Canadian Pork Producers:

[Mustang Sally Farm]

Wednesday, February 08, 2012
Pork Commentary: Russia Hog Prices Real Strong
RUSSIA - This past week we spent several days with Russian swine producers, writes Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
The prices in Russia are strong with 270 pound (125kilos) market hogs bringing over $300.00 per head. With break evens in well run operations at about $150.00 per head the profit potential and reality is $150 a head. To put it in context we did projections on a new 5,000 sow farrow to finish unit they are building. At current prices and profits over $17 million US in profits per year – it is a different world for sure!

The coming week we will be at Agrofarm Livestock Symposium and trade show in Moscow. Russia is like the US of the early 90’s as outside production moves inside the evolution and scale of farms takes hold. We met with a Russian builder last week. He has never built a sow farm since he started several years ago under 5,000 sows per barn, made us feel small, as the new Genesus Nucleus in Russia is 1300 sows and the two multipliers are 2500 sows each. Russia is like the US – never afraid of scale!

Tyson
Last year we listened to Donnie Smith CEO of Tyson at the Wisconsin Swine Conference. He was the smartest person who spoke that day.

Last week Tyson’s first quarter pork operating income was released at $165 million, or 11.2 per cent of US $1.48 billion in sales. That is good profits and margins; it is also good for hog producers. We need packers to make money. It keeps them investing and gives them the capital to pound their way into our needed pork export markets. It also makes you wonder how reflective the US pork cut – outs are to reality. For example, last Friday US carcass cut – outs were $85.10 per pound – the National daily base lean hog carcass 53 – 54 per cent or $88.46. If you took this at face value, packers losing big money and buying hogs for more than they sell pork? Obviously Tyson’s excellent profits don’t reflect a negative margin.

Hormel Foods
Hormel Foods, one of the US's major packers and significant hog producer announced last week at its annual share holders meetings the decision to phase out gestation stalls by 2017 at its company farms.

From our perspective this is a reality that many of us will face going forward. The visual of sows in gestation stalls is hard to argue to animal welfare advocates or more importantly consumers. We are not sure it will ever be scientifically proven that sows are at a disadvantage in stalls but it doesn’t appear to matter. The consumer push is enough to have us more in that direction. In the end we will have no choice – gestation stalls will disappear whether right or wrong. Hormel is accepting that reality but being pro active on their time line.

Hormel is another Packer – Food Company doing well. For the 2011 year $7.9 billion in sales up 9 per cent, net earnings are up 15 per cent over 2011, and exports up 26 per cent in sales.

We believe one of the greatest competitive strengths of the North American pork industry is the efficiency, scale, capital commitment, and aggressiveness of our packing industry. Hormel is one of such players.

Europe
Rabobank, probably the world’s largest ag lender in a recent report expects the European Union sow herd to show a 9 per cent decline when the December reports are released. If correct, a drop of over one million sows. That is huge! In the same report Rabobank expects Euro hog prices to reach 1.75Euro per kg which is $1.04 US per pound.

There is no way one million sows out of production don’t cut supply. EU won’t have as much pork to consume or export. This is all positive for North American hog producers.

Rabobank expects US beef production to be up in Quarter 1, but down 6 per cent by the second half of 2012. Rabobank also expects US chicken production to be down 4 per cent - 5 per cent in 2012. Reduced beef supplies are expected to result in record high beef prices that will provide an umbrella for pork prices.

PRRS
There still seems to be lots of stories of further PRRS breaks cutting hog production. We need to look no further than US cash early wean prices at $61.39 and 40 pound feeder pigs at $81.74. There are fewer pigs available, more barn space than pigs pushing up small pig prices. Beyond breakevens when you look at feed and hog future prices.

Summary
Rabobank sees the same scenario we have observed for months: 2012 strong pork export sales, less US beef, less US poultry, and insignificant pig production expansion leading to strong hog prices.

If all goes, 2012 will be good!


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Wednesday, February 15, 2012
Pork Commentary: Ohio and China
US & CHINA - This past week we attended the Ohio Pork Congress held at the Crowne Plaza Hotel in Columbus, writes Jim Long.


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

Ohio has 170,000 sows according to the last USDA Hog and Pigs Report or about 3.5 per cent of the US sow herd.


Ohio does not have large hog numbers but the Ohio Pork Council is doing a very good job promoting pork. The night before the Congress there was a Taste of Elegance pork tasting reception prepared by in state chefs. It was held beside the State Legislature and several State Senators and representatives attended. The interaction between the politicians and producers definitely highlighted the advantages of pork to Ohio. It appears the politicians like pork! In our opinion the reception was a good investment for producers to help connect with the politicians.


In Ohio there are finisher barns being built but little if any noise about new sow units.


We had some competitive drug company reps asking if our opinion on Pfizer’s Chemical Castration vaccine had changed – of course it hasn’t. We don’t see it as a positive for our industry to market pork with consumers and see no upside to risk our employee’s reproductive capacity with an accident at vaccinating. For what it’s worth, the other drug company reps saw it as a great Pfizer folly with 10s of millions of dollars spent to develop chemical castration vaccine with little thought to its real need or desire in the swine sector. Is it dead on arrival in America?


Ohio swine producers made a pact with the uniquely special Humane Society of the United States, whose main goal appears to us, is for everyone to eat lettuce. The pact is a legal initiative to eliminate gestation stalls in Ohio by 2025. Ohio in retrospect made a smart deal. They made a deal with long timelines on a subject (gestation stalls) we can’t win. Let’s hope until 2025 the lettuce eaters will leave Ohio alone.


Ohio like other parts of the US is getting hit hard by prrs. This past week we heard further reports from across the USA. and Canada of further prrs breaks. It appears filtered barns have limitations on prrs prevention. With the astronomical cost of their installation and operation it will be increasingly difficult for people who are actually spending their own money on filters to justify their investment. We increasingly believe the massive levels of prrs breaks relative to other years is large enough to cut summer hog production. With expected lower beef and chicken production in the same time frame, hog prices could accelerate beyond current summer lean hog futures in the high 90s per pound or "hang on cowboys we are going for a ride!"
China
This past week a Genesus team lead by Mike Van Schepdael Vice President – Shareholder signed a major agreement with Best Genetics in Beijing China. At the signing we were honoured with the attendance of Canada’s Prime Minister Stephen Harper, and Canada’s Agriculture Minister Gerry Ritz. The founder of Best Genetics is Monita Mo. The first phase of the project is $21 million US Genesus will supply Genetics and continued genetic improvement and technical management.

The Genesus team also visited COFCO with Minister of Agriculture Gerry Ritz. COFCO is China’s largest agri business and Genesus has supplied all of the registered purebreds that COFCO has in their swine production system. Genesus beginning last year has been supplying ongoing genetics and genetic improvement to COFCO. COFCO owns approximately 5 per cent of Smithfield Foods shares.

To say the least it was a big week for Genesus. China has 47 million sows in their latest inventories. This is a huge market but still limited access with tough health and quarantine restrictions. The Chinese restrictions have prevented some of the leading Genetic Companies whose health has not measured up to being stopped from exporting!

To keep it all in perspective in a 47 million sow market only just over 6,000 breeding animals were brought to China in 2011 from everywhere in the world - a drop in the ocean.

Over the last while we have had some customers in North America ask if it’s bad for North America – for Genesus to export our technology. The questioners are customers, they have seen our results. Our answer - The amount of capital needed to fund Genetic Research is significant. Export sales fuel genetic progress. This genetic progress benefits North American producer’s productivity and profitability. We believe that if you don’t have continual improvement you die.

Also like computers, cars, etc... technology is going to be purchased and adapted by countries when they see value. You can’t stop the inevitable. America is No. 1 in the world in innovation, No. 1 in productivity. North America is the best long term place in the world to produce pork. Go harder – go faster.


Author: Jim Long, President & CEO, Genesus Genetics

[Mustang Sally Farm]

Thursday, February 16, 2012
Key to Moving from Conventional to Group Housing
CANADA - A researcher with the University of Manitoba suggests an education component will be key to the success of any plan to move from conventional to group housing of sows, Bruce Cochrane writes.

 University news is a Wonderworks Canada Production. Visit us at www.universitynews.org 
The University of Manitoba is involved in two group housing studies, one in which factors to be considered when switching to group housing are being defined and characterized and one in which the factors associated with lameness in sows are being evaluated.

"This Little Piggy Stayed Home: Factors affecting success of sow group housing" will be discussed this afternoon as part of the University of Manitoba Faculty of Agricultural and Food Sciences Seminar Series for 2011-2012.

Dr Laurie Connor, the head of the University of Manitoba's Department of Animal Science, observes every housing system has pros and cons and a lot of that goes back to the human-animal interaction.

Dr Laurie Connor-University of Manitoba
When you have people that are very good animal caretakers, they can often make systems that you might think don't work well work very well but it's certainly seen that the key advantages to the group system is that it's a more natural-like environment for the pig, which a social animal, to have them be able to interact with other sows, for them to be able to move around and exercise.

The ability of the sow to be able to move around, to maintain muscle and bone strength and integrity is considered import in terms of their long-term welfare and also for them to express more of their normal behaviors in terms of foraging or investigatory type of behavior.

Dr Connor points out, for many in the industry, working within a stall system is what they know, so any transition program also has to include an education component.

[Mustang Sally Farm]

Monday, February 20, 2012
Tools Under Development for Detecting Lameness
CANADA - A researcher with the University of Manitoba is confident new tools being developed to assess the risk factors associated with lameness among group housed sows will help pork producers increase longevity and improve the profitability of their farms, writes Bruce Cochrane.

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

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

The University of Manitoba in collaboration with the University of Guelph and the Prairie Swine Centre is involved in a multidisciplinary project designed to assess the risk factors associated with lameness in pregnant group housed sows.

Factors affecting success of sow group housing was discussed earlier this week as part of the Faculty of Agricultural and Food Sciences Seminar Series for 2011-2012.

Dr Laurie Connor, the head of the University of Manitoba's Department of Animal Science, explains scientists are assessing the factors that affect productivity and longevity of pregnant sows housed under various group housing systems in an effort to develop tools producers can use to assess the risk of sows becoming lame.

Dr Laurie Connor-University of Manitoba
Lameness is a major reason for culling animals in housing systems because, associated with lameness, if they are in fact uncomfortable it may be creating stress and so they're not as productive.

Very often the lameness may also be associated with the animal not being able to remain in the herd for very long and so it can affect productivity, it can affect their longevity in the herd and both of those things are going to have economic impacts.

Of course if you have to treat the animal or you have to cull the animal and bring another animal in that is of economic importance as well.

Dr onnor says developing reliable tools for early identification of lameness and identifying the risk factors that contribute to lameness will improve the ability of producers to select animals for particular group housing systems.

A final report is expected by the end of 2012.

[Mustang Sally Farm]

Tuesday, February 21, 2012
CME: Canadian Pork Industry - Signs of Improvement
CANADA - Higher global pork prices and improved demand for feeder pigs from the US positively impacted the Canadian pork industry in 2012, write Steve Meyer and Len Steiner.


It is important to qualify that statement. While the Canadian pork industry is showing signs of improvement, it is still far from entering a full blown expansion phase and it remains about 20% smaller from its peak in 2005 (as measured by the size of the breeding herd). Still, modest improvements in the size of the breeding herd, producer reports of higher farrowings in late 2011 and much higher farrowings in the first half of 2012 offer further support to the view that the cycle may be turning.

Statistics Canada released yesterday the results of its quarterly survey of Canadian hog and pig operations. Below are some of the highlights from the survey and implications for Canadian pork production going forward. We will cover the Canadian cattle survey tomorrow.

The total inventory of hogs and pigs as of January 1, 2012 was reported at 12.020 million head, about 125,000 head or 1% higher than the previous year but still some 3 million head or 20% smaller than on January 1, 2006.

The Canadian sow inventory on January 1 was reported about steady compared to January of the previous year but it showed some modest improvements from the levels we saw in the July and September survey. The total inventory was pegged at 1.312 million head, just a few hundred head lower than the previous year but about 1% higher than what it was back in July 2011.

The more encouraging part is what producers expect to see in terms of productivity gains in the first half of 2012. The survey pegged sow farrowings in Q4 of 2011 at around 720k, up 0.9% from the previous year and the first year over year increase in farrowings in more than five years. The pig crop for the quarter was reported at 7.423 million head, up 4.1% from the previous year and the biggest year over year increase in the crop size since June 2004. The size of the pig crop vs. farrowings implies that Canadian producers, similar to their US counterparts, are relying heavily on productivity improvements as a way to expand production. The implied litter size for the latest reported quarter now stands at 10.3 pigs per litter, an all time record high and about 3% higher than the previous year. Canadian producers indicated that they expect significant increases in farrowings by the second quarter of 2012 although it appears to us their expectations may be a bit too optimistic. The survey pegged farrowing intentions for the Apr - Jun quarter at 722.7k, 6.6% higher than the comparable period a year ago. If this number materializes, combined with gains in pigs per litter, would imply a pig crop for Q2 of 2012 that is about 9%-9.4% higher than the previous year.

[Mustang Sally Farm]

Wednesday, February 22, 2012
Pork Commentary: McDonald's Joins Gestation Parade
US - Last week the world’s largest fast food chain McDonald’s, announced that they wish not to purchase pork from sows raised in gestation stalls at some time in the future, writes Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
No exact timeline has been established as McDonald’s is waiting for their pork suppliers proposed plans which they expect in May.

The Humane Society of the United States, a well organized lobby group intent on destroying intensive livestock production and have everyone eat lettuce was quick to respond. Wayne Pacelle, the HSUS President and CEO: "All animals deserve humane treatment, including farm animals, and it’s wrong to immobilize animals for their whole lives in crates barely larger than their bodies." Who could disagree with Mr. Pacelle, but as usual "whole lives" is far from reality. The truth is, this issue is never been anything but an innate desire of elite Washington based lobby groups intent on shaping the world into a vegetarian society while making a good living doing it. A vegetarian lifestyle is a concept contrary to centuries of human history. We believe in liberty and choice. Vegetarians can eat only lettuce if they wish but the moralistic and legislative attempts to shape society to their own vision is misplaced. Thankfully this elitist minority has little sway in most of the world. Global meat consumption is the highest in history. As peoples income rise the desire for meat is magnified.

Cost of Gestation Change
We expect the gestation stalls will be gone in the future. The cost to change to other types of housing will be significant. In Spain the estimate to change per sow is $300- $400 US per sow or one billion dollars for the 3 million sows. The US is about 6 million sows, that’s two billion dollars if all changed. (some are already done) All these costs increase cost of production.

In the US egg industry when more space was mandated in cages, the number of laying hens declined and egg prices increased. The same could happen with sows. It takes more space to have sows in pens. Same barns, less sows, the results could be a cut in hog production.

As a concept group housing - ESF Sow Systems and group sows work. Genesus has several customers with high productivity using such formats with one herd over 31 pigs weaned for the calendar year 2011. Also Genesus Genetics are being exclusively used at the National Centre for Livestock and the Environment, a $15 million dollar facility in Manitoba with a major research component in ESF and Group Housing. The future always leads to change, and we must get ready. Our concern is not about sow housing in the future but the assault that intensive livestock production is facing by the vegetarians who use it as a moral front to justify their quest for societal change through legislation.

Observations
July lean hogs closed at 99.75 on Friday, Aug at 99.725. The smart guys in Chicago obviously think hogs are going to be strong this summer. There is still upside to these prices in our opinion. Low cattle numbers, less chickens, strong pork exports and little change in swine production over the next few months is a recipe for even stronger prices. We won’t be surprised if the hogs touch $1.10 lean a pound. Producers could use it. From what we can figure most producers have not back filled the equity hole that was created in past years.

The feeder pig market is one that has little control. It is an emotional, truly supply and demand equation. No one controls it and the number of buyers and sellers keep it fragmented. Last week USDA 40lbs cash feeder pigs reached $94 with the average $85.38. Strong, strong prices. It tells us producers are voting with their own money that lean hogs will be high this summer.

Canada January Swine Inventory
Statistics Canada released its January list inventory this week, no big surprise. The sow Inventory was at 1.29 million down 1,000 sows from a year ago. Total other hogs were 10.708 million up 126,000 from the same time a year ago. Canada’s production has been standing still since the breeding herd declined 20% (-300,000 sows) in the past few years. We expect little change going forward either up or down. No one will build a new sow unit in the for-seeable future, Canada’s costs with a par dollar to the US puts Canada at a cost of production disadvantage and this coupled with the fact market hogs brings lower prices compared to the US market. No sow herd growth.

Bottomline: No more hogs from Canada is supportive for Canada-US and world Hog prices.


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

United States and Canadian Hogs - February 2012
United States and Canadian hog inventory up 1 percent.


United States and Canadian inventory of all hogs and pigs for December 2011 was 78.0 million head. This was up 1 percent from December 2010, and up 2 percent from December 2009. The breeding inventory, at 7.11 million head, was up slightly from last year and up slightly from last quarter. Market hog inventory, at 70.8 million head, was up 2 percent from last year but down 1 percent from last quarter. The pig crop, at 36.4 million head, was up 2 percent from 2010 and up 3 percent from 2009. Sows farrowed during this period totaled 3.61 million head, up 1 percent from last year but down 1 percent from 2009.

United States inventory of all hogs and pigs on December 1, 2011 was 65.9 million head. This was up 2 percent from December 1, 2010, but down 1 percent from September 1, 2011. The breeding inventory, at 5.80 million head, was up slightly from last year but down slightly from last quarter. Market hog inventory, at 60.1 million head, was up 2 percent from last year, but down 1 percent from last quarter. The pig crop, at 29.0 million head, was up 2 percent from 2010 and up 3 percent from 2009. Sows farrowed during this period totaled 2.89 million head, up slightly from 2010 but down 1 percent from 2009.

Canadian inventory of all hogs and pigs on January 1, 2012 was 12.0 million head. This was up 1 percent from January 1, 2011 and up 2 percent from January 1, 2010. The breeding inventory, at 1.31 million head, was unchanged from last year and up slightly from last quarter. Market hog inventory, at 10.7 million head, was up 1 percent from last year and up slightly from last quarter. The pig crop, at 7.4 million head, was up 4 percent from 2011 and up 3 percent from 2010. Sows farrowed during this period totaled 720,000 head, up 1 percent from 2011 but down 1 percent from 2010.

[Mustang Sally Farm]

Friday, February 24, 2012
Chance for Pork Producers to Improve Profitability
CANADA - The President and CEO of the Saskatoon based Prairie Swine Centre suggests, by focusing on feed, labor and utility costs, pork producers have an opportunity to improve the profitability of their operations, 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 Prairie Swine Centre's annual series of spring producer meetings kicks off this coming Tuesday in Stratford, Ontario and over the next couple of months will travel to Saskatoon, Saskatchewan, Lethbridge and Red Deer, Alberta and Portage La Prairie and Niverville, Manitoba.

The focus is helping producers improve the bottom line of their operations and the long term sustainability of the pork industry.

Prairie Swine Centre President and CEO Lee Whittington notes the Prairie Swine Centre is entering its 20th year of operation and has been holding spring producer meetings almost every spring since 1993.

Lee Whittington-Prairie Swine Centre
The research scientists like to use this as our kick-off series of meetings for the year and so each of the research scientists will be bringing their newest information.

We've asked them to focus on again the bottom line, how do we keep pork producers in Canada competitive.

We're actually just barely above the cost of production on most farms today and that's primarily because of increased feed prices.

We are expecting our pork prices to continue to rise at least through until the end of June and so that's a good sign.

The three areas that pork producers can typically make their greatest gains is in feed, labor and utilities.

Those are the three big variable costs that every pork producer faces and so we hope to be able to touch on all three of those during the various presentations.

Mr Whittington expects this year's meetings to be of interest to pork producers, veterinarians, barn ventilation experts, bankers, the pork industry's whole value chain because improving the bottom line often involves more than one discipline and more than one supplier helping to make it happen on the farm.

[Mustang Sally Farm]

Wednesday, February 29, 2012
First Shipment of Hypor Breeders to Taiwan
TAIWAN - Hypor, the pig breeding division of Hendrix Genetics, announced that their first delivery of Hypor breeders arrived to Taiwan on 30 December. All 111 pigs arrived at Taipei Airport Taiwan in good condition and great health.
 

Nice Garden, distributor for Hypor breeders in Taiwan, received the Canadian produced Hypor breeding stock and after fifteen days quarantine period. The Hypor sire and dam lines were transported to Nice Garden’s customers.



 The arrival of the Hypor breeders highlights the commitment between Nice Garden and Hypor to develop a supply of excellent genetic quality Hypor breeders for the growing Taiwanese market. Nice Garden believes in establishing a quality high health pig breeding herd in Taiwan and introduced Hypor as a breeding company late last year at a seminar with 150+ farmers and leading people in the pig industry. Hypor entered a new market with this partnership. Training and technical support of the customers is an essential part of the commitment between Nice Garden and Hypor to fully realize the genetic potential of the breeders.

Jan Bobbink, General Manager Asia sees the introduction of Hypor genetics into the Taiwanese market as a natural progression of market share growth in Asia. "Building on our experiences in Japan, The Philippines, South Korea, Thailand, Viet Nam and China, we have a long history for developing successful partnerships in this region and Nice Garden also has the ambition to further improve the production performance of the Taiwanese pig industry and its pork value chain," said Mr Bobbink.

Nice Garden sees unlimited opportunities for both Hypor and Nice Garden in this market and it marks the first time that a global genetic company joins forces together with a local agent to provide direct customer support and services in the Taiwanese pig business. Nice Garden believes not only will it benefit the pig producers, but it will also help the overall performance of the industry as a whole, such as lower production cost, better meat quality and more efficient management... etc.

Pork market in Taiwan
The average annual pig output was NT $57 billion in the recent three years, accounting for 16 per cent of the total agricultural output, according to the annual agriculture report. The pig head survey in May 2010 showed that there were 6.126 million heads of pig in Taiwan and pork consumption still accounted for some 50 per cent of the total domestic meat consumption, demonstrating the importance of the pig industry in both production and consumption.

[Mustang Sally Farm]

Wednesday, March 07, 2012
Cash Lean Hog Market Continues to Go Sideways
US - The cash lean hog market continues to go sideways with the US National lean hog price hovering around 85 cents. We’ve got about 60 days before the higher markets expected in the spring come to fruition with May – August lean hog futures averaging close to $1.10 lean per pound. The $30.00 per head boost in prices will go a long way to give strong profits for the four month period, writes Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
Cash feeder pigs continue to reflect potential profits this summer with an average last week of $86.27 for 40 pounds. Today’s 40 pounders are currently a July marketed hog. We expect feeder pigs to stay strong for the next several weeks.

Sow Herd Expansion
We believe that the US breeding herd has started to expand. Sow marketing’s are down with weekly numbers now below 60,000. We also sense an increase in sow numbers in many sow units. A cautious optimism is leading to this increase. Let’s hope pork exports stay strong. A leading packer executive several years ago called pork exports ‘The opiate of the American Pork Industry.’

Corn Markets
The USDA a week ago predicted $5.00 per bushel for corn and 94 million acres planted for the 2012/2013 crop year. The futures market doesn’t seem to be buying into this outlook with futures well over $6.00 per bushel for most months going forward. Let’s hope the USDA is correct, not the futures traders.

PRRS
The PRRS saga tearing across North America continues. Filtered sow barns are failing, filtered A.I studs, and bio secure sites going down, etc… It is really sad all of the devastation. We expect the number of hogs that will come to market this summer will be less and a price mover. The almost non - existent winter that we have had this year in all likelihood has made the PRRS spread easier. Wet, mild, and humid compared to a killing cold – a cursed disease!

USDA Outlook Forum
Donnie Smith President and CEO of Tyson was a guest speaker at the USDA outlook luncheon. Some of his comments were reported by Chris Clayton – DTN Ag Policy Editor. Tyson is the world’s largest meat producer. Packers such as Tyson are moving less volume of pork and beef right now, but dollar sales are up overall because of price inflation, Smith said. “All I am trying to say by the price inflation comment is the interest is there. If people had the money they would spend it on meat. The only reason they aren’t buying meat is they can’t afford it.”

“People want meat in their diet and I don’t blame them. I do too, but it’s getting pretty expensive. We’re concerned there are thresholds, and it depends on disposable income, where demand kind of tops it.”

He added “Per capita consumption, I think, will drop for the next two years. The current trend we have, I don’t see changing that for the next two years.”

The USDA expects 198 pounds red meat – poultry per capita in 2012. This is down six pounds from 2011.

While per capita consumption is expected to decline in the US, Smith said the outlook for protein exports remain strong. Smith cited a weak dollar and comments from the US Federal Reserve that interest rates are expected to remain unchanged through 2014.

“We should have a favorable environment for exports and that’s good for the economy.” Smith said.

The outlook that Smith gave makes sense. The world will be buying US meat and poultry in 2012. Companies like Tyson, Smithfield, JBS, Swift, Hormel, Seaboard, Maple Leaf, etc… are the point men for our pork exports. They need to know the domestic and world markets and they do. It’s a great strength.


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Thursday, March 08, 2012
Genesus Attends Canada Trade Mission in China
CANADA and CHINA - Genesus was recently honoured to attend a Canadian trade mission in China.
 

Headed by Gerry Ritz, Canadian Agricultural Minister, one of stops made by the group was at COFCO, a Genesus client. COFCO is a C$22 billion per year corporation mainly involved in food and ingredient procurement for the Chinese market.

COFCO has many holdings, including approximately five per cent of Smithfield Foods. Recently, COFCO has expanded into pig production, within China. Their goal is to produce several million hogs per year. Pork is a staple of the Chinese diet, so much so that it accounts for roughly 10 per cent of the weighting of China’s Consumer Price Index. With a growing middle class and increased demand for protein, pork prices have been at or near all-time highs in China, with a market hog worth approximately $350 each. The use of Genesus breeding stock with its noted reproductive performance along with the fast, lean growth of the market hogs, the China consumer will see enhanced meat quality in the restaurants and at the dinner table.

The only registered purebreds in COFCO’s production system are Genesus animals, located in COFCO’s two Nucleus herds (at Wuhan and Dongtai) combined capacity 4800 sows. Genesus is providing COFCO with ongoing Technical Service for the Genesus genetic programme. During the meeting with Agriculture Minister Ritz, Patrick Yu, Director and President of COFCO was quoted as saying that COFCO enjoys “a good relationship with Genesus Canada”.

Mike Van Schepdael, Genesus Vice-President: “We are very fortunate to be chosen by COFCO, the largest agri-business in China to supply Registered Purebred Swine as the genetic base for its huge commercial production system. COFCO had all the swine genetic companies in the world to choose from, they chose Genesus”.

Under the witness of Canadian Prime Minister Mr Stephen Harper, Canada Agriculture Minister Mr Gerry Ritz and Deputy Secretary of CPC Chifeng Songshan District Committee and District Governor Mr Xia, Guohua, the contract was signed by Mr Mike Van Schepdael, shareholder and Vice President of Genesus, and Ms Monita Mo, Chairwoman of Best Genetics.

[Mustang Sally Farm]

Pork Industry Economic Outlook Cautiously Optimistic
North American pork producers have reason for optimism on prices and cost of production through 2012, says leading industry economist, Karl Skold, speaking at the 2012 Banff Pork Seminar.

However, caution is called for in equal measure in a world facing instability in the wake of the global economic downturn, according to Mr Skold, reports Meristem Land and Science.

“The signs are positive but there’s a bit of wait and see,” said Mr Skold, who is president of Midwest–US–based Westside Economics. “Overall the fundamentals are promising and looking more solid than they have in recent years. We’re seeing transitions in the markets that should benefit US and Canadian pork production.”

At the 2012 Seminar attended by over 650 pork industry players from across North America and around the globe, Mr Skold provided a rapid-fire yet detailed analysis of the many intertwined and dynamic factors shaping this outlook.



Karl SkoldHere are a few snapshots of what Mr Skold sees as the key factors.

The Big Picture
At a macro or global level, there is significant volatility and lots at play, said Mr Skold. Europe is likely moving into a recession. The US economy is showing some improvement despite an array of challenges. There are overall lower rates of growth in developing economies. China shows slowing growth but at around nine per cent, is still moving at a very strong rate.

“There are some headwinds against commodity markets which overall is fairly good for hog producers,” stated Mr Skold. But caution is the order of the day as the world finds its way in the wake of financial shock, he says.

“The history shows the types of collapses we’ve seen aren’t normal and take a while to get through, so we need to bear that in mind,” he said.

American consumer sentiment remains fragile and the country’s debt is a looming issue, he says. Crude oil is on a solid upswing, which may cause headwinds in Canada’s favour. Weather issues in South America due to La Niña have cut the Argentine corn crop. And drying across the western US and western Canada is a potential factor to watch.

Feed Grain Picture
Feed grain markets also show encouraging signs for pork producers, said Mr Skold. Corn futures suggest much lower prices than in 2011, with under $6 a bushel likely for 2012.

He continued: “We’re anticipating really favourable prices among all feed grains. Big reasons include higher production of crops outside the US, the shift in US ethanol policy to end subsidies, and the overall transition from the demand-led markets we’ve seen that are now catching up with supply. Ethanol, in particular, has really driven the market and now we’re seeing the emergence of a more supply driven environment.”

Soybeans markets are likely to be pretty flat.

Mr Skold explained: “The big driver outside the corn crop is going to be China and what they do. They’re importing 60 per cent of the world’s soybeans and are likely to continue to import at a very strong level this year.”

The short-term bottom line is that current crop year prices will likely find support, he says.

“Unless there’s a shock, we’re looking at a promising scenario for the cost of pork production in Canada and the US.”

Pork Picture
Coupled with the good news of the feed costs outlook improving, there are signals of continued strong and rising demand for pork.

This is one of the most solid factors pork producers and their industry can bank on, said Mr Skold.

He continued: “World consumption of pork continues to expand with income growth. This is a pretty foundational long–term projected trend that is very promising for pork–exporting countries that can maintain disease-free and efficient pork production.”

In the short-term, however, there is some tempering of expectations following more favourable than anticipated conditions in 2011, he believes.

Mr Skold explained: “When we look back at the past year, we saw export factors really drive the market. We had the South Korean foot and mouth disease situation, the Japan earthquake and China’s attempts to control inflation by increasing pork imports starting last August. Those are three huge events that gave a lot of upside in 2011 that won‘t happen this year.”

He sees the overall export market declining about four per cent in 2012, which is not necessarily a bad thing.

He said: “It’s okay to take a breather. In 2011, we had a seven percent jump so we’re still looking pretty good overall.”

For the next couple years, the crystal ball shows modest productivity growth for Canada and the US coupled with the flattening of exports.

“Another factor that may come into play to benefit the pork sector is reductions in competing meat supplies, with pork likely to be very favourably priced relative to beef,” according to Mr Skold.

Overall, there is not much to complain about, particularly for a Canadian industry that has struggled through four years of extremely challenging conditions.

Me Skold concluded: “If we can see stability and improvement at the macro level, all these other factors should add up to support fairly good margins for pork production.”

[Mustang Sally Farm]

Tuesday, March 13, 2012
Government Helps Modernise Manitoba Hog Plant
CANADA - Pig producers are to benefit from increased access to a local processing facility with the support of the Government of Canada.


The Canadian government has announced an investment of more than $4.5 million to Maple Leaf Inc. to upgrade its Manitoba processing facilities.

"Today's investment underlines our commitment to the pork industry and our focus on creating jobs and growth in Manitoba," saidMinister of Public Safety and Regional Minister for Manitoba Vic Toews.

"Upgrades to its Manitoba facilities will help Maple Leaf boost productivity and production capacity to fill new market opportunities, which in turn will increase the demand for producers' high-quality swine."

"Supporting Manitoba's meat production industry will return dividends to the farm gate and will create employment opportunities for years to come," said member of Parliament Merv Tweed.

"Our government is proud to support Maple Leaf's expansions in Manitoba."

These investments will enable Maple Leaf to purchase and install new line processing, heat recovery, and packaging equipment, as well as new value-added production lines. This will improve operational efficiency, reduce costs, and increase revenues through the adoption of value-added activities.

"Maple Leaf Foods' total employment in Manitoba will soon grow to approximately 4,000. Our Brandon and Winnipeg plants are vital to a healthy hog and production sector in the province," said Doug Dodds, Chief Strategy Officer at Maple Leaf Foods.

"We appreciate the support from the Government of Canada, and we are committed to making our plants in Brandon and Winnipeg as efficient and competitive in both the North American and export markets."

Manitoba's pork industry contributes more than $750 million annually to the provincial economy and provides more than 13,000 jobs for Manitobans.

Under Canada's Economic Action Plan, the $60-million Slaughter Improvement Program made federal repayable contributions available to support sound business plans aimed at reducing costs, increasing revenues, and improving the operations of meat packing and processing operations in Canada.

[Mustang Sally Farm]

Wednesday, March 14, 2012
Pork Commentary: June Lean Hogs Drop $4.00
US - A week ago, summer lean hog futures went over $1.00 per pound; last week was a different story with June closing at 95.325, writes Jim Long.
 

Jim Long is President &
CEO of Genesus Genetics.
A surging US dollar and concerns that China might not keep buying pork at 2011 levels were the major negatives.

How these factors stake out is anyone’s guess. The US dollar will go one way or another. Lots of smart people have lost fortunes betting wrong on currency. China pork imports will in our opinion stay close to where they have been in 2011. The demand for pork in China is strong. Only a small percentage of consumption in the world’s largest pork market is needed for it to still lead to significant imports.

Price of US gasoline retail sales have always declined when gasoline gets over $4.00 a gallon. It is almost there. That can hurt all meat sales – beef and pork.

Expansion
We sense the US and Canada swine herd is growing – not much but it is. Some sow barns are coming back into production while weekly sow slaughter is in the high 50 thousand levels compared to low 60s of a few months ago. Profits have been had by many over the last two years, and it is restoring some confidence and capital. Compared to other countries the US – Canada per head projected profits of $5 - $10 per head in 2012 is miniscule but maybe what we lack in absolute profits people must think they make it up with volume? Or maybe more likely most are marooned in the swine industry, there are still very little opportunities to exit gracefully, existing sow units are still selling at a deep discount to new facilities, probably in the 25 – 35% of new range. At these low prices some of the existing units are being bought and started up. Consolidation continues.

Corn Crop
The USDA last week raised its estimate of Brazil’s corn crop by 1 million metric tonnes. Brazil and Argentina are now estimated at 84 mmt in 2012. Obviously more corn in South America is not bullish for corn. Now the market we expect will turn to the United States, if the USDA is correct on acres projected and trend line yields the 2012 crop will be the largest in history. This coupled with large global wheat inventories and expected large crop in 2012 could lead to downward pressure on grain prices in the coming months all leading to lower feed prices. It is our opinion high prices such that grains have had will always lead to lower prices. Commodities always move up and down. Growing crops is relatively easy business. Capital intensive but basic plan with relatively simple technology to adopt. Greater use of hybrid seed, herbicides, and better equipment is driving global yields at a pace from our observations travelling the world faster than is comprehended by many observers. The bottom line: it is easier to grow corn – wheat than it is to raise swine!


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Wednesday, March 21, 2012
Major Project for Canadian Hog Industry
CANADA - Jacques Gourde, Member of Parliament for Lotbinière-Chutes-de-la-Chaudière, and Pierre Corbeil, Minister of Agriculture, Fisheries and Food, announced the allocation of $500,000 to the Fédération des producteurs de porcs du Québec (FPPQ) to implement a major project for controlling the virus responsible for porcine reproductive and respiratory syndrome (PRRS), which is affecting the health of hog herds.


This financial assistance is being provided under the Support Program for Sectoral Development Strategies, the product of an agreement between the federal government and the government of Québec.

"Our government is investing in the hog sector because we believe in it and want to see it prosper," said Mr Gourde. "This major project aims not only to promote agriculture as a key driver of our economy but also to ensure competitiveness in the sector."

"This major project will generate significant benefits in the hog sector. By equipping it with the capacity to limit the economic losses currently resulting from this virus, we are working with the industry as it searches for structuring means to improve the financial health of enterprises," underscored Mr Corbeil.

The purpose of the project is to control and ultimately eradicate the PRRS virus in five production zones in the Montérégie, Chaudière-Appalaches, Estrie and Centre-du-Québec regions. The disease, which is not transmissible to humans, affects hog livestock by triggering abortions in sows and preventing growth in young pigs. Implementation of the project will allow for the development of strategies initiated by producers themselves to fight PRRS. By 2014, an expected 15 to 20 additional production zones will be covered by virus control measures until the disease is eradicated from Quebec entirely.

"MAPAQ's and the federal government's financial involvement, for a value of $500,000, for us means a strong commitment from the governments to support the meaningful initiatives for Quebec hog farms. The project is also part of the FPPQ's vision to reduce on-farm production costs by improving the health status of our herds. Hog producers are investing the significant amount of $320,000 in this future project. It is known that, every year, the PRRS virus costs producers more than $30 million," stated Cécilien Berthiaume, 1st Vice-President of the Fédération des producteurs de porcs.

"This project shows that producers want to get involved and ensure the sustainability of their enterprises and the hog industry. I applaud the initiative of the Fédération des producteurs de porcs du Québec to invest in a highly beneficial project that will foster the growth of the hog sector," concluded Minister Corbeil.

The financial assistance provided to implement the project comes from the Support Program for Sectoral Development Strategies. This cost-shared program, associated with the AgriFlexibility Fund, aims to stimulate growth and strengthen coordination in biofood sectors within a highly competitive and constantly changing business environment. In March 2011, a budget allocation of $16.7 million was announced to support the implementation of this program.

The hog sector is an important force in our economy: it generates over $1.1 billion in marketplace farm cash receipts and over $3.2 billion in processed product sales. It also generates close to 28,000 direct and indirect jobs for Quebec residents.