Canadian Pork Producers:

[Mustang Sally Farm]

Monday, October 03, 2011
Pork Producers Urged to Be Aware of Ergot Infection
CANADA - A swine nutritionist with the Prairie Swine Centre is encouraging pork producers to be aware of the potential for ergot in cereal grains this year and avoid feeding contaminated grain to pigs that will become part of the breeding herd, Bruce Cochrane writes.


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Manitoba Pork Council and Sask Pork

FarmScape is a Wonderworks Canada production and is distributed courtesy of Manitoba Pork Council
and Sask Pork. 

Ergot is a fungal disease that thrives under cool damp weather conditions infecting cereal grains at the flowering stage producing toxins that reduce the grain's end use desirability.

Ergot has emerged as the primary downgrading factor affecting cereal crops this year.

Dr Denise Beaulieu, a research scientist nutrition with the Prairie Swine Centre, explains you can actually see evidence of the fungus which is black in the sample and the fungus itself contains the toxins which are alkaloids and there are many different types of alkaloids so the concentration of alkaloids and the type of alkaloid will influence toxicity.

Denise Beaulieu-Prairie Swine Centre
When we did an experiment a few years ago looking at the effect of ergot on growth of weanling pigs the first thing that we saw was a depression in feed intake so this affected overall performance.

At levels as low as 0.1 per cent of ergot in the diet we saw a negative effect on growth and feed intake of the young piglet.

At that stage of growth we didn't see any gender specific effects but we also did see at very very low levels effects on some of the hormones in the piglets that would be associated with reproduction and so, while we would recommend that you could feed grains that have a very low level of contamination to the growing pig, we would recommend that you do not feed any at all to the breeding herd.

Dr Beaulieu says you can have ergot in the diet at levels not greater than 0.1 per cent so if you suspect ergot have your grain tested, then dilute out the ration to be sure it is not higher than 0.1 per cent and certainly do not feed it to any sows that will be destined for breeding.

[Mustang Sally Farm]

Tuesday, October 04, 2011Print This Page
Pork Commentary: September Hogs and Pigs Report Bullish
US - In this week's Pork Commentary, Jim Long comments on the latest Hogs and Pigs report released by the USDA on 29 September.


Jim Long is President &
CEO of Genesus Genetics.
Some of the wizard economists have called the last weeks USDA bearish, we don’t see that. This summer while we had US lean hogs around $1.00 the US breeding herd did not expand with the September breeding herd at 5.806 million, only 3,000 head greater than the 1 June. No expansion despite prices at historical highs. A breeding herd that is not expanding will not produce significantly more hogs over the next 10 months. Write $1.00 lean plus on the wall for next summer!

On the market hogs and pigs inventories we look at the inventory below 180 pounds. As most over 180 pounds on 1 September have already gone to market. The USDA reports that below 180 pounds 1 September was 49.917 million just a bit over 200,000 head higher than last year’s 49.682 million. That is less than ½ of 1 per cent difference year over year. The bottom line is the breeding herd and hog and pig numbers show little significant change. Going forward hog prices will be more affected by demand than supply variation. We are bullish, the USDA report is bullish. Demand is strong. How strong is pork demand? Last week despite marketing 2,250 million hogs US pork cut outs were 98.06 per pound, while the National 53 – 54 per cent lean hogs averaged $92.20 per pound. Both unprecedented high prices at market numbers that are 250,000 head a week more than we were selling weekly in the summer.

As we have been continually writing, hog prices in the major import markets of Japan, Mexico, South Korea, China and Japan are significantly higher than USA–Canada market prices. These price points will continue to pull pork to these markets. This pushes US hog prices higher. Throw in the high likelihood of less US beef in the coming year and US chicken supply that egg sets reflect 10 million fewer chickens per week year over year, it doesn’t take a rocket scientist that a growing US population will have to pay more for their meat ­­­­­­­­­­­­protein as total supply declines. The combination of supply and demand, we reiterate is bullish.

The Surest Cure for High Prices is High Prices
What a Eureka moment! Friday, the USDA discovered that $7.00 plus corn cut demand and increased supply. Friday’s USDA report indicated 164 million more bushels in storage than the experts’ guesses. By the end of the day corn had dropped 40 cents a bushel on the Chicago Board of Trade. On August 30, December corn was $7.75 a bushel with some ‘experts’ talking $12.00 per bushel. On September 30, a month later corn closed at $5.92 a bushel. That is almost a $2.00 per bushel decline. Also, on August 30, soy meal was $383 per ton while last Friday, September 30 it closed at $304 a ton. Almost $2.00 a bushel on corn and $80 a ton on soy meal translate into about a $25 per head decline in farrow to finish cost of production. That’s big money going in the right direction.

Margin Increase
The DTN Agdayta breakeven for 45 pound feeder pigs was $61.44 on Friday up $30.00 per head from a month ago. This is a reflection of the margin improvement in the industry mostly due to the big drop in feed prices. Unfortunately for feeder pig sellers the increase to $61.44 per head has not been reflected in the market place with the USDA weekly price calculation for 40 pound cash feeder pigs averaging $35.73. That is a huge difference. Over the years we have watched the small pig cash market and it usually follows the DTN Livestock Margin. Consequently, we expect a rapid increase in small pig prices in the coming weeks. 90 days from now we expect feeder pigs will be $80.

Summary
The September USDA Hogs and Pigs Report indicated a status quo for supply and when combined with strong pork demand domestically, and globally we expect this will lead to lean hog prices historically high for the next twelve months. We hope that the recent drop in corn and soybean prices continues, if it does, some fantastic hog margins will be captured in the next twelve months.


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Wednesday, October 12, 2011
Pork Commentary: CBOT June Lean Hogs
US - This week, Jim Long writes about the US hog market in his latest Pork Commentary.

Jim Long is President &
CEO of Genesus Genetics.
Last week we called the September Hogs and Pigs Report bullish. The Chicken Little Economists called it bearish. When the dust settled last Friday, June lean hogs closed at a new contract high of $100.40 per pound up from $97.75 a pound the day the Hogs and Pigs Report were released. The report was bullish! The final result: Pig Farmers 1, Chicken Little Ag – Economists 0.

Demand
Last week the US marketed 2.34 million hogs up 100,000 from the same week last year. A real reflection of the tremendous pork demand we are having is the fact despite 100,000 more hogs the lean hog price of 53 – 54 per cent lean hogs was $94.91 per pound last week compared to $79.88 a year ago. That’s $30.00 per head more per market hog year over year in the face of 100,000 more hogs per week. That’s a real reflection of the strong pork demand of both domestic and export markets.

Other Observations
Cash early weaned pigs jumped up $5.00 per head last week (still real low at $22.47). We expect a rapid increase in both early weans and feeder pig prices in the coming weeks as the breakevens reflect higher hog and lower feed prices. We expect feeder pigs will reach $80.00 in the next 90 days.


Chicken production continues to plummet with chick placement down 9 per cent last week from a year ago (approximately 13.5 million chickens less a week). Unfortunately for the chicken industry less chicken is not translating into higher chicken prices as the composite average 12 city boiler price is $72.20 a pound down from the same week last year’s $80.59. Lower chicken prices and higher feed prices are leading to ongoing chicken industry financial losses. Has chicken consumption hit a consumer consumption ceiling? Whatever is happening 13 million fewer chickens a week means less protein for pork to compete with. This is very supportive for hog prices.
Beef
We read a report this past week from Rabobank – the world’s largest ag – lender about US beef supply. The gist of their presentation is in the last half of 2012 US beef production will be significantly lower. A combination of drought and continual herd reduction will lead to extremely strong prices. As it is said ‘The dog is going to hit the end of the chain.’ No more give. If the scenario is correct the high cattle prices will pull hogs higher.

US sows slaughter the week before the USDA September Hogs and Pigs Report released were 64,856. That is a level that would reflect liquidation. Now we have a bullish report we will monitor if this continues.


We know of some empty sow barns starting up again but we know of no new sow barn construction in the US and Canada. We expect that the breeding herd number is moving little either way up or down. The big factor for ever stronger prices continues to depend on pork demand.
Summary
The US hog industry is benefiting from tremendous demand. Despite huge runs of market hogs lean cash hog prices are in the mid 90’s. As hog numbers seasonally decline over the next few months and pork demand stays robust (as chicken and beef supplies decline) we expect to see record seasonal hog prices.


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Tuesday, October 11, 2011
Strong Hog Prices Offset Feed Cost Concerns
CANADA - A partner with Gowan's Feed Consulting reports strong hog prices are helping offset some of the concerns of western Canadian pork producers over high feed costs creating some optimism moving into the fall and heading toward winter, 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. 

As the result of the difficult 2011 growing season, the cost of the various ingredients contained in rations for feeding swine have been extremely volatile heading into the fall.

Neil Campbell, a partner with Gowan's Feed Consulting notes, while feed ingredient costs typically come down following the fall harvest, prices have not come down as much as pork producers would have liked.

Neil Campbell-Gowan's Feed Consulting
Recently we have seen the cost of corn starting to come down and that is pressuring barley and wheat out of the rations in Manitoba.

The wheat price and the barley price, interestingly in Alberta and Saskatchewan, haven't really been following corn down.

They've stayed pretty stable which is a bit of a surprise in light of the fact that we didn't see much for harvest pressure this year on the price and our price really hasn't moved too much over the last few months on wheat and barley like we would expect it to especially in light of the fact that the corn price has come down.

On the protein side we've seen soybean meal and canola meal come down in price quite a lot here in the last few weeks.

Canola meal is trading probably 60 to 70 dollars lower than it was two months ago and really starting to be a factor in the rations where it hasn't been for quite some time.

Mr Campbell says, although feed costs have not come down as much as would typically be expected heading into in the fall, the pig price has been fairly strong so there is some optimism.

He encourages producers to consider locking in some percentage of their feed costs based on what they can sell the pigs for on the other side and look at hedging in some profits because these markets have been so volatile and there are profits on the table currently.

[Mustang Sally Farm]

Tuesday, October 18, 2011
Pork Commentary: US Meat Production for 2012
US - This week, Jim long writes about the US red meat and poultry price projections for 2012.
 

Jim Long is President &
CEO of Genesus Genetics.
Lower or no profit margins are pushing US total red meat and poultry production lower. The USDA projects over a billion less pounds in 2012 will be produced compared to 2011.

USDA Projected Production
(million pounds 2012)
  2011 2012
Beef 26420 25135
Pork 22660 23074
Chicken 36942 36604
Turkey 5717 5660
Total Red Meat and Poultry 92559 91283

An increase in US population and a small increase in exports have USDA projecting in 2012, 201 pounds of red meat and poultry per capita disappearance down seven pounds per capita in two years.

Less protein available will be price enhancing for pork producers. Lean hog futures reaching over $1.00 a pound is a strong reflection of the market place expecting ever stronger prices.

CME April Live Cattle closed last Friday at $128.15 a pound up from $1.06 almost a year ago. That is an increase of about $250 per head. Higher cattle prices will absolutely pull lean hogs higher, as the USDA projects the 2012 beef supply 5 per cent lower year over year.

We remain quite optimistic of strong lean hog prices through the summer of 2012. The wild card is feed costs as they go up and down in huge price swings. This past week corn jumped 40 cents a bushel while soybeans climbed $1.00 per bushel. The insanity of corn ethanol continues to wreak havoc on swine production cost structure.

Spain
This past week we had visitors from Spain.

Spanish producers are receiving about 75 cents US per pound (1.20 Euros per kilogram).


Producers in Spain are feeling strong economic pressures as only the best can make any money at current prices.


The cost of feed in Spain is such that about $140 is needed to produce a market hog.


Spanish producers are looking for productivity improvements as a way for them to survive. Genesus is glad to report that we are establishing a production facility in Spain to have Genesus Genetics available for the domestic market.


The European Swine Industry is under intense pressure. The industry is contracting. A report from The Netherlands last week indicated that Dutch based Topigs Genetic Company lost in the first six months of 2011 138 customers (33,000 sows). Topigs explained that they expect their gilt sales in The Netherlands will decline 27,000 gilts per year. This is a tough time for Topig.


Kicking Topigs when they were down was the President of Netherlands based Hypor (Hendrix Genetics) Antoon Van den Berg who said in a Dutch interview "The farmers are not happy with Topigs at all, the slaughter hogs cannot keep up with the hogs from the competition breeding companies." It seems to us the Dutch Swine Genetic Industry must be a blood sport. In the same interview, Hypor President Mr. Van den Berg was asked "Why is it not possible for Hypor to get more market share in the Netherlands?" He replied: "Hypor didn’t have market share in the gilt sales in the past, the image from Hypor not good at all, this is still hurting us."
As a competitor we have to admit we find it amusing when another competitor falls on their own sword while confronting their own brutal facts.

Bottom line: Intense competition in the Swine Genetic Industry pushes genetics forward which helps producers to lower the cost of production, increase productivity, and profit potential. I have to say the scenario is stimulation and challenging – but never boring!


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Tuesday, November 01, 2011
Pork Commentary: Road Trip to Montana and Alberta
US & CANADA - Last week we went to the state of Montana and the Canadian province of Alberta. The purpose of the visit was to have group meetings with Genesus customers and prospects. Of course, we got to hear about markets and other industry issues, writes Jim Long in this week's Pork Commentary.
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.
Montana
We had our meeting in Great Falls Montana. Montana is an important area for Genesus as we have over 30 per cent market share.

Montana is a tough area to raise hogs. Crop land is not the highest yielding and many producers are taking hogs 1,000 miles to market. These circumstances put extreme pressure on producers to push the envelope to increase productivity and keep costs in check. If you’re not good you can’t survive, consequently as a region we expect Montana has the highest productivity of any US state. A barometer of this is Genesus customers in Montana have by our calculation on average weaned an average of 27.3 pigs per sow per year, with some over 30.

The reality of Montana’s distance to markets leads producers to work together as a group. At our meeting there was extensive discussion and questions about pork quality and consumer desires. The Montana producers know one of the major keys to success for the pork industry is producing pork that creates demand. Marbling, meat color, ph, and tenderness were all points of dialogue. With this backdrop Montana produces almost exclusively Duroc boars (Genesus has the largest registered Duroc herd in the world) in their goal to produce pork with high standards.

Alberta
Our meeting in Lethbridge Alberta directly followed the annual producer meeting held by Maple Leaf Foods (Canada’s largest food company) for its Lethbridge plant. Producers were quite positive after the meeting as Maple Leaf appears committed to keep the export focused Lethbridge plant rolling. This sentiment was further augmented by Maple Leaf’s announcement two weeks ago to invest $560 million in infrastructure and technologies over three years in establishing world class prepared meats network. Not only will this investment keep Maple Leaf globally competitive but it should be seen as a huge positive for all Canadian producers. With 50 per cent of Canada’s pork production exports any and all efforts to keep the Canadian pork chain more competitive is price enhancing.

One of the great positives for Alberta Pork Exports is that currently Alberta feed prices are the lowest in North America but this is being done with little use of DDG’s, this in turn is keeping meat quality higher as the soft fat associated with DDG use is not prevalent. Several packers across North America have told us over the last few months about the issues of soft fat and soft bellies that lead to demand challenges. It’s the reason Iodine tests to measure fat firmness are now being done at several plants, soft fat is bad. An extra cost from the insanity of corn ethanol.

Alberta producers that attended our meeting were optimistic and as a group excellent producers. We don’t sense any significant expansion will be undertaken; it is more of how to get more productive and lower costs.

Other Observations
US cash early weans are averaging $32.86 and cash 40 pound feeder pigs $47.58. Each price is up almost $15.00 per head since September. We expect prices to continue to move higher.


The latest US weekly sow slaughter indicates 62,125. It appears we are running 2 – 4,000 head a week higher than a year ago. We believe such numbers mean there is little change happening in the US breeding herd.


Last week US 450 – 500 pounds sows averaged 61.56 cents per pound; a year ago they averaged 49.70 cents per pound. That is about $60 more per head this year compared to last. That certainly helps profits and cash flow.


Last week 53 – 54 per cent US lean hogs averaged 94 cents per pound the same week a year ago the price was 66 cents per pound. With a 200 pound carcass that would be $56.00 a head higher year over year. Last week US hog marketing’s were 2.306 million the same week a year ago they were 2.311 million. PORK DEMAND – same number of hogs and $56.00 more per head! The industry has some tremendous demand momentum. Thank goodness for exports!
Global Wealth
The 2011 Credit Suisse Global Wealth Report was released last week. ‘Since last year’s report global wealth has increased to USD 231 trillion from USD 195 trillion. Looking ahead, we expect to see total world wealth increase by 50 per cent to USD 345 trillion by end – 2016."

The high wealth growth countries in 2010 – 2011 (over 10 per cent) included Australia, Brazil, Chile, China, Colombia, India, Indonesia, Malaysia, and South Africa. The USA was under 5 per cent 2010 – 2011; Canada was (5 – 10 per cent).

Two interesting points wealth creation with recession ongoing? What is a recession? The second point as wealth increases in countries like China already a huge consumer of pork, we expect this will continue to increase pork demand. It is proven higher wealth leads to higher meat consumption. Global wealth increasing is good for the pork industry.

Summary
Despite what the Chicken Little Economists have been saying for months about prices and pork demand the market place is ignoring their projections. Global demand for US and Canadian pork is pushing prices higher. We expect a continuation over the next several months.

Genesus Announcement
Genesus is pleased to announce that Paul Flint and Susan Wulf of Ames, Iowa will be moving near Krasnodar, Russia to manage Genesus’ New Registered Purebred Nucleus and Multiplication system (6,200 sows) with other responsibilities including sales and marketing.

Paul Flint: Recently Swine Business Development Manager – Allflex USA. Previously Production and Marketing Manager Waldo Farms breeding company.

Susan Wulf: Recently Sales Manager PigChamp Swine record keeping company. Previously Real State and Contract Administrator with Christensen Farms Sleepy Eye Minnesota and Swine Farm owner.

Genesus is the world’s largest register of swine breeding stock. Purebred genetics are of paramount importance in the Russian market. Paul and Susan’s Russian responsibilities are very important for the development and education of Russian swine production personnel and the insurance of rapid genetic progress.


Author: Jim Long, President & CEO, Genesus Genetics

[Mustang Sally Farm]

Wednesday, November 09, 2011
Pork Commentary: Canada's Breeding Herd Steady
CANADA - This week, Jim Long takes a look at the latest Canadian swine inventory released by Statistics Canada.

Jim Long is President &
CEO of Genesus Genetics.
Statistics Canada released Canada’s Swine Inventory for 1 October last week.

Hogs on Farms Canada
1 October (thousands of head)
Year Breeding stock All other hogs
2004 1,628 13,216
2010 1,307 10,577
2011 1,308 10,681

The Canadian breeding herd is steady at 1.308 million while the market hog inventory has gained about 100,000. The bottom line: steady as she goes.

Look at 2004: since then Canada’s breeding herd has dropped 320,000 while the market hog inventory is down about 2.5 million. The strength of the Canadian dollar, Country of Origin Labeling (COOL), high feed prices, and Government buy-out scheme have significantly cut production.

Live Hog Exports to US from Canada
January – 22 October 2011
  2011 2010 % change
Barrows/Gilts/Sow 812,842 879,983 -7.6
Feeder pig 3,793,407 3,755,443 +1.0
Total 4,606,249 4,635,426 -0.6

The steady as she goes applies to Canadian pigs to USA, basically no change year over year. The bottom line:

The financial scenario in Canada’s swine industry will in our opinion not encourage any expansion in the near future. No new sow barns are being built. There are some existing empty sow units that will be refilled over the next two years as they come out of the Government buy out. We expect what comes back into production will probably be countered by older barns going out of production.

Continental Inventory
In conjunction with the release of Canada’s Swine Inventory the USDA prepares a USA–Canada combined inventory.

Hogs and Pigs Inventory Number by Class and Quarter – United States and Canada
September USA – October – Canada (thousand head)
  2010 2011
Kept for breeding 7,077 7,114
Market 70,779 71,475
Sows Farrowed 3,655 3,600
Pig Crop 35,984 36,252

The total supply of USA–Canada statistics tell us there is no indicators showing increased hog supply. A handful more sows, a handful more market hogs, and a bit larger pig crop is no indicator of any expansion. We expect hog prices will continue strong over the coming months. Supply is not the issue. Demand is everything.

Chicken Little Economists
We are accused of being optimistic and we are certainly not Chicken Little Economists. Last week, in the North American Review, Dr Steve Meyer economist listed potential 'sky is falling' scenarios.

His list:

A trade disruption that would leave any significant portion of the 22 per cent or so of US production that will be exported this year.
Something that negatively impacts US consumer level pork demand.
Output growth of four per cent or more and maybe even less, depending on the 2012 corn crop
Insufficient slaughter capacity in the fourth quarter 2012.
Of course, Dr Meyer is right – these are all points that could impact our industry. It’s good to be aware of what might go wrong. Be prudent.

We see differently, we do not dwell on what might go wrong. We are all descendents of immigrants that came here with little but optimism. Over generations, a next to vacant land has been built into the world’s largest economy, the world’s most innovative with the world’s best productivity. A society that looks ahead not quivering from what might go wrong. The sky is falling!!

Personally, having travelled to 38 pig-producing countries, I find it defeatist to think anything but that we can compete in the world. We have capital, expertise and infrastructure from production to packing – second to none.

Our perspective to Dr Meyer's points:

The world wealth is growing. They want meat protein – this leads to more pork exports, not less.
Pork is the safest meat product. No E. coli scares, no salmonella scares. Consumers have more fear of cantaloupes.
In 2012, every acre will be planted for corn, wheat and soybean in the US and the world. One of 10 years, there are US crop failures. You go broke betting on crop failures (corn in China $9 per bushel last week).
More hog output of four per cent by fall 2012? The September sow herd is the one bred for next fall. Four per cent increase will not happen from a ½ of one per cent greater sow herd.
Half of one per cent more sows on 1 September will never produce enough hogs to overwhelm US packer capacity next fall. The fear of 1998 is a red herring.
One other note:

We have been writing for a couple of years about the huge increase in planted grain acres in the world. High prices have led to more wheat acres. The International Grains Council projects the world’s wheat inventories the highest in 10 years at 684 million tons. December wheat closed at $6.23 last Friday. That is down over $3.00 ($9.65) a bushel from the high earlier this year. Wheat at $6.23 will help keep the corn price down. Wheat can and will feed pigs as a substitute ingredient. As it is said: ‘Surest cure to high prices is high prices.’

Author: Jim Long, President & CEO, Genesus Genetics

[Mustang Sally Farm]

Friday, November 18, 2011
Call to Resume South Korea Pork Trade Negotiations
CANADA - The Canadian pork industry is once again calling for the federal government to resume free trade negotiations with the Republic of Korea without delay.
 

In meetings with interested Parliamentarians, pork producers and exporters pointed out the concerns which led to suspension of negotiations in 2008 have been resolved or addressed in the Korea-US Free Trade Agreement.

"The negotiations with Korea have been stalled since 2008," said Canada Pork International Chairman Edouard Asnong. "Canada is the second largest exporter of pork to Korea and expects to ship $300 million of pork products mostly from Quebec, Manitoba and Alberta."

The pork industry is concerned that competitors like Chile and the EU who already have an FTA with South Korea enjoy preferential access and that it will completely push Canadian pork out of a key market. US exporters are already benefitting from anticipation of rapid removal of high tariffs under the Korea-US Free Trade Agreement (KORUS) which only requires ratification by the South Korean parliament.

Over the next two years, the Canadian industry risks losing the existing C$300 million in exports and the additional hundreds of millions that could be secured if existing tariffs which range up to 25 per cent were eliminated on the same basis as for the USA. The Standing Committee on International Trade (SCIT) in its 2008 Study of the Canada-Korea Free Trade Negotiations did not recommend the negotiations be abandoned; they outlined objectives to resolve concerns in continuing negotiations.


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"The pork industry is concerned that competitors like Chile and the EU who already have an FTA with South Korea enjoy preferential access and that it will completely push Canadian pork out of a key market." 

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Richard Davies of Olymel said: "By 2016, the US will have no duty on chilled and frozen pork while we will pay 22.5 per cent and 25.0 per cent respectively. Even though the full reductions will not occur immediately, they will cumulate quickly. With this disadvantage our Korean business will be gone within two years."

Barry Sutton, Vice President of Maple Leaf Foods explained, "Negotiations with Korea must be resumed. The pork export sectors were not pleased with the Korean offers in 2007. Nor were our US counterparts and they continued their negotiations until US pork received a better deal. We are here asking the Government of Canada to stand up for our interests in the South Korea market."

"It is unfortunate that no meetings or negotiations have taken place for the past three years," Jurgen Preugschas, Chairman of the Canadian Pork Council (CPC) commented. "Canada needs access to Korea and its disappointing that after 13 negotiating sessions, virtually all of them generating positive signals, the discussion stopped."

[Mustang Sally Farm]

Wednesday, November 23, 2011
Pork Commentary: Canada-Mexico Win Trade Case
CANADA - In this week's Pork Commentary, Jim Long writes about the latest Country of Origin Labelling (COOL) win between Canada and Mexico.

Jim Long is President &
CEO of Genesus Genetics.
Canada and Mexico won a trade case against a US law on meat labeling at the World Trade Organization (WTO) last Friday. A WTO dispute panel agreed with their complaint that US mandatory Country of Origin Labeling was too stringent, giving US cattle and hog sales an unfair advantage over imports from Mexico and Canada.

The US Trade Representative office said the panel affirmed the right to adopt labeling requirements and confirmed requirements, "We remain committed to providing consumers with accurate and relevant information with the respect to origin of meat products that they buy at the retail level."


Canadian Agriculture Minister Gerry Ritz said the ruling marked a "clear win" for Canadian beef, pork, and other livestock producers.


Mexico, Canada, or the United States can appeal the ruling in 60 days. It is expected the US will appeal.


Doug Wolf, President of the National Pork Producers Council (NPPC) the trade group (NPPC) opposed the labeling requirement when it was being considered by Congress, in part because of trade implications for trade relations. He said the costs "far outweigh any benefits and the US risks a ‘trade war’ with its neighbours if the decision stands and the US fails to comply."
Our Observations:
Over 25 per cent of US pork is being exported, Doug Wolf the President of NPPC is wise to articulate opposition to Country of Origin Labeling. The US needs global market access, building a template for other countries to restrict pork imports is not a good policy.

US Retail Meat Prices
October
Beef $4.90 per pound Up 10 per cent compared to October 2010
Pork $3.05 per pound Up 4 per cent compared to October 2010
Chicken $1.76 per pound Up 1 per cent compared to October 2010

Price is a reflection of demand. Red meat (beef and pork) command a dominate price point over chicken. People vote with their money – they want what they want.

If we use the USDA’s projected disappearance of meat per capita and put retail price per pound on each category it gives a very rough estimate of money spent per person on each.

November 2011 projected Per Capita annual disappearance
Times retail price (November)
Beef 57.6 pounds X $4.90/pound $282.24
Pork 45.9 pounds X $3.05/pound $139.99
Chicken 83.2 pounds X $1.76/pound $146.32

There is no doubt red meat (beef – pork) is the choice of consumers with almost 3 times more money spent on them than chicken. Despite what is considered tough economic times US consumers are showing that they will spend more total dollars and significantly more money per pound for red meat compared to chicken. In retrospect it was a good idea to get rid of the Pork ‘Other white meat’ programme consumers want red meat.

Other Observations
USDA cash early wean average last week $39.53 and cash 40 pound feeder pigs $57.57; small pigs showing the seasonal trend up $20 per head in the last three months. We expect cash feeder pigs will reach $80 per head in the new year.


Sow marketing’s continuing at levels which we believe indicates if not liquidation, little if no expansion. The latest weekly sow marketing’s of 66,069 are at levels about 10,000 a head above what we believe is equilibrium. Hog to corn ratios fewer than 15:1, which we have, has never and will never lead to expansion.


The Global Grain conference was held last week in Geneva Switzerland. We understand the conference included discussions on global wheat inventory that is the highest in ten years. On that note wheat closed at $5.98 a bushel on Friday. The lowest previous close in the last five years wheat on the CME was $5.84 a bushel on 10 June 2010. Indeed on 9 February2011 wheat closed at $9.82 a bushel. That is a decline of almost $4.00 a bushel since then.
At the conference there was a premise that wheat which directly substitutes for corn in swine and other livestock poultry rations will do two things. Keep a lid on corn prices from increasing dramatically as wheat is a price competitive feeding option. Also that global wheat supply and prices would cut US corn exports. Since 1 September US corn exports 277,677 (thousand bushels) last year the same time period 353,970 (thousand bushels) or down about 25 per cent.

This scenario is a big plus for hog producers by helping keep a lid on feed prices are already at historically high.


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Friday, December 09, 2011
Act Threatens Supply of Hogs for Processing
MANITOBA, CANADA - Manitoba Pork Council warns provincial environmental legislation adopted earlier this year is putting the supply of hogs for the province's pork processors at risk which, in turn threatens the viability of hog farmers, 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. 

Provisions contained in the Save Lake Winnipeg Act, which was passed in June, require new or expanding swine farms to adopt costly technologies such as solid-liquid manure separation or anaerobic digestion in order to qualify for a building permit.

Manitoba pork processors, including both Maple Leaf and Hylife, have expressed concern over the impact of the legislation on their ability to source hogs.

Manitoba Pork Council Chair Karl Kynoch observes over the past two to three years hog numbers have dropped to the point where it's starting to put pressure on the processors.

Karl Kynoch-Manitoba Pork Council
We need to see 10 to 20 barns built every year just to maintain the current hog base that we have and in the last three years we've only seen about two or three barns that have actually been built so we're not replacing the infrastructure that is currently there.

As this infrastructure wears out and has to be shut down, if we can't replace it we will see a reduction in hog numbers.

The one thing for a packing plant, the processing sector to be viable here it has to run at full capacity to make sure it stays viable.

It's a very competitive market against the plants in the U.S. and around the world, so to stay viable they've got to stay full.

If you start pulling the supply down too low then they can't stay viable so the first thing they would have to look at is probably shutting down one shift.

That would eliminate about 12 hundred jobs just in Brandon alone if they would have to go that route.

So when it puts the risk of losing a plant, then for producers it puts at risk of losing access for your hogs and producers need all of the markets that they can for the hogs, all of the options to sell and if we start to lose a packer, if we put it at risk then it really creates a problem for producers.

We have less place to sell our product.

Mr Kynoch notes industry and government are working together in an effort to find affordable solutions that will provide producers the opportunity to expand and stabilize the supply of hogs necessary to keep the packing plants full while working in a positive way for the environment.

[Mustang Sally Farm]

Monday, December 12, 2011
Focus on Feeding a Growing Population
CANADA - The Chair of the Banff Pork Seminar Advisory Committee says the 2012 edition of the annual event will focus on providing pork producers the tools that will help them prepare to feed a growing global population, 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. 

The theme of the 41st Banff Pork Seminar, set for 17 to 20 January in Banff, Alberta, is "Feeding Tomorrow's World."

Jim Haggins, the Chair of the Banff Pork Seminar Advisory Committee and Chair of Alberta Pork, notes the global population recently hit seven billion people, the forecast is for another two billion by 2050 and it will be a challenge for all food producing nations to ramp up production to maintain the supplies of good sound nutrition for that expanding global population.

Jim Haggins-Alberta Pork
As you can appreciate over 41 years the industry has changed significantly and the seminar itself changes along with it depending on what is happening within the industry and what is expected to happen in the years ahead.

That's the main purpose of the advisory committee who have feet on the ground in the industry, are involved in it from a day to day basis so their forecast of the future of production, the future of the industry in general and their expertise within the industry whether it be through research or production or supply to the industry is all very important in determining the direction of the seminar and it has been able to keep up and keep ahead of evolving issues in the industry to help producers over time address productivity issues and supply issues etc.

Mr Haggins says as people in the developing countries earn more money they're altering their diets accordingly and eating more protein so the challenge will be to produce pork as efficiently as possible and to do it in a way that's sustainable for the longer term.

[Mustang Sally Farm]

Wednesday, December 14, 2011
Pork Commentary: California and Other Things
US - This past week we went to Southern California on business, it was our first time there, writes Jim Long in this week's Pork Commentary.

Jim Long is President &
CEO of Genesus Genetics.
Weather was good and certainly it’s an area that celebrates the automobile. Cars wall to wall! We live close to Detroit and could not help but think how the car pioneers in Detroit ended up so linked to the development and evolution of Southern California. Seems strange in some ways how the Southern California of green, hybrid, solar, windmills, etc... depends so much on the automobile but appears allergic to mass transit.

Nothing of this has anything to do with the swine business. Other than 30 plus million people in California who raise next to no hogs and need their pork from the heartland of America.

Observations
Seems to be lots of stories coming to us about PRRS outbreaks in the Mid West. We usually discount disease stories as market movers but maybe levels of breaks might be greater than normal. PRRS occurring now, the timeline of production wacks hog supply in the summer of 2012. Already the lowest season of hog supply; less hogs always make higher prices.


We understand some of the sow barns that broke with PRRS had filters. Filters work but old fashioned biosecurity is still necessary to keep PRRS out.


Genesus is currently running approximately 40,000 sow system PRRS, myco, and app negative.


As the President – CEO the health of a genetic system is paramount. We currently blood test for PRRS weekly or every time we select breeding stock. PRRS is a curse in the industry, how it can ravage producers financially is significant. We need to safeguard the chance of spreading PRRS.


Genesus and some other leading genetic companies are working with KSU, ISU and USDA in a consortium to study if there is a genetic component to PRRS. Naïve pigs to PRRS were inoculated with live PRRS strains and the results are being tracked and studied. Possibly there will be some findings come out of this research that will help us genetically select pigs more PRRS resistant. We hope so!


December is always challenging for hog prices to get traction. Too many days of holidays that Packers are closed to push packer demand. On the flip side weekly hog marketing’s usually start to decline seasonally. Last week the US marketed 2.330 million hogs, 3.9 per cent more than a year ago. Obviously not fewer hogs just yet.


Pork demand stays strong despite the 2.3 million hogs a week as lean hogs averaged $83.50 per pound on Friday. That’s about $40 per head higher than a year ago. A huge improvement and an absolute reflection of domestic and global pork demand.


A few weeks ago we wrote about the Global Wealth Report from Credit – Suisse Bank. The report indicated that the world’s total sum of wealth is the highest in history despite the recession in North America and Europe. The wealth creation in other countries is enhancing demand for meat protein. This is pulling pork, creating demand, and leading to stronger hog prices. Confirmation of this is October pork exports posted their second largest monthly total ever, trailing only March’s all-time high. Demand, Demand, Demand.

Author: Jim Long, President & CEO, Genesus Genetics

[Mustang Sally Farm]

Tuesday, December 20, 2011
Banff Pork Seminar Shifts to International Focus
CANADA - The Manager of the 2012 Banff Pork Seminar says the theme of this year's event reflects a shift within the Canadian pork industry from a localised to an international focus.

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. 

Delegates attending the 2012 Banff Pork Seminar will notice a host of changes as the annual event moves to a new conference facility on the Banff Centre Campus. The 41st Banff Pork Seminar will run from 17 - 21 January with an opening reception set for Tuesday, 16 January.

Conference Chair Ruth Ball says the Banff Pork Seminar is primarily a technology transfer conference focusing on educational updates.

Clip-Ruth Ball-Banff Pork Seminar: The Banff Pork Seminar's theme for this year is "Feeding Tomorrow's World" and I think this does show that the focus for the pork industry has changed from a very local focus to the international scene as the Canadian pork industry needs to see its place in the total international market for the world.

The topics this year are far reaching looking at how livestock and pork production in particular are going to fit into tomorrow's world of high technology, of helping to alleviate poverty and just helping the world to have abundant food and just where agriculture is going.

I think that the Banff Pork Seminar has looked at the needs of its delegates and decided that they are looking for some futuristic topics and in addition we still have the break-out sessions with the hands on technology information with the most modern technology that science in the industry is able to provide.

Ball says the new location will provide more comfortable space for seminar's plenary and break-out sessions and there is still plenty of room for new registrations.

[Mustang Sally Farm]

Tuesday, December 20, 2011
Pork Commentary: Global Demand Pushes Meat Exports to Record
US - October net exports of pork, beef, broiler and turkey were the highest month ever at 1.225 billion pounds and also represented the largest per cent of total US monthly production at 15.5 per cent.


Jim Long is President &
CEO of Genesus Genetics.
The October results for pork exports were also excellent, posting the second highest month ever at 438 million pounds year over year. Exports to China/Hong Kong (+277 per cent), Japan(38 per cent), South Korea (+65 per cent), and Canada (+27 per cent). Year over year October was up 42.3 per cent from 339 million pounds to 438.

As hog producers we better thank our lucky stars that exports are so strong. With US pork production running at levels similar to a year ago if it wasn’t for the extra 100 million pounds of pork leaving per month we would never be seeing hog prices $40 plus per head higher than a year ago.

The fact US pork exports and other protein sources are so strong is a reflection of huge global demand. Relative wealth increase in importing countries and lower supply in the importing countries are the main drivers.

In our opinion high feed prices and financial losses which have cut projected US per capita meat availability from 200 pounds per capita in 2008 to 180 pounds in 2012 is being reflected in what we believe have been meat production cuts in many other countries. The lack of supply in some countries is clearly reflected in their domestic hog prices with many currently double. US pork prices exports will stay strong for the foreseeable future as pork (and other meats) is pulled to these markets.

Other Observations

The US chicken hatchery supply stock on 1 November was 50.170 million hens, which is the smallest breeder flock since December 1996. Cutting the breeder flock is like cutting sows. The production base is down; months upon months of chicken industry financial losses have forced the chicken industry to truly cut supply capacity. Less chicken is always supportive to hog prices.

US farmland prices are posting record gains year over year, good farmland in Illinois has increased 23 per cent, Indiana 29 per cent, and Iowa 31 per cent. A huge equity gain for farmland owners and a reflection of the bullishness in present and future crop production. The bullishness for land is in our opinion opposite to producers of hogs. We sense little bullishness or optimism for the future of swine production. Too many years of no or small profit margins have dampened appetite for existing swine producers to invest in increased swine production.

Pioneer Hi – Bred is targeting a 40 per cent corn yield increase globally over the next 10 years, and Monsanto projects corn and soybean yields to double by 2030. We will need these gains to sustain our livestock production especially if the US government continues to force Corn Ethanol to be used in transportation. When you combine the projected yield increases, more land globally coming into production and improving farming practices we believe global grain production will expand tremendously. For example China’s corn yields are about 50 per cent of the US getting China corn production yields to US levels would be 180 million metric tonnes more than are being produced now.(seven billion bushels +).

We all farmed long enough to know farmers can’t stand a good thing; profits will always lead to over production. In the early 80s farm prices were high; the world was going to run out of food! By the mid 80s farm prices dropped in half. Lots of farmers lost their farms. We lived through it. The most dangerous words in business: ‘This time it will be different.’ Unfortunately history seems to always repeat itself.

Summary

Even though our hog prices have been high, profits have been small due to high feed prices. Hog to corn ratios currently are around 13:1 have never historically stimulated hog expansion – it won’t now either. In the coming months we see strong hog prices as domestic and export demand stay strong. A reflection of demand is 40 pound feeder pigs being sold currently over $70 per head. Supply and Demand is alive and well.


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Wednesday, December 28, 2011
Main Cost Advantage When Producing Pork
CANADA - Sask Pork reports the cost of feed remains Canada's main advantage when it comes to the production of pork, 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. 

InterPig, an international network of swine economists, collects and exchanges standardized information on swine production costs and productivity in various countries for comparison.

Mark Ferguson, the Manager of Industry and Policy Analysis with the Saskatchewan Pork Development Board and a member of InterPig, reports the cost of producing pork in 2010 was higher in Canada than in both the United States and Brazil but lower than in European Union countries.

Mark Ferguson-Saskatchewan Pork Development Board
Canada's main advantage continues to be feed costs and in 2010 Canada had the second lowest feed costs at about 88 cents per kilogram.

We are second only to the US which has an estimated feed cost of about 85 cents per kilogram so we're very very competitive across the world in terms of feed costs and, just depending on the year, we might be slightly below the US, some years slightly above.

It just depends on the markets but that's Canada's main advantage.

In terms of disadvantages versus the low cost producers I think we have a higher labor cost.

Especially in western Canada, given a lot of the economic activity and growth that's happening that isn't surprising.

Countries such as Brazil have a very low labor rate and I don't think it's ever something we'll be able to compete with.

I think in terms of infrastructure as well, building costs, Canada also has a disadvantage there, just a higher cost to build a barn in Canada versus some of the other low cost competitors.

But important to remember that, in terms of labor and building costs and some of these other miscellaneous costs we are very competitive versus the EU countries.

Mr Ferguson suggests Canadian producers needs to keep a handle on those costs that are higher than their main competitors such as labor and to continue to focus on their main advantage, feed costs, and making sure they use feed efficiently and keep productivity high.