Canadian Pork Producers:

[Mustang Sally Farm]

Monday, July 18, 2011
Higher Slaughter Capacity, Value-Added Processing
CANADA - Improvements planned for the Hylife Foods hog slaughtering plant at Neepawa in Manitoba will allow expanded slaughter capacity and additional value-added processing, 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. 
Last week the federal government announced Hylife Foods, formerly Springhill Farms, a subsidiary of Hylife, will receive C$10 million under the Slaughter Improvement Programme for improvements to its Neepawa hog slaughtering plant including expansion of the cooler and cutting areas and the purchase of new equipment.

Denis Vielfaure, the Chief Operating Officer of Hylife, says the upgrades will expand slaughter capacity and allow more value to be added to the plant's products.

Denis Vielfaure-Hylife
Our goal when we bought the facility about 40 months ago was to diversify the product mix and just not to be pigeonholed.

At that time we were basically in the frozen international market, 90 plus per cent frozen international market so a lot of the upgrades have been done to improve the facility to be able to do fresh product and also to value add to that fresh product which means doing a lot more deboning of primal pieces to sell to our customers.

Also at the same time, the main focus has been to export fresh chilled, specifically to the Japanese market and the Korean market and some Asian markets.

Today we've maxxed out at about 900,000 hogs annually.

With these upgrade it's going to give us the opportunity to have some more throughput, it's going to permit us to have about 50 per cent more throughput, bringing us close to the 1.4 million hogs per year.

Mr Vielfaure notes Hylife Foods sources hogs from within the Hylife production system, from the former owners of the facility and from some independent producers.

He says the bulk of the additional capacity will be filled by hogs from within the Hylife system that are now being processed at other facilities.

[Mustang Sally Farm]

Tuesday, July 26, 2011
Pork Commentary: Heat Wave Pushes Weights Lower
US - The extreme heat and humidity that swept through the US the last several days not only caused great discomfort for people working in swine barns, cut pigs appetite but also ripped market hog weights lower, writes Jim Long in this week's Pork Commentary.


Jim Long is President &
CEO of Genesus Genetics.
Last week the National Lean average carcass weights hovered around 199.5 pounds per carcass down around 3 pounds from the week before or about 4 pounds live weight. This was a huge drop week to week. The weight decline also happened despite weekly market numbers at 2,010,000 quite close to the previous weeks.

The chase of packers to keep hogs coming lead to a jump in market hog prices to $99.55 (Iowa – S. Minnesota) on Friday. Most producers with premiums will be receiving over $1.00 lean a pound once again pushing cash hog prices into historical high areas.

Of note a year ago 53 – 54 per cent lean hogs were averaging $79.60 a pound, while carcass weights were 3 pounds heavier. A year over year difference of $40.00 per head, not enough to rally compensate for the higher feed prices we are facing but a real reflection of pork domestic and export demand.

Feeder Pigs and Early Weans
Historically the yearly price low for feeder pigs and early weans is in this time frame. This year is no different. The hot humid weather that has slowed down weight gains has also seemed to back up barn space. The challenge to find barn space can be seen in the average price of cash early weans at $13.20 and feeder pigs at $39.64. It’s amazing we are hovering around the highest lean hog price in history but small pig producers are losing $20 - $25 per head. Part of the low price is the barn space issue but also high feed prices continue to limit profit potential for pigs to be finished. The train wreck that is the cash small pig market is not leading to sow head expansion.

National Pork Industry Council
We received the following from a reader last week about our comments on our NPIC report.

"I cannot help but see a long term trend developing because the signs and symptoms are popping up everywhere we turn. Maybe only a few of us see the signs of a perfect storm brewing. I hope that most of us realize the road we are on early enough to make a difference. This conference seemed to have highlighted this perfect storm that is spawning quite nicely."

For example:

"The CEOs like Donnie Smith, who are Capitalists of America, but remain ahead of the curve and realize the needs of consumers whose main fear at the present time is food safety, carbon footprint, animal welfare, etc... We see the Walmarts and Safeway’s leaning toward consumer demand, etc... (note: Donnie Smith clearly stated Tyson would not be using Pfizer Improvest – Castration Vaccine at this time!)


"Then we have Clint Lewis who is so far behind the 8 ball, it is actually pathetic. Consumers are in hysteria about food safety, effects of GMO, environment and how we are engineering and mass producing our food and he dares to bore us with his ramblings on blindly about just another warlord, sorry, I mean drug lord money grab?? (note: Pfizer who had announced that they are planning on selling its animal health division stated this past week they would not sell rights to specific products to Eli – Lilly – Elanco who had expressed interest. We wonder if Improvac was not wanted by Elanco?)


"And then we have best for last, Monsanto putting us on a guilt trip by reminding us that we have an overpopulated planet and they are the heros of food production and without them is only a brick wall in front of mankind."
Thanks for reader’s concern.

Summary
The hot weather has cut growth rates the consequent need for lean hogs has forced packers to bid up. We expect packers will have to keep strong bids to meet export orders. Hopefully rains in the US. Mid – West this past weekend will help lower the grain price. The hog industry is like real estate – location, location, location!! While small pigs languish at real low prices market hogs in Japan are bringing around $800 per head! The good thing is Japan will continue to import pork and those small pig prices will get stronger.


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Thursday, August 04, 2011
Pork Commentary: Cash Market Hogs Surge Higher
US - Last week, the US National lean hog price pushed to over $1.04 per pound (53–54 per cent lean), writes Jim Long in this week's Pork Commentary.


Jim Long is President &
CEO of Genesus Genetics.
This is a welcome respite to an industry challenged by unprecedented high feed costs. This cash prices is $20 per head higher than August lean hog futures were indicating on 20 June. That $20 is the difference from breaking even as a producer and making money.

I have to say, we get some real satisfaction with not only the benefit from the higher prices but from knowing last August when 2011 lean hog futures were 80 cents a pound, we projected $1.00, says Mr Long. We were out there and we took some arrows for our opinion. The Chicken Little economists were projecting 80 cents lean at the same time we were at $1.00. They just didn't know what was going on in the rest of the world. Armchair academics with no skin in the game and have never left North America do not get global dynamics. After all, 92 per cent of all pigs in the world are not in the US. When the US exports 25 per cent of its pork production and Canada 50 per cent, market conditions in the rest of the world really matter.

We expect the pull of global pork demand will continue for months to come. China is approximately US$1.33 per pound live weight, Russia is $1.56 per pound live weight, South Korea is $1.95 per pound live weight, Japan is $3.25 per pound live weight, and Mexico is 85 cents per pound live weight. It doesn't take a rocket scientist or an economist to realise these countries as large importers of pork have price points way beyond the North American domestic price. There is little wonder pork importers in each of the above countries can and will pull pork to their markets.

It is August again and we see no reason why US lean hog prices next year will not be in the $1.00 plus range next summer, says Mr Long.

He sees little sign of breeding herd expansion, indeed US sow slaughter in June was 268,000 up 21,000 from June last year. For the first six months of this year, US sow slaughter is 1.468 million, up 6,000 from last year. He expects the increase of 21,000 in June would indicate a liquidation level.

If sow prices are any indication, the sausage-makers are getting all they need. On average, 500–550 pound sows are 63.99 cents per pound, the same time last year, they were 67.65 cents per pound; this despite market hogs at $1.03 while at the same time last year they were $82.00.

It has been hot but market hogs keep getting pushed to market. It appears hog weights are still coming down with average US lean hogs last Thursday 198.49 down two pounds from Thursday the week before.

Mr Long expects that some of the sow herd liquidation in June we saw is related to the freefall prices in small pig prices. Last week's cash early wean price averaged $15.58 and 40-pound feeder pigs, $36.99. There are lots of stories of small pig-buyers running away from their contracts. It seems to be a never-ending story. When small pig prices are high, finishers want to buy pigs on a contract usually lower than cash. Then when cash drops below the contract price, too many buyers cannot or will not live up to the deal. The $20 per head loss on the cash small pig prices is too much for many to handle after the cash and equity crater of the last four years.

On the global feed prices, the huge drop of $2.00 a bushel for wheat since the end of May ($8.75-$6.72) could keep upward pressure on the corn price limited. Russia, after a year of no exports, is now on the market again and offering wheat about 75 cents a bushel cheaper than the rest of the world. (That's how you get business back). Wheat can and will flow into swine rations to replace corn. Just last week, the CEO of Cargill blamed much of the jump in world grain prices on Government policy and interference which included Russia Grain Embargo. The US corn ethanol policy is also Government interference but it is expected that the US debt ceiling issues will in all likelihood not play out well for the corn ethanol lobby.

Pfizer's Improvac for chemical castration of pigs was approved last week in Canada. Mr Long is not saying anyone will use it. If Michael McCain, CEO of Maple Leaf, says "no" as Canada's leading personality in the packing industry, it will be dead on arrival, he says. Mr Long says he expects Maple Leaf will not want to risk a consumer and export market backlash from using chemical castration as a risk of damaging their brand.

Road trip
As Mr Long wrote above, you can't get a feel for the global pork markets sitting in a university or corporate cubicle, with no skin in the game. The next 19 days, he is on a road trip to Russia, China, Thailand and India. He will report on what is happening on the ground in the grain and swine markets.


Author: Jim Long, President & CEO, Genesus Genetics

[Mustang Sally Farm]

Wednesday, August 10, 2011
Pork Commentary: A Week in Russia
RUSSIA - "We spent this last week in Russia," writes Jim Long in this week's Pork Commentary.


Jim Long is President &
CEO of Genesus Genetics.
Here are our observations:

Our visit was in the Southern Russia region of Kuban. Kuban is approximately 700 miles south of Moscow. The climate is much like Kansas – Nebraska warm with lower humidity. The area sits between the Black and Caspian Sea.


Kuban region is an extensive agriculture region with corn, wheat, barley, sugar beets, sunflowers, and livestock.


Last year much of Russia suffered from a drought. The Russian government put a total embargo on shipping of grain from the country. Consequently the world grain price became stronger due to a lack of Russian grain on the world markets. About a month ago Russia began allowing grain exports.


If you take no other message from this commentary be conscious of this: The Russia grain harvest where we were in the South is excellent. There has been timely rain and in the middle of summer a reflection of this is green grass everywhere.


We understand that Russia wheat is available currently at Black Sea Ports about $30.00 a tonne cheaper than anywhere else in the world.


The harvest of wheat has been done and storage is full. We saw many piles of wheat with no place to store waiting for export. Yields were strong 6 -8 tonnes per hectare. (80 – 100 bushels on average). Feed wheat locally is about $5.00 per bushel, barley $4.00 per bushel.


Corn and sunflower harvest will begin in a month and yields are expected to be strong.


In sugar beets the combination of expected yield and planting acreage (hectares) are expected to overwhelm processing capacity; a reflection of the good growing weather.


The bottom line is in the last 12 months the world Grain and Oilseed market price was enhanced by a lack of Russian exports. Now their back and it matters on prices going forward. Russia’s livestock numbers are not that large, there is no ethanol production, and the only outlet for the surplus grain – exports.
Nothing Better
Russian hog producers are in a wonderful place. Market hogs with good genetics are bringing about $325 US dollars per head or around $1.40 US a pound live weight. In a meeting with one producer we said you must be making $150 US per head, he corrected us it is $190. Imagine that wouldn’t fill an equity hole and to think some 12 pound pigs in the US are $10 each.

Now there are still many poor producers in Russia. One we met said his hogs take 300 days to reach 220 pounds (100kg), 14 pigs per sow per year. 35mm (1 ½ inch) back fat. They also receive about a $40 per head discount for poor quality. We calculated the difference in production cost and market price received was a minimum $100 per head less. The joke is they still were making $50 per head. It’s a fool’s paradise though as this will not last forever. They are dead men walking unless they upgrade their technology.


Russia is the largest exporter of oil and natural gas in the world. Approximately half of the Russian government’s revenue comes from oil and natural gas, or about $3 billion US per week.


The Russian government is looking at expanding swine production with financial support for the estimated $7 billion US dollars that is currently being planned to being invested in the Russian swine industry over the next five years which is 1 per cent of the expected Russian government petroleum revenue in the same years.
Our trip included Kubansky Bacon one of Genesus Nucleus Multiplication in Russia. Currently the genetic nucleus is being populated with registered purebreds, the fist 2500 sow multiplier will be ready to receive breeding stock in 10 weeks, and the second 2400 sow multiplier has begun construction. When completed, Genesus will have the largest supply of high health genetics in Russia. We have to admit it is a big undertaking and one never dreamed of as a child growing up on a 10 acre farm on a gravel road. I am travelling with my 14 year old son, he is having an opportunity to see, learn, and be exposed to a world I couldn’t ever imagine when I was his age.

Summary
Hog prices in Russia are strong and profitable. It’s a reflection of lack of supply. Russia will be importing pork for the foreseeable future. This will help US – Canada hog price to stay strong by supplying Russia pork. As the Russian economy grows we expect Russian pork consumption to increase. Russia has grain with an estimated 40 million acres of farmland not yet in surplus. Large tracks of land for bio security – Government money for expansion. Time will tell but it is a pretty exciting place for swine production right now. As we write we are on a plane flying from Moscow to Beijing. We will be in China all of this week. We will report our observations.


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Wednesday, August 10, 2011
Strong Pork Export Demand Drives Up Live Hog Prices
US & CANADA - The Saskatchewan Ministry of Agriculture credits strong export demand for pork for a substantial increase in North American live hogs prices over past couple of weeks, 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 Saskatchewan Ministry of Agriculture's weekly hog market update, released Monday, 8 August, shows significant improvement in live hog prices.

Livestock economist Brad Marceniuk reports strong export demand has helped push North America live hog prices to record levels.

Brad Marceniuk-Saskatchewan Ministry of Agriculture
Hog prices in Canada and the United States are up quite noticeably here over the last two weeks.

Both US and Canadian hog slaughter numbers over the last two months, they've been relatively close to year ago levels.

They've had a bit of a small increase however in the last two week or two we've seen some reductions in slaughter numbers.

This was likely due to the recent heat wave slowing animal growth and weight gains but overall the recent slaughter decline was positive for hog prices.

Both US pork cutout values and live hog prices have reached new record highs.

The Iowa/Minnesota daily average price reached US$106.30 per hundredweight while in western Canada the Maple Leaf Signature-3 price reached 190.31 per hundred kilograms.

The primary driving factor for the record North American hog prices and record pork cutout values has really been the strong pork exports with particularly strong demand coming from China and South Korea.

Mr Marceniuk points out feed wheat and barley prices in western Canada have trended upward since the beginning of the year and, while Canadian feed prices lag behind US corn prices, feed costs are at the upper long term range for hog producers.

He notes the slide in the value of the Canadian dollar has also helped improve returns for Canadian hog producers.

He says, with North American hog slaughter numbers and pork production close to year ago levels and not expected to change significantly over the next few months, hog prices will continue to be strongly influenced by pork export demand and, with uncertainty around the North American feed crop and potential for tightening supplies, producers will need to keep an eye on feed prices as we move into fall and winter.

[Mustang Sally Farm]

Tuesday, August 16, 2011Print This Page
Pork Commentary: Road Trip to China
CHINA - Last week we arrived in China after our visit to Russia, writes Jim Long.
 

Jim Long is President &
CEO of Genesus Genetics.
These are our observations:

The swine industry in China right now is quite profitable. Live hog prices are 19.05 a kilo or $1.35 US with profits reported to be $70 - $100 per head.


Between 50 – 65 per cent of all hogs produced in China are raised in backyards with less than 50 market hogs per year. The China sow inventory is estimated to be between 35 – 43 million. (Notice margin of error 8 million is greater than North America’s sow inventory).


There are large scale operations as we met groups with 65,000 sows, 25,000 sows, and 20,000 sows in production or under construction.


Over the last five years backyard production has declined about 15 per cent of total production. As we travelled throughout China you could see massive construction of apartments, most of the new tenants will come from the countryside. This will and has cut backyard production as no pigs will be raised in apartments.


Pork is a big deal in China. This is from the front page of the China Daily:
"China pork prices were unchanged week on week for week ending 7 August after declining for two straight weeks, the Ministry of Commerce said on Wednesday."

"High pork prices have become a huge concern for the country, as the consumer price index, the main gauge of inflation rose to a 37 month high of 6.5 per cent in July. Pork prices soared by nearly 57 per cent year on year, according to National Bureau of Statistics."

I have never seen hog price updates on the front page of the New York Times, writes Jim Long.

Many of the farms are really, really small, less than an acre. It’s intensive production but not very efficient as it is very difficult to mechanise. While in China we read a report where there is about 22 million hectares 46 million acres that will not be planted this winter in Southern China mainly because the people have left the farms and moved to the city. The same little farms had pigs and many of them are gone.


When we asked about why the big price surge in hogs, we got three reasons: liquidation last year due to low prices, urbanization, and then disease, which we were told is PRRS. One group told us there are fewer than 10 PRRS-free farms in China.


The disease factor is the biggest impediment to new barn construction as producers and bankers worry about its implications. The idea of a high health site is half a mile from other pigs. This is drug company heaven!


This Pork Commentary is translated every week into Chinese and available on The Pig Site China. On the tour, one of our readers has commented on Pfizer’s Improvac – Chemical castration vaccine. He said pigs with testicles have no value in China’s market and that it is illegal to sell their meat. He felt the Pfizer product got no traction at their meeting as too many producers were worried about missing one of the two shots and getting zero value for the boar. The cost of vaccine versus risk was not justifiable. To paraphrase old Chinese Proverb, "That dog won’t hunt".
The amount of labour used on farms in China is significantly higher than North America. One person per 2.5 sows farrow-to-finish and this is in automated facilities. The workers live on site in single rooms and do not leave the farm operation very often.

We flew from Beijing to Sichuan Province. The 'Iowa of China' with 4.5 million sows. It is hot and humid, and subtropical. The city of Chengdu was nine million people the province nearly 100 million. Producers there are making money and happy. It seems to go hand in hand in any country, the area had been hit by a major earthquake three years ago, rebuild is massive, it is incomprehensible the new buildings, their size, and the overall infrastructure. When the earthquake hit the province, the government divided the province up and put an individual province from somewhere else in the country to rebuild that specific area.


While in China, Genesus and our agents became the first foreign genetic company approved for sale of AI in China. This is a big step for us.


Also on our trip, we received confirmation that Genesus breeding stock imported already to China will become the genetic source of a 75,000-sow system organised in three pods.
Summary
China is where the USA was in the 1980’s. There has not been much consolidation or industrialized production. In our opinion that is about to change. Food service, retail supply, and food safety issues will push for larger production bases. The producers that capture the technology, available nutrition, health, genetics, barn design, and most importantly employee training will drive the others out of business. Rapid consolidation, we expect the building in the 80’s in America will pale to China’s in the next decade.

I am travelling with my 14-year-old son, adds Jim Long. He is holding together well. Seeing things like the Great Wall, Tiananmen Square, a hog farm with a huge wall alleged to keep pandas out! Modern as can be urban areas and rural areas in abject poverty. He is also seeing negotiation in a different culture and the desire for technology. I imagine he will remember long after I am gone. We are on our way to Thailand now; we will report our observations next week.


Author: Jim Long, President & CEO, Genesus Genetics

[Mustang Sally Farm]

, August 23, 2011
Pork Producers Advised to Secure Feed Supplies
US & CANADA - An agricultural Economics professor with the University of Missouri is advising North American pork producers to consider securing feed supplies in advance of need and locking in some margin on their hogs during the coming months, 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. 

Although the summer of 2011 has seen some record high North American hog prices high feed costs have taken a big bite out of profitability.

Dr Ron Plain, an agricultural economics professor with the University of Missouri, notes USDA is advising livestock and poultry producers to expect this year's corn crop to be sold at and average price of around 6.75 a bushel, 1.45 a bushel higher than the 2010 crop which currently holds the record.

Dr Ron Plain-University of Missouri
Feed cost is a big factor and I contend that trying to stay a little bit bought ahead on feed is a good strategy.

Interestingly in the last several years we have seen the low in corn prices coming a bit earlier in the fall than normally.

It used to be that October was the odds on favorite for the low price month for corn and it seems now that more August and September is when we very often have the bottom so staying bought ahead on feed I think is a good strategy.

Then, as far as marketing hogs and particularly trying to hedge prices using futures contracts, past experience indicates that those hogs that go to slaughter during the fourth quarter or the first quarter of the year generally have offered a little better opportunity to hedge at a gain than prices sold during the summer of the year so I would argue producers might be looking at some of these futures contracts and locking in some margin here in coming months.

Dr Plain observes these record prices put a lot of pressure on producers to manage their cash flow.

He says there's a lot money flowing through pork producers fingers and they've got to be sharp managers to hang on to enough of it to pay the bills.

[Mustang Sally Farm]

Tuesday, August 23, 2011Print This Page
Pork Commentary: Road Trip Continues - Thailand & India
THAILAND & INDIA - "The odyssey continued last week, not quite Jason and the Argonauts but we are covering a lot of ground. As you probably read in previous commentaries we have travelled one week Russia, one week China, this past week Thailand and India," writes Jim Long in this week's Pork Commentary.

Jim Long is President &
CEO of Genesus Genetics.
Our observations:

Thailand has a hot and humid climate. The people are quite pleasant and very polite.


Bangkok is everything you have ever heard about. We would be surprised if there were any middle aged white men left in Europe currently. It must be a European tradition to travel without your wife. Just an observation but we are not cultural experts.


My 14-year-old son who has been on the odyssey was quite quick to observe, "Bangkok is a lot different than where we live." He is a quick study.


Thailand has about one million sows and the price of market hogs is about 85 Baht (THB) a kilogram live weight or about US$2.25 a kilo (US$1.00 ive weight a pound). Producers told us current market hog prices are the highest in history. Profits per head are about $100.


We had a meeting with Government officials and several producers who collectively made up about 30 per cent of Thailand’s sow herd.


Feed prices are similar to USA. Thailand produces about 80 per cent of its corn needs. Soybean meal is imported.


We were told Thailand hog prices are record high because of low hog prices in the past couple years and what they called 'Chinese PRRS'. The PRRS that we wrote about last week in China got to Thailand. Lots of abortions and dead pigs, it reminds us of a few years ago when Larry Pope (now CEO of Smithfield Foods) spoke at the National Pork Industry Conference and basically said that PRRS is the producer’s friend: it cuts supply and increases prices. People were somewhat shocked at what Mr Pope said but it has some real logical merit. Then again, you do not get to be CEO of the world’s largest pork company by being unable to do your own thinking.


Our impression of Thailand is that its production base is more technical and consolidated than China. The percentage of backyard pigs is significantly less than China’s. About 100 entities make up the bulk of Thailand’s industry, almost all family-owned.


Producers in Thailand prefer Duroc-, Yorkshire- and Landrace-based genetics. Synthetic lines with Pietrans have proven to be too disease-susceptible and too slow growing. The climate where 20° C. or 68° F. is the lowest recorded temperature puts a significant premium on genetics with appetite and disease resistance.


Thai producers do not get paid by grades on hogs directly but fat pigs get discounted.
Summary
Thailand is a fascinating country with a relatively mature swine production base. Like many other countries in the world, they have these highest prices and profits in history. The producers we talked to were all veterans of the 'pig wars'. As one said, "We know it won’t last, we got to get ready for the next downturn." Sounds like home!

India
We had a quick stop in India. India’s swine industry is small. Official statistics are limited. Like other parts of the world, as people's disposable income increases so does demand for meat. Many Indians are vegetarians because of lack of income for meat, not necessarily for religious reasons.

We were stimulated for our visit by project development by South East Asian associates of Genesus that look at investing. We expect outside expertise for India because of proximity and business ties.

One interesting aspect of India is that no grain can be exported so feed prices are relatively insulated. Current feed grain stocks in India due to the ban on exports are 61 million tonnes - a level challenging grain storage facilities.

India like other countries wants meat and poultry. For India, with over one billion people, a little bit per capita of pork is a lot. We see current project developments as a pebble in an ocean.

Summary
The odyssey is almost over. We are writing this in Indira Gandhi International Airport, New Delhi India. It is a big world; we will have gone around by the time we get home. Take home message: hog producers are good people in every country. My final thoughts as I listen to flights being called for Kabul and Kandahar, Afghanistan: not only is there no pork on these flights but as Dorothy said in 'The Wizard of Oz', "There is no place like home."


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Global Market Report – Canada
CANADA - Better days are ahead for Ontario pig producers, writes Bob Fraser, Sales and Services for Genesus Ontario.
 

In his last column, Mr Fraser suggested 'better days ahead'. He says he is a 'glass half full' candidate. It would be difficult operating in this business without being an optimist. Also with better days ahead, he says he was thinking about a time line a little longer than a month. However, he goes on to take a look at least in his area of Ontario.

The Ontario market
(OMAFRA Weekly Hog Market Facts compiled by John Bancroft, Market Strategies Program Lead, Stratford OMAFRA)
Week ending on Friday 15-Jul-11 22-Jul-11 29-Jul-11 5-Aug-11 12-Aug-11
Average price (C$/ckg, DW total value) 194.28 188.39 193.08 202.53   
Low price ($/ckg, DW total value) 165.70 158.60 164.79 171.26   
High price ($/ckg, DW total value) 207.28 201.78 206.85 216.09   
Weekly average dressed weight (kg) 96.17 95.55 94.81 95.17   
Market hogs sold 86,149 86,023 89,499 74,351   
Market hogs sold (as % of previous year) 110 110 108 101   
100% formula price ($/ckg, 100 index) 166.72 164.90 171.65 183.88 192.95
Previous year - 100% formula price ($/ckg, 100 index) 146.96 148.03 154.01 157.72 157.27
Weaned pig value (C$/pig) – formula value 43.35 42.87 44.63 47.81 50.17
Feeder pig value (C$/pig) – formula value 68.77 68.02 70.81 75.85 79.59
Estimated grow-finish feed cost for current week 95.84 96.40 95.68 97.84 96.87
Estimated margin after feeder pig and feed 20.13 17.51 22.64 34.08 43.61

Mr Fraser continues that there is a $23.48 increase in margin after feeder pig and feed or 117 per cent improvement in margin in a month. Not sure even I was that optimistic but probably qualifies as 'better' by most anyone's definition. Of course, the question always remains "Yes but will it last?" Part of that lies in whether the 15,000 head or more than seven per cent drop week-on-week in market hogs sold is just an aberration of summer heat and a holiday shortened week or something deeper going on. Certainly in my travels in Canada I don't see anything to give us more market hogs anytime soon beyond the normal seasonal 4th quarter expansion, and as a genetic salesman, I have reason to be looking hard for any sow expansion.

So supply looks at worst to be flat. As for demand we are setting new price highs and perhaps establishing a new price plateau more in synch with the apparent new price plateaus of grains. Finally, on the demand side as Canada very much appreciates as a trading nation is exports are strong and look to remain so as reinforced by Jim Long’s recent around the world Commentaries. Therefore the supply/demand balance looks favourable to prices but what about from the cost side? Will it be enough to outstrip grain and feed prices?

From his view of his own share-cropped corn this year and just what he sees from the road in his travels, the crop well perhaps not great has recovered marvellously from a difficult spring to certainly look like a good, if not a very good crop. Now, he says, this may be the view of 'rose-tinted' glasses. However, it seems supported by an article in this week's Ontario Farmer newspaper on entitled 'Corn crop makes a comeback'. The article quotes several seed corn agronomists suggesting the following 'Just a month ago, there were plenty of concerns about the crop's uneven development, pollination and cob fill in hot, dry weather, and its ability to mature on time. Not all the concerns have been alleviated but things look a lot better as the crop approached mid-August.' The article goes on to suggest the crop has caught up three weeks over the course of the summer and now with timely rains, suggesting at least average yields of 145 bushels with potential of 200+ in some areas. So, not the bin buster of 2010 but hardly a disaster either.

Mr Fraser adds that he appreciates Iowa may spill more corn than Ontario grows such that the latter crop has little if any bearing on price. Nevertheless for the land-based pork producers, the backbone of the Ontario swine industry, it looks like their corn supplies will be adequate allowing them to maximise their return on corn putting it through hogs.

In summary "better days ahead", he adds. He believes we have already made significant gains that we might consider as we navigate the challenges of a volatile environment.

Genesus Global Market Report
Prices for week of 15 August 2011
Country Domestic price
(own currency) US$
(per pound liveweight)
USA (Iowa-Minnesota) 101.39¢
US$/lb carcass 75.02¢
Canada (Ontario) 1.89
C$/kg carcass 69.52¢
Mexico (DF) 22.10
MXP/kg liveweight 80.76¢
Brazil (south region) 2.23
BRR/kg liveweight 63.06¢
Russia 94
RUB/kg liveweight $1.47
China 19.29
RMB/kg liveweight $1.37
Spain 1.23
€/kg liveweight 80.30¢



 

[Mustang Sally Farm]

North American Hog Inventory up One Per Cent
US & CANADA - This publication is a result of a joint effort by Statistics Canada and the USDA's National Agricultural Statistics Service (NASS) to release the total inventories of hogs, breeding, market hogs, sows farrowed and pig crop for both countries within one publication.
 

United States and Canadian inventory of all hogs and pigs for June 2011 was 76.9 million head. This was up one per cent from June 2010, but down three per cent from June 2009. The breeding inventory, at 7.10 million head, was down slightly from last year but up slightly from last quarter. Market hog inventory, at 69.8 million head, was up one per cent from last year and up two per cent from last quarter. The pig crop, at 35.7 million head, was down slightly from 2010 and down two per cent from 2009. Sows farrowed during this period totalled 3.56 million head, down two per cent from last year and down five per cent from 2009.

United States inventory of all hogs and pigs on 1 June 2011 was 65.0 million head. This was up one per cent from 1 June 2010 but down three per cent from 1 June 2009. The breeding inventory, at 5.80 million head, was up slightly from last year and last quarter. Market hog inventory, at 59.2 million head, was up one per cent from last year, and up two per cent from last quarter. The pig crop, at 28.9 million head, was up slightly from 2010 but down one per cent from 2009. Sows farrowed during this period totalled 2.88 million head, down two per cent from 2010 and down five per cent from 2009.

Canadian inventory of all hogs and pigs on 1 July 2011 was 11.9 million head. This was up one per cent from 1 July 2010 but down one per cent from 1 July 2009. The breeding inventory, at 1.30 million head, was down one per cent from last year and last quarter. Market hog inventory, at 10.6 million head, was up one per cent from last year and last quarter. The pig crop, at 6.8 million head, was down three per cent from 2010 and down seven per cent from 2009. Sows farrowed during this period totalled 678,000 head, down four per cent from last year and down eight per cent from 2009.

[Mustang Sally Farm]

Friday, September 02, 2011Print
Study: Composted Hog Manure for Potatoe Protection
CANADA - Researchers with the University of Manitoba will launch a study this fall to assess the value of composted hog manure in improving the yield and quality of Manitoba potato crops, Bruce Cochrane writes.





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. 

A three-year study being launched this month will compare the effect of composted beef cattle manure, the composted solids from liquid-solid separated hog manure and conventional fumigation in reducing the yield losses in potatoes caused by Verticillium Wilt.

Dr Mario Tenuta, a soil scientist with the University of Manitoba and Canada Research Chair in Applied Soil Ecology, explains previous work has shown the addition of composed beef cattle manure reduces the amount of Verticillium in the potato.

Dr Mario Tenuta-University of Manitoba
Verticillium Wilt is the major cause disease agent of potato early dying which a lot of potato producers in the province of Manitoba are concerned about in their potato fields believing that it robs them of yield.

We know when the compost is added the disease incidence in the field is much lower and we have these increased marketable yields.

How it does this, we're not certain.

Of course, we always think of compost as having nutrients, particularly phosphorus, in the compost so that's on our radar in terms of teasing out is it actually an increase in phosphorus nutrition and then there's also, what we're finding is that there's healthier potato plants.

Particularly, they don't die as early as untreated plants although those plants have had synthetic fertilizers added.

This extra longevity in the potato plant actually allows the late tuber bulking stage to be a bit longer and this means we get bigger tubers which relates to greater marketable yield and in cases where the larger tubers are desirable actually greater marketable yield and bonus payout to producers.

Dr Tenuta says the effectiveness of the treatments in killing Verticillium and in reducing disease and how that impacts marketable yield, size distribution of the tuber and quality parameters will be assessed.

He hopes to have the first preliminary results from the study available by next fall.

[Mustang Sally Farm]

Wednesday, September 07, 2011
Pork Commentary: Hog Production in Tricky Position
CANADA - This week's North American Pork Commentary from Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
Corn closed Friday at $7.60 up $3.00 a bushel from a year ago. That’s at least a $25.00 per head farrow to finish increase in cost of production year over year.


On Friday, soybean meal closed at $385 per ton up $100.00 per ton from a year ago. Put the corn and soymeal price increase together it’s a cost of production increase of at least $30.00 per head year over year. A big increase and one that with October Lean Hogs 85.80 Friday we expect financial losses in the coming weeks.


If there was any consideration of breeding herd expansion we believe it has come to a halt. We believe that the USA-Canada breeding herd is getting smaller every week. Cash early weans around $20.00 doesn’t work for the sow owner. This in itself is lowering the breeding herd. Throw in $7.00 plus corn and the risk to reward for any expansion is daunting.
Chicken
The chicken industry is suffering serious financial losses. Sanderson Farms, the 4th largest chicken producer lost $55.7 million last quarter. Pilgrim’s Pride the second largest producer lost $128 million last quarter. The chicken industry is reacting to this grim reality. The latest egg sets were down almost 13 million (-7 per cent) from the same week a year ago.

Throw in the announcement that Chicken Integrator Townsends Inc. is closing down the first of October due to losses and Allen Family Foods have filed for liquidation. While some chicken industry observers are speculating 8-10 companies are struggling with potential bankruptcy. Put the pile of all these stories together and you get a strong feeling the chicken industry has been hit hard and there will be less chicken in the coming weeks and months. The chicken industry run to gain market share from beef and pork is looking like it was assisted suicide.


This past week we had meetings with some Genesus South Korea customers. Their country is still recovering from the devastating Foot and Mouth disease that lead to 1/3 of their production to be destroyed. They told us the market price in South Korea is equivalent to $2.50 US liveweight a lb. ($5.50 a Kilo).

This is down from over $3.00 per lb. now that pork is being allowed in tariff free. We expect US – Canada pork exports to South Korea will stay strong until at least the summer of 2012. All feed is imported into South Korea but at $2.50 a lb. the producers with hogs are making over $300 per head. They are one happy group.


On a real personal note we are very pleased that Genesus has supplied over 60 per cent of all the breeding stock imported in South Korea from everywhere in the world since 1 June, when imports where first allowed since the Foot and Mouth break. In our meetings last week we asked our South Korea partners why do they think we have such dominance. They replied "Performance" Genesus over the past five years has shown South Korean producers, more pigs, growth and that there strong. Strong being under disease conditions less problems and strong better feet and legs. As President of Genesus the reason “performance” was gratifying. South Korea producers have lots of genetic choices as every genetic company from all over the world has been in South Korea trying to get sales.


Another Genesus customer Evergreen Colony recently was chosen as the Maple Leaf Foods – Signature Award winner for 2011. The Signature award is a weighted combination of backfat, loin depth, index, yield and sort. Evergreen was chosen based on 12 months of carcass data out of producer pool that supplied over 4.3 million market hogs to Maple Leaf Foods – Brandon in the 12 month period. Only one number one – Evergreen – a 20 year Genesus customer using Genesus Duroc sires being bred to Genesus Yorkshire Landrace. Evergreen weaned 29.5 pigs per sow in the last calendar year. Congratulations to Evergreen! Congratulations to Maple Leaf Foods. As we say Genesus – The Total Package. More Pigs, Better Pigs and more Profit for you.


A big win for US pork producers with Mexico scheduled to remove the retaliatory duty on US pork in October, because Mexico’s trucks will be allowed in the United States after a ten year dispute. Removing Duties on pork by Mexico, the United States second largest buyer of pork should be price supportive for US producers.
Summary
Feed Prices are daunting – chicken is cutting back under financial distress. The coming weeks for hog producers will be margin challenging. We expect there is breeding herd liquidation and we are setting up hog prices to meet and exceed this year prices next year.


Author: Jim Long, President & CEO, Genesus Genetics

[Mustang Sally Farm]

Bill Threatens Ability of Abattoirs to Access Pigs
CANADA - The executive Vice President of Hylife Foods warns the ability of his company's recently upgraded Neepawa pork processing plant to access adequate hog supplies is being threatened by the Manitoba government's expansion of its moratorium on new hog barn construction, 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. 

Bill 46, the ‘Save Lake Winnipeg Act’, passed in June, contains new provisions to reduce the amount of nutrients entering Lake Winnipeg including extending a 2008 moratorium on new hog barn construction or expansion in part of Manitoba, to the entire province.

On 13 September, representatives of the town of Neepawa, Keystone Agricultural Producers Hylife Foods and the local pork industry gathered in Neepawa to draw attention to the impact the bill will have on their local economy.

Hylife executive vice-president, Denis Vielfaure, fears the bill will hamper the ability of abattoirs, including his company's recently upgraded Neepawa processing plant, to access hogs.

Denis Vielfaure – Hylife
It is getting of a concern.

We've had a couple of really tough years in the hog industry.

We lost ten per cent of the inventory in Canada in the last two years, there's less hogs.

We have abattoirs that are here, they need hogs so there's a bit of a demand for hogs right now.

Typically, through normal attrition, you'll keep that balance and a little bit of a growth but we haven't seen that because of the hard times in the industry.

Now with a higher level of environmental regulations which are closing down some of the smaller farms who can't cope with the costs and also some that simply don't want to invest in this industry because it's too tough.

Mr Vielfaure acknowledges as a result of factors such as the high value of the Canadian dollar and US Country of Origin labelling (COOL), which have reduced to the movement of Canadian hogs south, Hylife has been able to access enough hogs, but just enough and he insists we can't allow that to slip.

[Mustang Sally Farm]

Lentils a Good Protein Source for Weanling Pigs
CANADA - Research conducted by the University of Alberta has concluded the diets of weanling pigs can include up to 20 per cent lentils without any negative impacts on performance, 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. 

Lentils contain higher levels of protein than cereal grains but less than canola meal or soybean meal and are a potentially good source of energy but they contain antinutritional compounds that can reduce performance when fed to pigs.

An abundance of lentils following the 2010 harvest prompted researchers to launch a three week feeding trial in which lentils were included in the diets of nursery pigs weaned at three weeks of age.

Dr Ruurd Zijlstra, an animal science professor with the University of Alberta, says the trial began about one week after weaning and researchers gradually replaced 20 per cent of the soybean meal and ten per cent of the wheat in the ration with lentils.

Dr Ruurd Zijlstra-University of Alberta
Probably two things that we found.

The first one is pigs actually are willing to eat lentils so there was basically no response to feed intake so that's a very good thing because it means the anti-nutritional factors that were still in these lentils, they did not have a negative impact on voluntary feed intake, so in other words from that perspective we can feed 30 per cent lentil.

The other thing we found is that using the predicted digestible nutrient profile that we use for feed formulation, up to about 22 and a half per cent of lentil we did not find a change in average daily gain and feed efficiency but once we moved to 30 per cent of lentils we saw a slight negative effect on daily gain and feed efficiency.

That means that we conclude that up to close to 20 per cent of lentil in the diet for nursery pigs, you shouldn't expect a negative impact on performance.

Dr Zijlstra says the big advantage is lentils are one more feedstuff that can be considered for diet formulation providing more flexibility in the feedstock matrix.

[Mustang Sally Farm]

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

Jim Long is President &
CEO of Genesus Genetics.
December corn lost 53.5 cents a bushel last week closing Friday at $6.38. It is good to see it going down when not so long ago corn was $7.79 and there were some speculators chirping that it might go to $12.00 a bushel.

Of course part of the price slippage is due to the general negative news that have dominated the global economic news.

Not sure how relevant the reports we are getting, but early indicators from the US, harvest is many are finding 20 more bushels of corn per acre than they expected. A Bigger corn crop then expected is only good news for hog producers.

While corn was down October Lean hog futures gained $1.45 a pound for the week.

The combination of corn down 53 cents a bushel and hogs up $1.45 a pound improved hog margins about $8.00 per head.

You can see the improvement in Hog Margins in the livestock margin that DTN Ag data does daily. Not so long ago it projected you could pay $30 for a 45 pound feeder pig. Last Friday it projected $50.78. That is a $20 improvement per head.


Pork demand is strong. Last week the US marketed almost 2.3 million hogs. That is 100,000 more than the same week last year despite the greater number of hogs per week. The lean hog price is $7.00 per hundred higher than a year ago with USDA. US pork cut outs at $97.84 an unprecedented high price with hog numbers at 2.3 million per week. Fantastic demand from pork exports will continue to support hog prices throughout the fall.


Pork demand will be further aided in the coming weeks as chicken marketing’s drop about 5 -7 per cent year over year or about 10 million less chickens a week. Less chicken should support their own prices but also help pork.


The US September Cattle on Feed report released last Friday is being called bullish. 1 per cent less cattle than a year ago surprised the trade which was expecting 1 per cent more. This should push cattle prices up which should also pull hogs along.
Tough Times
It’s not easy to be a hog producer. Feed prices have been at unprecedented levels and then throw in the fear of even higher feed prices it makes it even harder. We get a sense of little optimism in the hog industry. A sense that many feel marooned in the hog industry with little opportunity to escape. We have as an industry in the last few years had to deal with negative margins, high feed prices, H1N1 (swine flu), animal welfare, environmental, corn ethanol, etc… It appears we have not got many breaks. The bright spot is pork demand has been strong domestically and globally. This has allowed lean hog prices to reach and exceed $1.00 lean per pound. We expect much of the same in prices in the next twelve months. As hog producers we are producing a product that domestically and globally people are voting with their money that they want. That in itself is an underlying strength that we have in our business. No choice, no exit strategy, best we stay focused on maintaining our position as the Number One choice of protein consumers in the world.


Author: Jim Long, President & CEO, Genesus Genetics