Canadian Pork Producers:

[mikey]

Pork Commentary: EuroTier Report
GERMANY - "We spent the last week at EuroTier in Hannover Germany. Eurotier calls itself the largest livestock exhibition in the world," writes Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
After seeing it for four days, we have to agree.

Our Observations
EuroTier is massive. The site in Hannover covers hundreds of acres. The size of the buildings is mind-boggling. Some exhibitors such as Big Dutchman appear to have had thousands and thousands of square feet in exhibit space. There were many other displays that were large with hundreds of thousands of dollars for space, display, hospitality, and manpower being spent by several exhibitors. It was professional, and it was costly.


To understand some of the scope of detail was the expense by several exhibitors to purchase and outfit their exhibit personnel in matching suits, shirts and ties. Nothing was left to chance as the bi–annual EuroTier event is the major livestock exhibit in the 14 million plus sow industry of the European Union.


There were few exhibitors from the swine industry of North America at EuroTier. Genesus was the only large-scale swine genetic company based in North America that showed up to exhibit. There were 51 Chinese-based companies at EuroTier exhibiting their products. It is not hard to see which national group is the most aggressive is it. We never figured out why so many companies sit at home and wait for the phone to ring.


The European exhibitors we talked to told us the show was excellent for them. There are significant renovations of swine complexes and new buildings in central and Eastern Europe. There was certainly a positive feeling to the exhibition.


At the exhibitio,n there was a large contingent of Russian people looking at pig production expansion and/or investment. Russian pig producers should be making about $135 per head. That is a great stimulus for thinking being a pig producer is a good thing.


European 27 has about 14 million sows. It is a mature market like North America. We went as we have come to realise that our company, Genesus, is more than competitive with all the major genetic companies from Europe that have come to North America. Mature markets like Europe are margin-challenged and the only way for producers to prosper is to use all the technology and tools available to drive down costs and increase productivity. We see great opportunities for Genesus in Europe.
EuroTier was a positive environment and if was good to see a swine industry with hope. This despite high feed costs and having had to live with low margins. The world pork industry is providing 44 per cent of meat protein globally. The opportunities for pork producers as global disposal income increases is a positive that should help to keep us going each and every day.

Other Observations
June lean hogs closed Friday at $89.15 lean. This is getting closer and closer to 90 cents. If liquidation continues, we expect to see $1.00 lean hogs next summer. High feed prices are going to make less hogs. The sad part is high feed prices are not making 90 cent hogs a bonanza!

We have to watch chicken numbers. That industry has been on a path of destruction with production jumping five to six per cent year over year in the face of high feed prices. Let’s see if they blink. Last week’s year-over-year egg sets were only up one per cent. For all meat groups to have enhanced profitability in the coming months, chicken numbers need to stay close year over year. Last time corn hit $6.00 a bushel, Pilgims Pride – the world’s largest chicken producer – went broke. Maybe the chicken guys can open their history book. The old adage ‘this time it will be different’ never seems to play out.


Author: Jim Long, President & CEO, Genesus Genetics 

[mikey]

Production Costs May Determine Profitability for Hogs
CANADA - A US-based agricultural economist projects production costs, particularly feed costs, will be the biggest factor affecting profitability in the North American hog industry this winter, 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. 
US projected beak-even costs for raising hogs for next year have climbed from the low to mid 60s on a carcass weight basis in July and August to the mid 70s and as high as 78 or 79 dollars.

Paragon Economics president Dr Steve Meyer told those on hand last week for Saskatchewan Pork Industry Symposium 2010 corn is the largest feed ingredient and drives feed prices.

Dr Steve Meyer-Paragon Economics
We're going to see a big battle for acres next spring as corn, soybeans, wheat, even cotton fight over the available tilled acres in the US and so I think costs are going to be the issue.

This year of course the corn crop was thought to be very very good early on and it kind of got smaller and smaller as we got toward harvest.

It's still going to be the third largest crop on history but still because of when it happened, because we realize that it's going to be a short crop the season average corn price is going to be the highest on record.

The ethanol situation is still the driver.

There will be possibly some changes in policy on the blenders tax credit and the tariff but those plants are already out there and they're still going to make ethanol out of corn.

If those policies, the tax credit and the tariff are changed that could help prices some but it's not going to push us back down significantly lower than where we are now.

Dr Meyer says hog prices are always important for profitability but the futures indicate prices will be reasonably good next year if we can manage our costs.

He says, given these higher feed costs, feed efficiency will be critical and suggests fine tuning diets and checking feeder adjustments to make sure there isn't any feed going into the pit, optimizing selling weights and keeping an eye on other input costs such as energy.

[mikey]

CME: Livestock Imports from Canada Trend Lower
US - Cattle and hog imports from Canada have trended lower in recent years as a combination of a strong Canadian currency, declining livestock inventories and changes in US rules for handling imported livestock have negatively impacted trade flows, write Steve Meyer and Len Steiner.


It is important to recognize that following the NAFTA agreement, the US and Canadian livestock industries became increasingly integrated. In part this was supported by geography. It is much more efficient to have Canadian cattle flow into Western US packing plants from Alberta and Saskatchewan and have US beef flow into the populated centers of Eastern Canada. Also, Canada invested heavily in building feeder pig operations that quick quickly and efficiently service Midwest hog operations, many of them built when the Canadian dollar was trading at a significant discount tothe US currency.

Because of some technical difficulties, USDA stopped the release of import data in September and October but recently the data flow has resumed and USDA did provide the numbers for the missing weeks this falls. As the top chart show, feeder cattle imports from Canada remain quite limited and at some of the lowest levels in years. In the last six reported weeks (11 October - 20 November), USDA pegged imports of Canadian feeder cattle at 9,111 head, some 46 per cent lower than the comparable period a year ago and 82 per cent smaller than in 2008. Canadian feeder cattle supplies are quite tight and given the strong currency and good demand from domestic feedlots, there is very little incentive to ship feeders into the US market.

Also keep in mind that barley prices in Canada have not appreciated as much as corn prices in the US, making Canadian feedlots more competitive for Canadian feeder supplies. Omaha cash corn prices are currently running some 45 per cent ahead of last year’s levels, compared with Alberta barley which is currently up about 15 per cent compared to a year ago. More recently we have also seen a notable reduction in the number of Canadian slaughter cows coming into the US market. This is important as we see a developing shortage of grinding beef in the US due to very light shipments from Australia and New Zealand.

Canadian slaughter cow imports to the US in the last six reported weeks were 22,634 head, 7,096 head or 24 per cent lower than a year ago. Shipments of Canadian slaughter cows in January and February of 2010 were very strong, which helped offset the shortage of imported beef at the time. If current trends continue, imported beef will continue to be very tight in Q1 of 2011 and slaughter cow supplies, both US and Canadian, likely will be more limited. Shipments of Canadian feeder pigs also have drifted lower in 2009 and so far in 2010. In the last six reported weeks (11 October - 20 November), imports of Canadian feeder pigs were pegged at 516,667 head, 4 per cent lower than a year ago and 26 per cent lower than in 2008.

 

[mikey]

Manitoba pig producers adopt needle free injection technology
//09 Dec 2010
The Manitoba Pork Council has announced that one fourth of all Manitoba pork producers are using needle-free delivery technology in their vaccination programs.
Pulse NeedleFree Systems has been highly successful in supporting the industry’s implementation of the Pulse technology in Manitoba over the past year. The Puratone Corporation is among the many Manitoba producers that have recently implemented the Pulse technology in their operations. Puratone, recognised as one of the most efficient pork producers in North America, markets over 500,000 hogs annually.

“The Puratone Corporation has adopted the needle-free delivery technology in response to the voice of the customer and to reduce the risks associated with conventional needling that our employees deal with every day. The expertise of Pulse NeedleFree Systems and their assistance with the training program has given us a remarkably seamless transition to this new technology,” said Lyle Loewen, Vice President Production at Puratone.

“Puratone is an industry leader that is highly focused on quality production, animal well-being and environmental stewardship. Pulse is excited to add Puratone to our growing Canadian customer base and we appreciate the confidence that they place in our company and technology,” said Edward Stevens, chief executive officer of Pulse NeedleFree Systems.

Puratone is among the many Canadian Quality Assurance certified pork producers in Manitoba that are switching to Pulse’s needle-free technology under the MAFRI “Growing Forward” program. Pulse NeedleFree Systems’ devices improve animal health and safety by avoiding needle-based disease transmission and ensuring accurate delivery of products to the target tissue. Pulse injection systems also advance food safety and eliminate the environmental sharps waste from syringes.

Related website:
Pulse NeedleFree Systems, Inc.

[mikey]

Pork Commentary: Hog Markets Tread Water
US - In this week's Pork Commentary, Jim Long writes about the Iowa – Southern Minnesota hog market.

Jim Long is President &
CEO of Genesus Genetics.
The Iowa – Southern Minnesota price last Friday averaged $68.10, while USDA cut – outs averaged $78.50. Producers are losing money. Breakeven is approximately 80 cents lean. US hog marketing’s last week were 2.257 million head, up 22,000 from a year ago. The big difference year over year is that carcass weights are averaging 208 pounds; a year ago they were 202 pounds. Those 6 pounds extra carcass weight is obviously putting extra pork tonnage on the market. Lean hog prices are now only 5 cents more than a year ago when as an industry we were still playing defense with H1N1 (swine flu) being trumpeted by the Government and the media (maybe we should sue for damaging our industry).

Other Observations
Cash early weans averaged $50.51 last week ($39 - $58) while cash 40 pound feeder pigs averaged $60.11 ($50 – 69.50). A continual increase over the last few weeks in these small pig prices is a reflection of lack of supply and strong demand which is flying in the face of high feed prices.


While lean hog prices are 5 cents per pound higher than a year ago. Sow prices are 13 cents per pound higher year over year. This year (500 – 550 pounds) $51.50 last year $38.25. Strong demand for the sausage trade and fewer sows going to market is allowing gross revenues per sow to be $65 a head better than a year ago. The revenue per sow of over $250 is allowing gilts to be purchased for very close to even money.


The USDA came out with projections last week that US pork production will increase from 22,346 million pounds in 2010 to 22,591 million pounds in 2011. We will see, but we find this increase hard to believe when our production base has a 100,000 fewer sows than a year ago. In our opinion, $5 corn is and will make fewer hogs over the next several months.


USDA is projecting total beef, pork, broilers, and turkey production in 2011 will be 91,319 million pounds and 91,320 million pounds in 2012. In our world that is same. Let’s assume a 1.5 per cent increase in USA. population continued export growth. Equal meat tonnage with more buyers we find it not hard to assume meat prices at minimum equal to 2010 with upside of 5 – 10 per cent in prices year over year.


DTN Ag Data had a chart last week which estimated gross pork packer margins. The chart showed packers have had around $35 per weight of carcass the last eight weeks. The three year average was $20 over the same 8 weeks. Bottom line: Packers have been doing fine. As an industry we want strong packers to have money to re – invest into their facilities, resources to get retail shelf space and pound into export markets. One of the greatest strengths of the US hog industry is the financial strength and production capacity of packers. It appears to us, packer margins have begun to narrow as hog supply begins to seasonally decline.


The European Union produces about double the pork of North America. It produces approximately 20 per cent of the world’s production. EU sow herd is about 14 million sows. Recently a survey by producers by the United Kingdom’s National Pig Association came up with an estimated 2.9 million tonne decrease over the next 3 years. In the EU a 14 per cent decrease in pork production in the three years. A huge decline.
Reasons given are:

Many producers losing money for nearly half a decade.
Loose housing is mandatory legally in 2012. The cost is prohibitive for many producers.
Higher feed costs.
Lack of bank confidence in swine production sustainability.
The projected EU decline if fulfilled in the next 3 years is equal to 6,380 million pounds or a US production decline of 28 per cent! It is hard to believe such a decline is likely. If it happens the EU will not be a factor in global pork export markets. Such a decline would lead EU hog prices that would be record breaking.

Summary
It continues to be a harsh time to be a hog producer. Market prices are lower than break evens. It is discouraging. Feed prices have been surging with the underlying concerns of potential further price gains. On the plus side, lean hog futures are strong reflecting prices $20 - $40 per head higher than they are now. We expect prices to move higher than they are now. We expect prices to move higher in the coming months. Profits are on the way!


Author: Jim Long, President & CEO, Genesus Genetics

[mikey]

Tuesday, December 21, 2010
Pork Commentary: US Pork Exports Continue Strong
US - In this week's Pork Commentary, Jim Long writes about US pork exports during October.


Jim Long is President &
CEO of Genesus Genetics.
USA October pork exports were $407 million in October; the third highest month in 2010. Year to date (January to October) 1.39 million metric tons have been exported for a total value of $3.49 billion. The 1.39 million metric tons is estimated to be 23.5 per cent of total US hog production. Mexico, Japan, and Canada are the leading export markets taking about 75 per cent of US exports.

It would be interesting to see a calculation how the $511.8 million of pork in the first ten months exported to Canada relates to the value of pigs sent from Canada. Our cowboy math stab at it the $511.8 pork exports in ten months is $51 million per month. Canada’s small pigs’ exports to the USA are hovering around 400,000 head per month. Small pig value average of $60/head = $24 million/month. Trade works both ways!

The strong US pork exports seen in 2010 are expected to continue in 2011 with FAS estimating new record tonnage of 2.221 metric tons eclipsing the previous record of 2.117 in 2008.

FAS estimates the US will remain the world’s largest pork exporter with a forecast market share of 35 per cent in 2011. With Canada estimated to export about 20 per cent of the world pork exports. It is not hard to calculate the global dominance of the US – Canada pork industry with 55 per cent of the world’s pork exports. The two other major global export players are EU -27 with 25 per cent and Brazil at 10 per cent.

Bottom line: Strong export demand will push hog prices in 2011. The Achilles heel to big dependence on exports is the danger of a major swine health break that can hinder market access.

Other Observations
The US corn ethanol industry got an early Christmas present by getting their 45 cent subsidy and tariffs renewed for one more year when it got tied to US tax bill. For livestock producers the continuation of the insanity of corn ethanol subsidization was if the Grinch had stole Christmas. Corn around $6.00 a bushel is driving swine cost of production higher. If what’s good for the goose is good for the gander maybe congress should subsidize livestock producers. Why is corn ethanol any more important than meat protein production? When the price of food inevitably goes higher from the pressure of higher feed prices. It will be interesting to see how the politicians that continue to vote for corn ethanol explain high food prices to the electorate.


Cattle prices are real strong. Live fed steers are $1.00 a pound, a year ago they were $79.20. This price surge despite marketing numbers up are a reflection of excellent domestic and export demand. Beef prices 26 per cent higher than a year ago. Last Friday’s live cattle futures for 2011 ranged from $104.50 - $109.90 per pound. It looks like real high cattle prices in 2011 will be their support hog prices.


After several weeks of chick placements around 7 per cent year over year. The chicken broiler industry has pulled placements down to 1 – 2 per cent year over year. The 5 per cent difference is between 40 – 50 million pounds of chicken a week. The high feed prices have shocked the chicken industry from their own game of chicken suicide. Less chicken will support hog prices.


US cash small pig prices continue to move higher up $2.00 to $4.00 per head last week. Early weans averaged $52.23 (41 – 62.00) 40 pound feeder pigs $64.38 (48 0 71.00). The strong price move is exceptional in the face of high feed prices. In our opinion the lack of small pigs and lean hog futures of near 90 cent lean a pound are overcoming the fear and reality of $6.00 bushel corn.


In last week’s commentary we wrote about the British report that estimates that unless European hog market margins improve up to 60 million hogs a year of production could disappear in the next three years. This past week we had visitors from Spain. Spain has 2.8 million sows. The spoke about the crisis their hog industry was in. High feed prices, low hog prices, many legislated mandates including banning of gestation crates in 2012. The point is the challenges we have in North America are not unique. All producers are under constant pressure to increase productivity and get value for expenses. This constant pressure is difficult for all involved affecting our family life on top of the financial pressures.
Summary
US pork exports are strong, and will continue strong. We expect US – Canada hog production will be lower in 2011 than 2010. The combination of strong exports, steady domestic demand, and fewer hogs are good reasons to believe lean hog prices in the high 80’s are a good bet indeed. We see scenarios that could push hogs north of 90 cents in the summer. Prices can’t be too high to fill the equity hole.


Author: Jim Long, President & CEO, Genesus Genetics

[Mustang Sally Farm]

Pork Commentary: Lean Hogs Hit Life of Contract Highs!!
CANADA - This week's North American Pork Commentary from Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
Last week’s USDA December Hogs and Pigs Report were definitely interpreted as bullish. Life of contract highs was reached in all the summer months in 2011 with all four months in the 90’s. The formula for stronger prices is many.

Our Observations
The USDA December report showed there was about 70,000 fewer sows, and 500,000 fewer pigs than a year ago. Less is not more!


Global meat consumption is expected to increase 2 per cent in 2011


US cattle futures hit record highs this past week when the lead month peaked at 107.475. Texas cash cattle also hit $1.07 per pound – the highest in seven years. Drivers in the cattle market are strong domestic and export beef sales, optimism China will buy beef and expected fewer cattle in 2011. April live cattle futures closed at $112.20 per pound last Friday up over 20 cents per pound from April future lows. That would be $260 per head higher on a 1300 pound steer. Record beef prices are going to do nothing but enhance hog prices and the lean hog future market pushing higher is a reflection of that reality.


This past week a pork powerhouse leader expressed to us his greatest fear for 2011 – it is not pork demand; the fear is feed price acceleration and the large packer margins that packers have enjoyed since last spring. The just of his premise that packer margins that have reached above $30 per head at times are unhealthy for a robust production base. Especially the last three months when producers were losing $20 per head.
Of note: Pork plant margins for last Thursday, on average, were forecast at $3.90 per head down from $16.70 a week ago, this as hog prices surged in the past week. Over the next while we expect to see an interesting dynamic of lower hog numbers and the dilemma of packers to try to hold margins and or market share.

In our opinion, one of the greatest indicators of market psychology is the USDA cash early wean and feeder pig market. Last week cash early weans averaged $56.75(high $65.00), cash 40 pound feeder pigs averaged $67.77(high $73.00). Very strong prices in the face of $6.00 corn. This is a real indication of lack of supply and strong demand.


High corn prices, soybean and feed prices will only push hog prices higher over the coming months. With North American pork producers as least cost as any in the world, high feed prices will result in a greater market share gain as pork production is further limited in grain importing countries. Countries such as South Korea, Japan, Taiwan, and Mexico will need to have substantially higher hog prices to cover their cost of production significantly higher than North America. The high domestic prices in these countries will continue to pull pork from North America enhancing prices.


In the next while there will be increased interest in improving feed conversions due to high feed costs. There will be ongoing pressure on Genetic companies to show improvement and results. Some Genetics can, some can’t. We are glad that Genesus spent significant money eight years ago to measure individual feed conversions and growth rates. Currently some boars are 2.1 to 1. We all have to become increasingly more efficient.
Summary
Watching NBC national news last week the increasing cost of food and pork was a news item, a National story. Wait until the Einstein’s that have subsidized the insanity of putting billions of bushels of corn into ethanol production begin to see the economic, social, and political implications of higher feed costs. This will become a bigger story in 2011. We suspect that more land will be coming out of set aside while the battle of continued corn ethanol subsidies will be engaged.

The good news for hog producers in 2011 is pork prices will be strong which will support higher feed prices. We expect hogs will reach $1.00 lean this season.


Author: Jim Long, President & CEO, Genesus Genetics

[Mustang Sally Farm]

Pork Commentary: Lean Hog Futures Push Higher
CANADA - This week's North American Pork Commentary from Jim Long.

Jim Long is President &
CEO of Genesus Genetics.
Lean hog futures last week continued to push higher with all contract months in 2011 reaching contract highs with four summer months closing Friday at about 93 cents lean per pound average. What’s the upside? These are volatile times; corn and soybean prices have moved in price ranges unprecedented in history. Cash lean hogs currently are about 70 cents per pound, while lean hog futures for May are around 92 cents per pound. That is less than four months away! The futures market is anticipating an almost $50 per head jump in prices in a very short time. The $50 per head is an expected average increase of over $4.00 per head per week between now and May. That’s moving, that’s volatile.

The volatility we have in the market place whether it is grains or meat is hard on producers. How do you plan? What do you do to protect yourself? The volatility is a reason we see some producers contemplating quitting. We had one industry participant tell us last week that he suspects the high feed prices will remove as many producers in the next twelve months as we have seen in the last year. We suspect that if corn stays above $5.00 a bushel until this fall he would be correct. Too many producers due to age of themselves and or their buildings will quit. Growing corn at $5.00 a bushel plus is a relatively easy play. Having sows is hard work. It is a 365 day commitment of resources and time. It will be why bother as much as anything that will take out the next 100,000 sows of production if the $5.00 plus corn continues throughout 2011.

Other Observations
It has been pointed out to us this past week that high grain costs are increasing working capital needs. The same person observed Banks are not enamored with the hog industry. Both points diminish expansion scenarios.


Last Thursday the average weight on the National Daily Lean was 210.49 pounds per carcass. Probably the highest day average ever. A year ago it was averaging around 203 pounds. In our opinion for lean hog prices to appreciate the carcass weights need to start going down. When we see that it will indicate demand and the beginning of the seasonal supply decline.
Genesus does business in South Korea having sent more breeding stock to that country than any other genetic company in the last 2 years. South Korea is a country of about 50 million people; the area is approximately 180 miles by 350 miles with over 50 per cent mountains. Korea imports almost all of its feedstuffs. Its economy is strong. Currently South Korea is fighting a huge foot and mouth outbreak. So far over 1.1 million animals at over 3,000 farms have been destroyed. The challenge for Korean authorities to control the situation will be daunting. Unless you have been to Korea it is hard to comprehend the density of people and farms. There is no separation. The latest reported swine price we have from South Korea is 4400 KRW/kg which is $3.91 US per kg or $1.77 US per pound. Huge liquidation of South Korea’s almost one million sow herd will lead to the need for imports of pork to feed the nation. The US – South Korean ongoing negotiation for a free trade agreement could lead to significant US pork sales opportunities.


Author: Jim Long, President & CEO, Genesus Genetics

[Mustang Sally Farm]

Analgesics in Farrowing and Castration
Preliminary data indicate no economic benefit from providing analgesia to sows at farrowing or to piglets at castration, writes Ed Barrie, Sow Weaner Pig Specialist at Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA), reviewing research presented at the University of Guelph.

In a paper delivered to the University of Guelph Swine Research Day entitled 'The effect of pain relief at castration and farrowing on piglet performance" by S. Taylor, R. Friendship and G. Cassar, the subject of castration of piglets without the use of anaesthesia or analgesia was examined.

To date, there have been few research studies that evaluated the use of analgesia for this procedure and whether pain relief might be associated with improved piglet performance.
*
"The decision to use analgesia will most likely be based on ethical concerns and not on financial concerns" 
 
A second part of the same study was directed at whether there was any economic benefit or reduction in still births or perinatal death losses if sows receive medication to reduce the pain associated with farrowing. In the castration study male piglets were randomly sorted into a control group or a treatment group at five to seven days of age. Piglets were ear-notched for identification purposes, and weighed. The procedure was that they received a saline injection or Anafen® (Ketoprofen injection 100 mg/mL, 1mL/50 kg body weight, respectively). Piglets were castrated 30 minutes after receiving the injection, and observations were made 10 minutes after castration for signs of discomfort. Piglets were weighed at 21 days of age, and mortality was recorded.

In the sow study, sows were randomly assigned to a control group or a treatment group. The treatment group received an IM injection of 1 mL/50kg body weight of Anafen prior to farrowing and again the day of farrowing. Piglets from both control and treated sows were ear- notched and weighed on the day of farrowing and day 21, and pre weaning mortality was recorded.

Castration trial results to date showed no apparent difference in both the average daily gain and pre-weaning mortality of male piglets in both the control and treatment groups. No difference was noted in post castration behaviour between the two groups. The cost of analgesia was $0.22 per piglet and it did increase the time to castrate.

The farrowing trial showed no differences between stillbirth rate, weaning weights or pre-weaning mortality between treated and control animals. The cost of Ketoprofen was 13.05/sow/dose.

These preliminary data indicate no economic benefit from providing analgesia to sows at farrowing or to piglets at castration. Further analysis or further studies might show benefits to using analgesia where a small sow is delivering large piglets.

This work to date suggests that the routine use of ketoprofen to piglets at castration or to sows at parturition did not result in improved performance and was therefore not cost-beneficial. In general, the decision to use analgesia will most likely be based on ethical concerns and not on financial concerns.

January 2011

[Mustang Sally Farm]

Tuesday, January 18, 2011
Pork Commentary: No Break in Grain Markets
CANADA - This week's North American Pork Commentary from Jim Long.
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.
The USDA released a revised 2010 crop production report last week. The corn crop was revised down to 12.45 billion bushels 600 million bushels lower from the crop a year ago. Soybean production was trimmed to 3.33 billion bushels. The USDA lowered US and world ending stocks in corn and soybeans.

When the dust cleared, March corn had gained 45 cents a bushel while March soybeans jumped 57 cents a bushel. Good for grain producers but it would take the optimism of a child seeing a pile of manure and figuring a pony is inside to see much upside for the hog market. The hog to corn ratio is now below 12 to 1. Six months ago, it was 24 to 1. There is never swine herd expansion at a 12 to 1 ratio. We expect history will repeat itself.

We can continue to thank our Government leaders who have sold out the poultry and livestock industry with the crazed idea that corn ethanol production is the panacea for fueling vehicles. Subsidising the heck out of corn ethanol while leaving meat producers on their own. We pay taxes too?!

Look no further than China. They do not subsidise corn ethanol production, it is illegal to produce corn ethanol in China.

Last week, we talked to a grain producer with several thousand acres. He said that in his opinion, corn ethanol has had little effect on grain prices due to the DDGS that can be feed. Our answer if corn ethanol can stand on its own, it doesn't need subsidies and tariff protection. Let's level the playing field and at the same time stop mandating ethanol use. Check the fuel mileage of E85 versus regular fuel. How is the lack of efficiency economic or environmentally sound?

Hog Markets
The Iowa–Southern Minnesota price last Friday was $73.42, while pork cut outs were 85.14. The $12 spread is about $25 per head margin for packers. Packers are making very good money. Time will tell as the supply of hogs decline seasonally if this spread can be maintained.

Of note: Many of the same packers are in the beef business where packer margins are low or next to non-existent.

The latest Iowa–Southern Minnesota market weights are 275.6 pounds live weight up 6.8 pounds from a year ago. To see a bounce in market hog prices we believe that we will have to see weights start coming down from this unprecedented level.

Lean hog futures continue strong reflecting the scenario of supply and demand. Friday close June LH 95.475, October 83,650. It is very fortunate that the lack of supply of pork with perceived demand strength is pushing future prices higher. With $6.00 corn the losses would be devastating if it were not for these potential higher prices.

The continued strength of the small pig market is a sign of bullish sentiment for high hog prices. Last week US cash early weans averaged $58.68(high $67.00), while 40 pound cash feeder pigs averaged $75.13(high $82.00).

Summary
We will be at the Banff seminar this week. We will give a report in next week's Commentary. If you are coming to the Banff seminar, join us Tuesday night at the Genesus reception St. James Gate – Olde Irish Pub, Banff – 9 pm.


Author: Jim Long, President & CEO, Genesus Genetics

[Mustang Sally Farm]

Pork Commentary: Banff Pork Seminar Report
CANADA - This week's North American Pork Commentary from Jim Long.


Last week we attended the 40th annual Banff Pork Seminar held in the beautiful tourist town and National Park of Banff, Alberta, which is surrounded by the Rocky Mountains. The venue is a far cry from the normal places we have swine conferences.

Our Observations
About 600 people attended the seminars. Most were from Canada, but there was also a strong contingent from the United States.


Mood of the producers and industry participants could be best described as cautiously optimistic.


Feed prices were the big topic of conversation. Fear of runaway feed costs is tempering all enthusiasm of future lean hog prices in the mid 90’s.


We heard of no significant sow herd expansion. There are still many empty sow units in Canada, but for many reasons. Few, if any, appear to be restocking in the near future.


Mark Greenwood, Vice President of Ag Star Bank in Minnesota (Farm Credit affiliate) spoke and said that currently in the US, 25,000 sow farrow-to-wean units with a good bio-secure location are being valued at $800 per sow, while sow units in more disease prone areas are $400 per sow. He said that recently some 10 year old finishers were sold and brought more than $150 per finishing space, selling for more than they cost to build ten years ago.


Ron Plain, an Ag Economist spoke. He projects the Iowa (USA) barrow-gilt price will range in the second and third quarters between 76 and 82 cents lean per pound. Considering the lean hog futures are averaging in the 90’s in the same time frame, we have to wonder if Mr Plain knows something that all the many in Chicago are not smart enough to see. Mr Plain’s projections reflect a price that is $25.00 per head less than what the futures project? On the other hand, we continue to believe lean hogs will reach $1.00 lean per pound this summer. June lean hog futures closed, as of Friday, at 97.52. A 2,500 sow producer commented to us after hearing Mr Plain, “Makes you want to sell the farm after listening to him!”


We were in several discussions that involved higher weight grids from packers. A couple of speakers gave presentations on the economic considerations of higher weight hogs. It’s also becoming apparent that a couple of Dutch genetic companies selling in North America are having a difficult time with their hogs getting too fat at heavier weights. Short and fat doesn’t work at 280 pounds.


We spoke to several bankers who attended the conference and you get the feeling they, like the rest of us, are marooned in the hog industry. The accounts they have, they have to manage, but bankers are not looking for new business and are far from optimistic. There will be little bank funded expansion until equity levels are replenished.


We had the Genesus Reception last Tuesday night at Banff, with approximately 300 attendees. It was good to see so many customers and industry people having a good time.


The foot and mouth disease in South Korea has been devastating. There are reports that an estimated 2.5 million pigs or about 15 per cent of Korea’s inventory has been eliminated. North American packers at the Banff Seminar told us that they were getting many calls for pork in South Korea. The need and demand for pork to replace what has been destroyed will lead to greater pork exports. This will be supportive of North American hog prices.
The Markets
Several lean hog contracts reached life of contract highs last week – ie. June 97.525 and Oct 85.875.


The ISM, last Friday averaged 74.59 on their way to 80 in February.


Cash early weans averaged 59.10 while 40lb feeder pigs increased to an average of $78.10 (with highs of $83).


The latest ISM weekly weights were 274.8lbs, down 1lb from the week before, still 4lbs heavier than the same week a year ago, but closer year over year than they have been in some time. We expect to see hogs move up when we see weights dropping because this, in itself, will show a more current hog inventory.
This week we will be at the Iowa Pork Congress and you can visit us at the Genesus booth. Wednesday, at 5pm, Genesus will host a beverage and appetizer reception at the Holiday Inn – across from the Convention Center. You are invited.

Next week’s commentary will give our observations of the Iowa Pork Congress.


Author: Jim Long, President & CEO, Genesus Genetics

[Mustang Sally Farm]

Tuesday, February 01, 2011Print This Page
US Ethanol Policy Blamed for High Feed Costs
CANADA - A market analyst with the Guelph, Ontario based George Morris Centre suggests US policies surrounding ethanol are the biggest factor driving up feed costs in North America, writes Bruce Cochrane.




Farm-Scape is sponsored by
Manitoba Pork Council and Sask Pork
 
In October the US Department of Agriculture released a report which indicated grain supplies and grain quality and yield where much lower than originally thought and in January USDA confirmed that stocks heading into 2011 are near record lows.

Kevin Grier, a market analyst with the George Morris Centre, suggests that report and confirmation of the low supplies coupled with strong export demand and in particular ethanol demand caused prices to sky-rocket and we're probably looking at record high grain prices throughout 2011.

Kevin Grier-George Morris Centre
First and foremost the direction of the prices is driven higher by ethanol.

In 2011 it's conceivable that ethanol will burn up more of the corn crop than will be consumed by livestock and poultry and it's a case of ethanol becoming a run away train.

I don't think anybody anticipated that we'd get to a situation where ethanol uses up more corn than the livestock industry so in an of itself that is the single reason why we've got this out of control grain price situation.

Our crops in 2010 were near record large so we need to continue to have record large crops in order to feed the ethanol beast which is again fueled by subsidies, tariffs and mandates.

It's an extraordinarily artificial pricing situation but the reality of it is it's driving livestock producers out of business.

Mr Grier says the American situation has gone so out of control on ethanol that we now have a feed cost advantage in western Canada and in Eastern Canada, which is a positive.

He suggests producers across Canada need to lobby the government to make sure Canadian ethanol policies do not go as out of whack as the Americans and drive up feed costs further in Canada.

[Mustang Sally Farm]

Thursday, February 17, 2011
Pork Commentary: Where is the High?
CANADA - This week's North American Pork Commentary from Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
Last Friday the lean future months of May, June, July and August closed over $1.00 lean a lb. Where is the high? At $1.00 plus lean it’s $200 plus per head for four months.

Unfortunately, corn closed over $7.00 a bushel on Friday, price of hogs are high but the price of corn and feed is taking away our possibility of great profits. The big winners the hog farmer feeding their own corn feed. $7.00 corn plus hog profits it’s as good as it gets. We estimate that no more than 20-25 per cent of all hogs are raised by producers with their own feed. If they own their land even better as $7.00 bushel corn is driving land values higher. The old model that built many of a family farms wealth is alive and well.

Pork Exports Rocket Higher
Hog prices have been pushed by strong US pork exports with December at 146,483 metric tonnes in the preliminary data. That’s the highest monthly total since June of 2008. Mexico was the largest importing country at 40,692 metric tonnes, followed by Japan 37,941; South Korea jumped to 9,623 tonnes from 3,122 in September. We expect to see further gains to South Korea in the coming months as the foot and mouth ravages their domestic pork supply.


Last week hog prices in South Korea were 4400 per kilogram or about $470 US for a 270 lb hog. You would think hogs being bought for $300 per head less in the US would lead to excellent opportunities to have some pork sent there?


Other Asian markets of note; Philippines $300 US for 270 lb hog, Viet Nam $230 US for 270 lb hog. Thailand $260. Appears to us the best option for Koreans to get Pork is USA-Canada.
Other Observations
We continue to see no sow herd expansion. As we have written before being in the swine genetics business leads us to look for new or existing units that are buying breeding stock. Unless we are real lame we are not seeing many opportunities to do either. On the flip side there are strong replacement sales as many producers are replacing older sows and or upgrading their genetics. To put in context Genesus breeding stock sales were 63 per cent higher in 2010 than 2009 but we did not see herd expansion. Genesus booked breeding stock sales for the first half of 2011 reflect and sales increase of 45 per cent on top of last year’s 63 per cent, but still none into empty units in USA – Canada. What we are observing is many producers who have survived the low markets recognizing to stay competitive they must upgrade their technologies did this includes better genetics. The same old is not satisfactory for many forward thinking producers, but still good sow units sit empty.


The feed did corn market is scaring the crap of many producers. All ask “How high can this go?” We have no idea. We do expect though $7.00 corn will lead to every acre available planted everywhere not only in North America but the whole Northern Hemisphere. $7.00 corn will lead to increased fertilizer use (reports we read say fertilizer sales up). Maximum herbicide and insecticide use. The old surest cure to “high prices is high prices will probably play out” We all know farmers will overproduce given a chance.


Last year the drought in Russia was the trigger that helped push grains higher. Currently in Russia a new sow unit which Genesus is stocking has major construction delays because of the mud caused by high precipitation.


We had an interesting email from a President of an Ethanol company explaining we were foolish for not seeing the benefits of corn ethanol. Obviously their person is underemployed if he has time to write a 500 word Magna Carta on the benefits of corn ethanol to us. We guess what we are saying is hitting home. Corn Ethanol will go down in history as one of the most insane government policies ever created. The concept that burning our food to fuel cars is beyond comprehension. Now the mass media is picking up the doubling of corn prices, the major move in meat prices, and appreciation of land prices. Then we move to geopolitical events; food riots government regime change, the moral dilemma of pricing food beyond the means of many third world people to fuel SUV’s. We expect events could move fast on Corn Ethanol, as west coast –east coast people realize their disposable dollars are being eaten up by government subsidized corn ethanol things can change rapidly. The east-west coast congress now far outnumbers any ethanol backing numbers. Corn ethanol could very well become the scapegoat for many economic problems. We would not be surprised if legislation is not adopted in the next two years that will make corn ethanol a very unattractive business venture.
Summary
Lean Hog Prices continue to push higher. The summer month’s futures are all over $1.00 lean which would lead to market hogs over $200 a head. Global price points for hogs are all higher than USA – Canada. With 50 per cent of the worlds pork exports USA – Canada is poised for strong exports in 2011. Fact is the preliminary USA December Pork Exports were the highest since June 2008. We called $1.00 lean six months ago when future lean hogs were .80 we were bullish hog prices. We did not see increased hog supply and our global wanderings told us world demand would pull exports. You see nothing happening in either supply or demand not to remain price bullish well into 2012.


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Tuesday, March 01, 2011Print This Page
Pork Commentary: Growth Rates Best Ever?
CANADA - This week's North American Pork Commentary from Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
US market weights are at unprecedented levels despite corn around $7.00 a bushel. Last week’s Iowa – Minnesota market weights were 273.1 pounds, almost 5 pounds heavier than (268.1 pounds) a year ago. We expect a large amount of the weight difference is the unprecedented average daily gain we have seen the last few months. Case in point.

Last week, we spoke at the annual meeting in the mid – west of a large Genesus Genetic user. At the meeting production data was given for the prior 12 – 14 months. Wean to finish A.D.G. on close – outs have jumped .15 per pound per day since last November.

The only reason gains had jumped so significantly was the improved quality of the corn crop in 2010 compared to 2009. A .15 A.D.G. improvement would be a good ten days quicker to market and/or a heavier market hog. In our opinion the higher quality corn helps explain the 5 pound heavier market hogs we are seeing year over year and we expect hogs are being pulled ahead. Such a rapid growth improvement could lead to U.S.D.A. market inventory. March 1st that is smaller than many will expect.

Global Swine Prices
Market hogs in China are $1.10 U.S. live weight per pound; in South Korea $1.60 U.S. live weight per pound; in Mexico 80 cents U.S. live weight per pound; and Russia $1.10 U.S. live weight per pound. All are major consumers of pork; all major importers of pork. All prices reflect each countries supply – demand. All market hog price points are significantly higher than U.S.A. – Canada market hog prices and lean hog futures. 50% of Global Pork Trade originates in U.S.A. – Canada. We expect strong pork exports in the coming months. Hog prices will benefit greatly from this reality.

Bill Clinton
Former U.S. President Bill Clinton spoke at the U.S.D.A.’s outlook forum last week. Clinton spoke of the need to have food balanced with energy needs re. bio-fuels. “If you produce more bio – fuels and less food will that mean food prices will be even higher and we’ll have more food riots?” Clinton said.

The corn ethanol debate is being engaged. We continue to expect as the year goes forward and food prices react higher due to the price of corn, wheat, etc… the discussion will become more intense. When you have Democratic Champions Clinton, Gore’s now questioning the wisdom of corn ethanol and a Republican Congress last week pulling financial support for corn ethanol expansion. You have to ask where will corn ethanol get its support in the coming months?

Chemical Castration
One of the issues not fully debated in our opinion as a danger to our domestic industry is the potential licensing of the Pfizer product (Improvac) to chemically castrate pigs from injection. In a time where as an industry we are being pressured on antibiotic use and the quest for more organic or natural products. We are having a hard time seeing how a chemical injection could be a positive to increase pork demand. It will be interesting if North American pork packers risk the marketing dilemma to explain this chemical manipulation of the pig consumers, retailers, and restaurants. Another risk of potential use of Pfizer’s chemical castration product could be global restrictions on pork imports as countries reject pork from countries that approve its use as a trade barrier. When North America exports 25% of all its pork a consequence that cannot be tolerated.

Summary
Iowa – Southern Minnesota lean hog prices averaged $81.33 a pound last Friday, while the U.S.D.A. pork cut – outs averaged $92.08 per pound. The packer – farmer spread indicates packers making good money and pork demand is strong. Feed prices continue to increase pushing the cost of production higher. We still see no expansion underway. We expect lean hog prices will remain historically high through the summer 2012 with no significant supply increases and strong domestic and export pork demand.

Announcement
Genesus would like to announce that Stewart Watson has joined our sales team. Stewart lives in Lethbridge Alberta and has extensive experience and expertise in the swine genetics industry. Stewart joins Dave Borsboom in Alberta and together they will support Genesus clients and increase our presence in the Alberta, Montana and Saskatchewan markets.


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Tuesday, March 15, 2011Print This Page
Pork Commentary: Earthquake - Market Mover
CANADA - This week's North American Pork Commentary from Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
The earthquake in Japan last week helped push May corn down 36 ¾ cents a bushel and May soybeans down 79 ½ cents a bushel. Japan is the US’s largest corn customer and buys 30 per cent of the US pork exports. The fact that Japan is such a major customer of US pork was seen with Friday’s June lean hogs off 1.95 to 99.650.

The tragedy in Japan and the quick effect it has had on the US grain and pork market indicates the interdependence of much of our global economy including pork. For a couple months the US pork industry has been supported by the devastating foot and mouth outbreak in South Korea. Now the question short term will be port facilities in Japan been damaged too much to import grain? What has happened to the Japanese swine farms? Pork storage? and Packing plants? Will the damage lead to less or more pork being imported? We have lots of questions but no answers. We do suspect Japan has the resources and capacity to recover quickly.

Sometimes we observe world events and we are discouraged. In these circumstances we found it more personal. We have significant swine genetic business with the major Japanese swine producer. With that business relationship has come personal knowledge and friendship with our Japanese colleagues. When we heard of the crisis, we were concerned for their family’s safety. Fortunately they are safe. The earthquake was so far away however it affects our industry and our personal lives.

Other Observations
Fed Cattle prices are strong around $1.17 live weight a pound. Such high prices make pork in the stores look like a bargain. With fed cattle futures averaging almost $1.20 live weight per pound for the next year we see this as only to price supporting for hogs.


Chicken broiler egg sets and chick placements continue to run almost the same as a year ago. Composite average broilers 12 city is averaging 80.67 per pound compared to 82.59 per pound a year ago. We all know feed is a lot more expensive this year compared to last. We can’t see how the chicken price relative to feed cost is going to head to chicken expansion.


Reports on the foot and mouth in South Korea are now estimating pork production is down 33 per cent to the lowest point in twenty years. It will take a minimum two years to recover in the meantime more pork will be imported. About 5 million hogs per year equivalency will need to be replaced. Most of the imported pork will come from USA-Canada.
National Pork Board
We had some negative feedback last week from some readers who do not like our support for the new pork slogan Pork: Be Inspired. We listened but we did not change our mind. The slogan itself is not as important to us as the direction of the Pork Board. The new slogan tells us instead of putting their head in the sand we lost market shares for twenty years there is a plan to fight back. Getting pork eaters to eat more is strategic. For the first time ever there is a target to increase pork consumption 10 per cent. 10 per cent more can be reached with regular pork eaters consuming one more pork meal a month and intermittent eaters twice more per year. It is a target. It is a plan. Something we don’t believe there ever was before. We don’t know if it will work, nobody does but sitting back and watching us lose market share is an option we don’t like the most. Consequently we support the National Pork Board its CEO Chris Novak, its directors and its staff. For the first time in a generation our check off dollars are being used for a plan to increase market share.


Author: Jim Long, President & CEO, Genesus Genetics