 cents a pound, while Iowa – Minnesota was 61 cents per pound. The average bet is pricing is going up.


With lean hogs 61 cents per pound and USDA pork cut – outs $77.50 last week, the 16 cents per pound spread is giving excellent margins to Packers. As hog supply declines we expect this cut – out margin will allow packers to bid up hog prices quickly.


Last week we discussed the USA – Canada swine inventory being 2% smaller than a year ago this past quarter. This obviously means fewer hogs are coming to market for the coming months. The USDA small pig price continues to support the idea of fewer pigs coming. Cash early weans of $37.96 and cash 40 pound pigs $48.41 in the face of corn closing on $6.00 a bushel is a sure sign pig demand is overcoming margin calculations.


Sow slaughter has been around 62,000 a week for the last few weeks. This is up from the 55,000 we have averaged for the year. At 55,000 a week the breeding herd was holding steady. At 62,000 we expect this means liquidation. High feed prices coupled with the drop in hog prices has translated into negative margins. It takes capital and courage to be in the hog industry. Some are being challenged on these attributes and are exiting.


The swine profit margin challenge is putting a big break on potential expansion. Genesus is in the business of selling swine genetics. Empty sow units needing restocking we pay attention too. Before the grain price surge we had several empty units in play to get restocked. The feed price surge has put most if not all plans on hold. There is no way when you consider the biological time period to breed sows and get hogs to market that there will be anything but less hogs in 2011 compared to 2010.


You want to feel bad. Currently Russian hog producers are making $135 per head. That’s more than our gross revenue per head. This is what happens when you have low production and tariffs.


It is a good time to call your congressman and tell them the livestock industry and consumers are both being hurt by the drive up in corn prices pushed by subsidized corn ethanol production. The 45 cent volumetric ethanol excise tax credit and 54 cent ethanol import tariff are due to expire December 31. Let them expire. If the corn ethanol industry is efficient and necessary, it will survive. Of course worse fuel economy and no benefit to the environment have been proven. It is a boondoogle! There is talk to cut government spending as a legacy of midterm elections. China has made it illegal to make corn into ethanol. The insanity of burning food is morally and economically un-defendable.
Finally, we will be at Euro tier Livestock Exhibition in Hannover Germany in a week. You can find us at the CSEA booth 12B40. We look forward to seeing you there!


Author: Jim Long, President & CEO, Genesus Genetics

[mikey]

Pork Commentary: Maple Leaf Foods Burlington Sold
CANADA - This week's North American Pork Commentary from Jim Long.

Jim Long is President &
CEO of Genesus Genetics.
Last week Maple Leaf Foods of Canada announced the sale of their Burlington Ontario slaughter plant to Fearman Pork (used to be Pork brand and company in Ontario), an affiliate of Sun Capital Partners Inc for approximately $20 million.

Our Observations
Burlington has the capacity of 42,000 head per week. The other major players in Ontario are: Quality Meats approximately 35,000 head per week, and Conestoga Pork approximately 15,000 head per week. There are also smaller players and of course hogs are shipped to Quebec and the USA. The Burlington plant has recently been working at less than capacity. Hog numbers in Ontario are running at about 90,000 per week. There is plenty of slaughter capacity in Ontario.


With the sale of Burlington, Maple Leaf stays on their restructuring path. The Brandon, Manitoba plant (largest in Canada) is harvesting almost 90,000 per week. They also have a smaller export oriented plant in Alberta. The sale of Burlington puts Maple Leaf’s total slaughtering capacity in Western Canada. It was their announced plan to sell Burlington and they have executed their plan.


There had been concerns on the part of Ontario’s hog producers that if Maple Leaf did not find a buyer for Burlington it might be shut down. At that point Ontario would have been significantly short of slaughter capacity. Country of Origin Labeling in the US makes it difficult and price detrimental to send many hogs to the US.


The purchase of Burlington by Fearmans (Sun Capital) is a real positive for Ontario producers. No one would buy a slaughter plant without the intention of operating it for a profit. Sun Capital is a large organization with its affiliates combining for about $40 billion in sales. Companies that are food related in the Sun Capital Group include Can Agro, Creekstone Farms (Beef Processor), Hickory Farms (700 stores meat and food products), Marsh Supermarkets (grocery stores), Boston Markets, plus maybe 20 plus other companies in other industries.
Big Time Player
On the Sun Capital website their business description of Fearmans Pork the largest pork processing facility in Ontario serving primarily the Toronto area, Eastern United States, and select international markets. Fearmans Pork supplies product to other processors, retailers, and food service providers including chilled pork products, speciality, and counter ready products.

Summary
The purchase of the Burlington plant is good for all hog producers both in Canada and the USA. We have seen the last few weeks the wide spread between hog prices and pork cut – outs. Packers have been doing just fine in North America we could not afford to lose more packing capacity. Fearmans Pork is a new player and buyer for hogs. Having more buyers is always good for producers. Another plus, Sun Capital has chosen to be an investor in our industry. They must see a future.

Bullish Corn Report?
Last Tuesday the USDA came out with a so called bullish corn report. The morning after the report release, December corn went up to $6.05 a bushel. The close on Friday three days later was $5.34, a 69 cent a bushel decline. Goes to show that nobody knows what is happening. It is a crap shoot. My deceased friend Doug Maus used to call the Chicago Board of Trade ‘Las Vegas with no rules.’ Run them up, run them down. More trades, more money for the brokers.

Markets
We believe the seasonal low for early weans and feeder pigs has been reached. Last week cash for both USDA categories increased $1.00 per head. Cash early weans averaged $39.95, while 40 pound feeder pigs $49.12. The supply of small pigs is declining, the only way to ration them is higher prices.

A consortium of food retailers and processors last week brought legal action against the US Environmental Protection Agency (EPA) allegedly overstepping their legal right to mandate increases on ethanol use in fuel. Corn hitting $6.00 is motivating and helping food groups, AMI and oil companies to fight the lunacy of tariffs and subsidies for corn ethanols which are due to expire December 31. Expensive corn is not good politically for corn ethanol producers at this time. Now is the time to let your congressman and senator know what corn ethanol is doing for you?!

The USDA pork cut – outs at 76.68 while Iowa – Minnesota lean hogs closed at $63.65 last week. As hog numbers decrease from yearly highs, cut – outs will increase with lean hogs chasing them higher.

Summary
With hog supply declining we expect the demand scenario in the summer of 2011 will push some hogs to $1.00 lean. You just can’t keep cutting supply with a low US dollar not to have strong pork export demand to chase fewer and fewer hogs.

This week we are in Hannover Germany at Eurotier – possibly the world’s largest livestock industry exhibit. We can be found at the CSEA exhibit. Next week we will write our observations.


Author: Jim Long, President & CEO, Genesus Genetics