Canadian Pork Producers:

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Long Term Outlook for Pork Consumption Bright
CANADA - A US-based agricultural economist is confident, despite the current economic squeeze, the long term outlook for North American pork production remains positive, writes Bruce Cochrane.





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

Farm-Scape is a Wonderworks Canada production and is distributed courtesy of Manitoba Pork Council
and Sask Pork. 
Fueled by high feed costs due to increased competition for corn from the ethanol industry, low hog prices due to an over-supply, the global recession and the impact of the H1N1 flu, the North American hog industry is facing its worst economic squeeze ever

University of Missouri agricultural economics professor Dr Ron Plain notes US producers have lost money in 20 of the past 22 months and losses in the Canadian industry have continued even longer.

Dr Ron Plain-University of Missouri
Pork is quality meat and people like it.

If we look at long term, for the last 70 year or so, there's about a one and half per cent per year growth rate in demand for pork and so with time a growing world population and, in general, a wealthier population means that we need to grow our industry both in the US and Canada and supply that growing demand.

Long term one of the key things is this whole issue of competitive position in the world and I think North American hog industry long term is a place that's going to gain market share.

The portion of the world's pork produced here in the US and Canada is likely to increase.

I think we're in a cost competitive position and still a regulatory competitive position to places like the European Union.

Certainly hog producers in both of our countries are losing an enormous amount of money and unfortunately a number of them won't survive the current situation but long term our plentiful supply of feed grain and our environmental situation puts us in a pretty good shape once we get through the current economic problems.

Dr Plain acknowledges the weak economy worldwide is hurting the pork industry right now but if we can turn that around and generate some improvement, that will certainly help.

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Canadian Hog Statistics - Second Quarter 2009
Canadian producers had 6.7 cent per fewer pigs on farm on 1 July 2008 than a year previously, and the breeding herd was down 4.6 per cent, according to the latest quarterly report from Statistics Canada. The combination of US COOL regulations and perceptions of the H1N1 virus caused the number of pigs exported from Canada to drop by more than one-third for the first half year of 2009 compared to the same period in 2008.


Highlights
Canadian hog producers had an estimated 12.1 million hogs on their farms, down 6.7 per cent from 1 July 2008. The Canadian breeding herd, mainly sows and gilts, declined 4.6 per cent to almost 1.4 million head during the last year.

During the first two quarters of 2009, hog producers nationally exported an estimated 3.3 million hogs, down 34.6 per cent from same period last year. New Country of Origin Labelling (COOL) regulations in the United States have constrained market access, and the perception of the H1N1 virus has also had a negative impact on markets.

Analysis
Livestock statistics as of 1 July 2009
As of 1 July 2009, the number of hogs on Canadian farms was down from the same date a year earlier.

Table 1. Hog inventories on 1 July (thousand head)
  2008 2009
CANADA 12,980 12,105
Atlantic 187 148
Quebec 4,075 3,870
Ontario 3,237 3,101
Manitoba 2,720 2,530
Saskatchewan  971 810
Alberta 1,670 1,530
British Columbia 120 116

Hog inventories still decreasing
Canadian hog producers had an estimated 12.1 million hogs on their farms, down 6.7 per cent from 1 July 2008. Hog inventories have been decreasing since 2006, following a period of investments in more efficient barns in the late 1990s and early years of 2000.



Figure 1. Hog inventory on farm per quarter, Canada, 2000 to 2009
The Canadian breeding herd, mainly sows and gilts, declined 4.6 per cent to almost 1.4 million head during the last year. As sows decrease so do the number of farrowings. Farrowing intentions for the third quarter of 2009 are down 4.1 per cent from the same period last year and are expected to be down 5.5 per cent for the fourth quarter. On 1 June, the US breeding herd has decreased 3.0 per cent from the same date last year.

Prior to the onset of this decline, hog producers had tolerated tough times in the industry while waiting for markets to improve. By 2006, some hog producers began leaving the industry, reflecting a number of factors. These include high feed costs, low commodity prices, a strong Canadian dollar and the economic downturn. The downturn has reduced access to credit for producers and decreased meat demand by consumers. Last year, the Canadian government put a Cull Breeding Swine Program in place to help hog producers reduce the size of their breeding herds. Recently, new Country of Origin Labelling (COOL) regulations in the United States have constrained market access. The perception of the H1N1 virus has also had a negative impact on markets.

Despite hog inventories decreasing since 2006, hog slaughter remains strong in 2009 as more weaners were fed to slaughter weight in Canada rather than being exported to US finishing operations. Domestic slaughter capacity increased, mainly in the Prairies.

During the first two quarters of 2009, hog producers nationally exported an estimated 3.3 million hogs, down 34.6 per cent from same period last year. The bulk of hog exports are market hogs shipped to slaughter and weaner hogs shipped for feeding. In the first and second quarters, hogs exported for slaughter are down 58.5 per cent, and weaner hog exports are down 27.6 per cent from the same period one year ago. Manitoba, the main exporting province, had a 32.4 per cent decrease in exports in the first and second quarters of 2009.



Figure 2. Hog exports, Canada, 2000 to 2009
Revenues from the sale of hogs declined 2.9 per cent in 2008, the fourth consecutive annual decrease. The average annual weighted price in Ontario, a leading hog price indicator in Canada, remained virtually unchanged in 2008 from the previous year. This is a decrease of $29 since its peak of $86 per hundredweight in 1996. Historically, decreases in hog prices were generally recovered within a year or two, even following the price collapse in the fall of 1998. However current hog prices have not recovered since 2005.

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Calculating Energy Content of Swine Rations
CANADA - An international study indicates margins of error need to be built into net energy calculations when formulating rations for swine, writes Bruce Cochrane.





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

Farm-Scape is a Wonderworks Canada production and is distributed courtesy of Manitoba Pork Council
and Sask Pork. 
Research conducted by the Prairie Swine Centre in Saskatoon in collaboration with the Universities of Illinois and Missouri looked at net energy systems used to calculate the energy content of feed ingredients when formulating swine rations.

The goal was determine whether genetic or environmental factors would influence the calculations.

Dr. Denise Beaulieu, a research scientist nutrition with the Prairie Swine Centre, says research techniques were carefully duplicated to ensure accurate comparisons.


Dr. Denise Beaulieu-Prairie Swine Centre:
The maintenance, the requirement to maintain the animals was different between research centres.

Whether this is due to genetics or environment, we're not exactly sure but this certainly confounds our ability to estimate the energy retained in a feed.

We did find also that the net energy was affected by growth so it was affected both by where the animal was, the environment, perhaps the genetics but also the stage of growth of the animal.

So even if a producer is using, for example, the digestible energy system they may have to use different numbers depending upon the stage of growth of the animal that they're feeding.

We've known about that for some time, that we may not be able to use a single number for each feed.

This research certainly has demonstrated that again, that producers depending on where they are and or the stage of pig that they are feeding, they may have to use different numbers to predict the energy requirement of that feedstuff.

Dr. Beaulieu says, because the numbers are not precise, a margin of error is acceptable when formulating rations.

However she suggests, with the current economics, produces may be willing to use lower cost ingredients, estimate the energy content of those ingredients and accept slightly lower performance

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Net Energy Based Ration Formulations Encouraged
CANADA - Scientists with the Prairie Swine Centre are encouraging hog producers to consider moving to net energy based ration formulations but to make the change cautiously, writes Bruce Cochrane.





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

Farm-Scape is a Wonderworks Canada production and is distributed courtesy of Manitoba Pork Council
and Sask Pork. 
Researchers with the Prairie Swine Centre in Saskatoon and the Universities of Illinois and Missouri have completed a study which looked at various net energy systems used to calculate the energy content of swine rations.

Dr. Denise Beaulieu, a research scientist nutrition with the Prairie Swine Centre, says, where producers are using a lot of alternative feeds or reducing the crude energy content of the diet, using some type of net energy system has been shown to be economically advantageous.

Dr. Denise Beaulieu-Prairie Swine Centre
This was a collaborative project with the Universities of Illinois and Missouri in the US and each of us carried out similar experiments because one of the objectives of the project was to see if you need different values depending on the location because of, for example, the genetics or the environment the pigs are being housed in.

The objective of the project was to look at the net energy systems that are available now.

We know that a lot of producers are interested in using some other system of evaluating the energy content of the diet besides the digestible energy system that's commonly used.

There's various types of adaptations of the net energy system and we were specifically looking at whether we could use the systems developed in Europe here in North America.

We wanted to evaluate those.

For example there's no reason for us to go and develop a new net energy system if we can adapt those systems.

Dr. Beaulieu encourages producers to move to a net energy system cautiously, perhaps retaining digestible energy in the matrix formulation while monitoring net energy until they become familiar with the numbers, however she recommends moving to some type of net energy system.

She invites anyone with questions about net energy to contact the Prairie Swine Centre directly.

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Canadian Pork Producers Face Tough Decisions
CANADA - The Chair of Manitoba Pork Council says Canadian pork producers will be facing some tough decisions over the next few months as they decide the future of their operations, writes Bruce Cochrane.





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

Farm-Scape is a Wonderworks Canada production and is distributed courtesy of Manitoba Pork Council
and Sask Pork. 
Earlier this month Ottawa unveiled a restructuring plan for Canadian pork producers which includes interest bearing government backed credit, incentives to help struggling operations transition out of the industry and funding for international pork marketing initiatives.

Manitoba Pork Council Chair Karl Kynoch says pork producers have faced challenges ranging from high feed costs and the strong Canadian dollar to the economic down turn and most recently H1N1 but he is confident the industry is still viable in Manitoba and will ultimately return to profitability.

Karl Kynoch-Manitoba Pork Council
There's still quite a few details to work out over the month.

A lot more of the details will come out in September.

We've been working very close with government and pushing on them to at least get the announcement out so producers would have some idea of the structure of the programs coming forward.

The big thing was is that they finally came out with an announcement to give producers a heads up on what the government is actually going to do to help them so producers can move forward and make some touch decisions.

There's going to be a lot of tough decisions made over the next few months but the big thing was producers needed to hear the announcement so they could decide what to do with their operation and what to do going forward, whether to restructure it and continue or whether to decide to exit the industry.

I know this initiative isn't going to help out every producer but there's going to be a lot of hard decisions made here going forward and at least producers now know what the government's willing to do so I commend the federal government for coming to the table.

Mr Kynoch expects the difficulties to continue to echo through the provincial economy for the next few months.

He notes a lot of spin-off jobs that had depended on pork production are now being affected as we see feed mills cutting back on staff or closing and trucking companies laying off drivers.

He says it'll be interesting to see how things develop over the next few months.

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Pork Commentary: Q2 Canada-USA Swine Inventory Report
CANADA - This week's North American Pork Commentary from Jim Long.

 

Jim Long is President &
CEO of Genesus Genetics.
Canada released its 1 July Swine Inventory report last week, with this comes a United States and Canada combined report for the 2nd quarter. It’s a continental market the aggregate is what counts in our opinion.

2nd Quarter USA - Canada
Thousands of head
  2008 2009 2009 as per cent of 2008
All hogs and pigs 80,368 78,184 96
Kept for breeding 7,557 7,347 97
Market 72,803 70,837 97
Sows Farrowed 3,846 3,710 96
Pig Crop 36,432 35,850 98

Observations
The combined Canada – USA breeding herd peaked (7.752) 3rd quarter of 2007 (about 2 years ago). Since then we have had continual financial losses in our industry. Since the inventory peak 1 September 2007, the Canada – USA breeding herd has declined 405,000.


The 2nd quarter market inventory of Canada – USA was about 2 million head less than a year ago. Considering a year ago right now we had lean hogs around 85 cents, it is difficult to comprehend the $80 per head difference we are currently seeing year over year. Less hogs but significantly lower prices. It’s hellish!


We cut sows by 4 per cent but have a Pig Crop down only 2 per cent. The 2nd quarter pig Canada – USA pig crop was down only 500,000 + this year compared to last. Supply is not dropping significantly.


There is no Golden lining in the Canada – USA report. To get any relief from these extremely low prices we will need a demand pick – up. Breeding herd liquidation is continuing the 400,000 plus we have taken out since September 2007 is being added too.


We had reports from the field of many farms beginning liquidation over the last few weeks. By our calculation, that is putting names on known liquidation under way, we have come up to 120,000. We are sure this isn’t all. Continual $40.00 per head losses will continue to make the liquidation list grow. Sows haven’t dropped $50.00 per head in a week because of lack of supply.


Demand could be enhanced by South Korea’s announcement 10 days ago to lift most of the import restrictions put in place on H1N1. We had visitors last week from South Korea (Genesus sells more swine breeding stock to South Korea than any other Genetic company). Our visitors told us they were receiving $3.00 US per kilo or about $1.35 US per pound. Opening up of South Korea’s pork imports and the price point spread between North America and South Korea can only enhance total pork exports in our opinion.


The hog prices in Mexico continue to be strong with the average price 20 August, quoted as 19.5 pesos per kilogram, with USA to Mexican peso exchange rate of 12.837. That would be $1.51 US kilo live weight or 69 cents US per pound live weight. Mexico is the United States number two largest market for pork. The border is open for pork. This is the largest Mexico – USA hog price spread we have seen in 15 years of doing business in Mexico. This will lead to more pork going to Mexico. Demand is price enhancing.


The most recent European Union hog prices are about 1.5 Euros a kilo (1.00 Euro = 1.432 USD), or about $2.14 US a kilo or 97 cents US per pound. The European Union has approximately double USA – Canada hog production and is obviously a major global player. Slaughter prices in USA – Canada are half of E.U’s and can only enhance USA – Canada export opportunities.


The USA Cold Storage Report 31 July indicated a pork pull down of 30 million pounds from June 30577 down to 547. A year ago, July 1st was 505 million pounds. Nothing extraordinary in this data but at least inventory went down and is not significantly higher than a year ago when we had historically high prices. The real challenges right now are the reports we get of continued concern of H1N1 flare ups (unfortunately still called swine flu). These concerns are making packers, retailers, and exporters all reluctant to hold anything more than minimal pork inventory in case of a further price collapse due to H1N1.


The Canadian Government's aid package has not been greeted warmly. No one seems to understand the criteria or rules (including banks we talked to). What is a viable operation for qualification? What is percentage of loans guaranteed? Lots of questions left unanswered. Big Bang Announcement with little meat. We still can't get the arithmetic of Economists at Iowa State who has calculated liquidation in Canada will hurt US producers by cutting US prices 7 per cent. We want to see what his calculation would be if the US adopted a sow buyout program proposed last week by producer groups including Producers Livestock. It's good to see leadership from the co - ops; unfortunately, the NPPC and the National Pork Board seem to be like a deer in the headlights. Proposing the USDA. buy some meat to give away is a joke. People eat free meat instead of buying it. How does that help? Maybe we will get the ISU economists calculation on how free pork increases prices.
Summary
Ugly, ugly, ugly - that is the scenario we are in. People are losing their farms and as a whole we are collectively gassing $100 million plus a week. Supply will decline but we need increased demand. We believe Mexico and South Korea will likely take more pork. We need a push. We believe it will come at some point by off farm speculators who will see lean hog futures quite low in any historical measurement. When they believe there is liquidation and export demand enhancement we see them entering big into the lean hog pit. It’s all about money. It doesn’t matter if it’s gold, oil, steel, etc... speculators could be our salvation. Old proverb: "Peasants don’t go broke."

Genesus Duroc Boars
Setting New Genetic Standards
Genesus Duroc Boarsare selected from the World’s largest High Health Registered Purebred Herd. Genesus Durocs are selected for rapid growth rate, durability, feed conversion and carcass quality. Genesus Durocs are analyzed using a proprietary carcass program that emphasizes lean meat percentage while complementing selection for intramuscular fat, color and tenderness. All characteristics demanded by the Premium White Tablecloth and Export Markets, Genesus Duroc have been recognized for superiority with several National Genetic and Packer Carcass Awards. Our selection process is extensive.

Rapid growth – Genesus has the industry’s only dedicated Registered Purebred Duroc performance testing facility that uses computer transponders to individually measure average daily feed intake. This allows Genesus to identify High Appetite Boars that grow faster and are robust throughout production. Research has estimated that including individual feed intake measurements taken over the complete grow-finish period will increase the expected response to selection in our sire line index by 43 per cent. A key selection tool in the Genesus genetic program by our geneticists is the Sire Line Index (SLI). The SLI combines EBV (Estimated Breeding Value) for the key economic traits into one value based on their relative economic value for traits important to slaughter hogs. Last year Genesus performance tested 5.014 Durocs. As shown in the following graphs, Genesus has made steady, annual progress in the key economic traits.

Feed Conversion – Genesus genetic improvement programs have always included selection for feed conversion ratio (FCR). Our selection indexes have a significant amount of emphasis on FCR: 29 per cent in the Sire Line Index. In our current evaluation system an EVB for FCR is computed based on the relationships between FCR and age. Lean yield, loin eye area and percentage of lean in the loin relative to 3 primal lean. Most experts agree that feed intake is strongly related to growth rate and fatness. A 1993 study determined that one day less to 220 lb resulted in 1.96 lb less feed and for every .04 inches less fat at 220 lb resulted in 2.34 lb less feed from 55 to 220 lb growth period.

So what has been the result from the selection Genesus has practiced for FCR? The genetic trends for Duroc are shown in the graph below.

Use of Carcass and Meat Quality Data
Carcass and meat quality data is combined with off-test data (growth and ultrasound), pedigree data and off-test, carcass and meat quality data on sibs and relatives for genetic evaluation.

The data collection has enabled Genesus geneticists to accelerate superior carcass quality traits. Packers recognize Genesus Durocs Quality and Uniformity and this leads to our customers having hogs with market options and demand.

Structure – Over the last decade tens of thousands of Genesus Durocs have been tested annually on cement slats in a real life environment. The ability for Genesus Durocs to breed and produce offspring that perform in commercial facilities is well recognized in our industry and by our customers.

Health – All Genesus Duroc boars come from our Primary Nucleus Units. Genesus Duroc Boars health meets and exceeds industry standards. Our seven dedicated AI centers have excellent health and biosecurity.

Registered Purebred Durocs – Many genetic companies sell what they call Durocs. Genesus sells only Registered Purebred Durocs from 100 per cent registered purebred herds. Genesus currently has the world’s largest Registered Purebred Herd. Last year Genesus registered 41 per cent of all Purebred Breeding Stock in the nation. You can be confident you are getting a 100 per cent Duroc boar with Genesus, verifiable by the official National Purebred Swine Registry.


 

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Canada’s breeding herd continued to shrink in the second quarter but it did so at the slowest rate since the fourth quarter of 2007. Statistics Canada’s Hog Statistics report, released on Thursday, showed the Canadian breeding herd numbered 1.3798 million head on 1 July, down fractionally from the 1 April inventory of 1.383 million head and 4.6 per cent lower than the inventory level on 1 July 2008. As has been the case for all of this large liquidation, the western provinces accounted for more of the decline (down 7.2 per cent) than did the east (down 2.4 per cent).

This reduction in Canada’s breeding herd, when combined with the 2.7 per cent reduction in the US herd on 1 June, puts the Canada-US herd at 7.347 million head, 3 per cent lower than one year ago. The June-July count is 5.2 per cent lower than the herd was at its peak of 7.752 million in October 2007. Several analysts, including me, believe that the combined Canada-US herd will have to decline by about this same amount – 400,000 head – to balance supply and demand at price levels that will be profitable relative to higher costs.

Canadian producers intend to farrow 740,700 sows in the July-September quarter, 7.5 per cent fewer than one year ago. Those intentions rise to 743,700 sows in the October-December quarter, only 2.5 per cent lower than last year. Farrowing intentions in the eastern provinces for the two quarters are virtually unchanged (-0.5 per cent and -0.6 per cent) from last year, meaning virtually all of the future decline will come in the west.


This is almost certainly due to the intense pressure that recent markets have placed on producers who specialize in weaned pigs and that is especially true of those who sell those pigs on spot markets. Figure 2 shows spot prices for 10-lb. weaned pigs – and the picture is ugly to say the least. These prices get hammered from both sides. When lean hog futures fall or corn and soybean meal future rise, the value of these pigs goes down. There have been times this summer when that value was zero and there are few signs of any significant rally now.


Pork Supply, Hog Market Levels Cause Concern
Friday’s Cold Storage report from USDA was yet another piece of bearish, though reasonably expected, news. Pork inventories on 31 July, at 547.331 million pounds, were 8.3 per cent larger than one year earlier, but 27.5 per cent higher than the average for 2003-2007. Ham stocks, though 5 per cent smaller than last year, remain large by historic standards, exceeding the 2003-2007 average by 29 per cent. Belly stocks were only 3.9 per cent higher than last year, while total loin stocks were 16.2 per cent lower than last year.


The problems, from a supply standpoint, in this report are in the "other" and "unclassified" categories. Those two are 25 per cent and 30 per cent higher than last year and they are not small categories. Only the total ham inventory (i.e. the sum of bone-in and boneless hams) at 137.8 million pounds is larger than these two. Stocks of "other" pork totaled 107.3 million pounds on 31 July, while stock of "unclassified" pork amounted to 70.6 million pounds.

We don’t know much about these. They contain a number of processed products, such as sausages and bacon, but we don’t know much else. When they begin to account for a large proportion of total cold storage, it becomes a bit difficult to judge just where the marketing challenges might lie.

31 July cold storage inventories represented 30 per cent of July production. That number is 1.7 per cent higher than last year’s figure, but about in the middle of historical levels. Those have ranged from an outlier low of 23.7 per cent (3.2 per cent lower than all other observations since 1998) in 2001 to a high of 34 per cent in 2000.

Finally, this recent surge in federally inspected (FI) hog slaughter (Figure 4) has everyone concerned about hog numbers this fall. Last week’s run of 2.228 million was only 0.5 per cent lower than last year and 2.7 per cent higher than my forecast level based on the June Hogs and Pigs Report. That makes two weeks in a row that slaughter has been significantly higher than the report suggested. Is it because we backed hogs up with plant shutdowns and slower chain speeds in July? Or, because we have pulled hogs forward with unusually mild summer temperatures? Slaughter weights (201 lb. last week, +6 lb. from last year – again!) can support either argument.

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Pork Commentary: Darwin - Some Must Die that Others Can Live
CANADA - This week's North American Pork Commentary from Jim Long.
 
The North America swine industry is at a point of real crisis. Billions of equity and cash have been lost over the last 24 months. We read the other day where total industry losses surpass by 100 per cent the great price collapse of 1998 – 1999. What’s even worse is the lean hog futures indicate losses in the $30 per head range for the next six months. It’s piling up and on.

The H1N1 crisis (unfortunately tagged swine flu) continues to rear its ugly head with ongoing claims by Government and Agencies of big problems this fall and winter. Certainly they don’t know what’s going to happen but they are doing the rear – covering program. If it’s a problem they are covered. If not, oh well, they were wrong.

In the meantime thousands of producers are each looking at their own circumstances. There is no monolithic decision making group. Everyone has their own unique position. It takes capital and courage to continue. Some are done, quitting from lack of will, faith, and in many circumstances out of cash. Others are digging in, committed to our industry, believing in its future. It is interesting being in the genetic business and seeing the producers who believe in survival now and in the future is about getting better with some upgrading to their genetics. The net effect of these plus – minus circumstances is sow liquidation at 69,000 two weeks ago and more coming.

The grim economic reality is pushing bankers, feed companies, and producers to the point of surrender.

Other Observations
We are getting strong indicators that some of the pork powerhouses that have done little or no sow liquidation up until now are beginning to. We understand some are looking at a 15 per cent reduction with rumors rampant that these percentages are being encouraged strongly by their financial institutions. It makes sense in any context. A significant industry cut back of hog production will only strengthen prices. It’s now a matter of survival, many producers need increased operating lines and/or are in breach of loan covenants, the trade off is mandates from their lending institutions. Breeding herd reduction is probably one of these mandates.


At some point small pig supply is going to drop significantly. There has been a large reduction of sows in Canada that produced small pigs. All these pigs were sent to the USA These herds are just finishing liquidation. We will see right soon, 20,000 less a week available leads to more finisher space chasing fewer pigs.


The hole we have dug is huge. Losses could be approaching $1000 per sow farrow to finish by the end of this December. The equity loss will take a long time to recover for the survivors. What are really sad are the real people stories. The devastation on people and their families is heart wrenching. Statistics have no soul. It’s unfortunate that pork demand could not have been sustained at a level that there has to be so many casualties. We all know of family’s financially smashed by the effects of the corn ethanol boondoggle, H1N1 (swine flu) misnaming. The unfortunate part is all producers want liquidation to adjust supply. It is happening. The end result is casualties. It’s too bad for most to live there has to be death. Quite Darwin, but real.
Any Good News
Hog prices in the 60 cent US per pound live weight plus range in Mexico is increasing imports from the USA
South Korea has made pork imports easier. Prices there are over $1.20 US per pound.
The grain supply at this time looks more than ample.
A weak US dollar will help exports.
The coolest summer weather in the U.S Midwest in recorded history put weight on hogs and made them grow faster. The weather factor will normalize as we go into the fall. You only sell them once.
Liquidation of the breeding herd due to higher sow slaughter and less gilt retention is cutting production capacity USA and Canada. We believe we are dropping 10,000 plus a week currently.
We expect a Spring – Summer 2010 Lean Hog Future rally in the coming weeks driven by hedge funds that are looking at low lean hog futures and the reality of herd liquidation.

Author: Jim Long, President & CEO, Genesus Genetics 

[mikey]

Pork Producers Welcome Reopening of PSC Elstow
CANADA - Saskatchewan pork producers are hailing the reopening of the PSC Elstow Research Farm under new ownership as very good news for the province's pork industry. writes Bruce Cochrane.





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

Farm-Scape is a Wonderworks Canada production and is distributed courtesy of Manitoba Pork Council
and Sask Pork. 
The PSC Elstow Research Farm, constructed in 2000 by the Saskatoon based Prairie Swine Centre, was taken over last week by United Kingdom based JSR Genetics after it was depopulated and closed last fall in response to the economic squeeze being experienced throughout the North American swine industry.

Saskatchewan Pork Development Board producer services manager Harvey Wagner says JSR Genetics' presence in Saskatchewan is a welcome development.

Clip-Harvey Wagner-Saskatchewan Pork Development Board:
It's very good news to see that facility back in operation.

It's a wonderful facility that was built at Elstow and run by the Prairie Swine Centre.

To see it back in operation with a high quality genetics is a real boost to not only the local area around Elstow for the ability to sell grain and to have people working at the barn but it's also a really good psychological boost for the industry to know that other outside companies see that there is some future in the pork industry in Saskatchewan and Canada and North American so we're happy for that.

The other thing is this facility really shows that the prairies, in particular Saskatchewan, is a really good place to house high quality genetics because of our biosecurity.

Large distance between barns makes it a really good repository for the world genetic stock so we see that as an excellent vote of confidence for the Canadian pork industry because these animals will be available for movement all over the world and what better place to have them than in Canada for that purpose.

Mr Wagner notes a number of international swine genetics companies are located throughout Saskatchewan already.

He says they are the repository of the best swine genetics the world has to offer and to have another major international company locate in the province reaffirms Saskatchewan's advantages for raising hogs.

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Losses on Hogs Expected to Continue into 2010
CANADA - Trends in US hog slaughter numbers, pork production and meat in cold storage are expected to be the key factors influencing live hog prices heading into 2010, writes Bruce Cochrane.





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

Farm-Scape is a Wonderworks Canada production and is distributed courtesy of Manitoba Pork Council
and Sask Pork. 
North American hog prices have remained well below long term averages and producers continue to lose money.

Saskatchewan Ministry of Agriculture Livestock Economist Brad Marceniuk says, unless there's an unexpected spike in North American pork exports or a large drop in hog production, the low prices will likely drag into 2010.

Brad Marceniuk-Saskatchewan Ministry of Agriculture
In Canada slaughter numbers are actually moderately up in 2009 from 2008 and that's largely due to COOL and more Canadian hogs staying home.

In the US slaughter numbers over the last eight weeks were relatively flat from the same period in 2008 but up moderately in recent weeks actually.

US pork production is up moderately here over the last few weeks compared to the same period a year ago but, overall, US slaughter numbers really have not declined in 2009 as much as initially anticipated.

Domestic demand for pork in North America has been relatively good in 2009 while the export market has been weaker.

This is partly due to the H1N1 virus and partly due to increased pork production in countries such as China and Russia.

US pork exports to China and Russia for the first six months of 2009 were down significantly from the same period here in 2008.

Pork in cold storage has declined moderately here from June to July but it still remains higher year over year.

Looking at beef, chicken and turkey stocks, they've actually increased from June to July.

Looking at cold storage stocks in general, they continue to remain in the upper end of their five year average and I think they will keep meat prices from increasing significantly here in the short term.

Mr Marceniuk says, with reduced pork exports to China and Russia and an unlikely rebound to 2008 levels, the North American sow herd may need to decline by another five to ten percent.

He says it looks like Canada will introduce its second cull program but a US program would have a much larger impact on prices as the US sow herd is over four times larger than the Canadian sow herd.

[mikey]

Swine Producers Encouraged to Analyse Feed Grain
CANADA - With the increasing prevalence of a new more aggressive and toxic from of fusarium graminearum, swine producers are encouraged to make sure they know what's in the grain they feed their hogs, writes Bruce Cochrane.


University news is a Wonderworks Canada Production courtesy of the Faculty of Agriculture and Food Sciences at the University of Manitoba.
Visit us at www.universitynews.org 
Fusarium gram produces the mycotoxin deoxynivalenol or DON.

Since 1998 the prevalence of the 3-A DON chemotype, which produces higher levels of the mycotoxin, has increased from about five per cent of fusarium-infected wheat crops in western Canada to 40 to 50 per cent.

Dr. Martin Nyachoti, an animal science professor with the University of Manitoba's Faculty of Agricultural and Food Sciences, notes pigs are very sensitive to DON and will refuse to consume DON-contaminated grain.

Dr. Martin Nyachoti-University of Manitoba
The Canadian Food Inspection Agency recommends no more than one PPM in the diets of swine but we hear a lot of anecdotal comments that pigs are able to tolerate higher levels.

In fact we completed a study here a few years ago with Dr. House and indicated that growing pigs, particularly barrows were able to tolerate fairly high levels than the one PPM that is recommended by CFIA.

So there is a lot of variation from what you hear people talking about.

I think what's happening is that we don't know what else is present in the feed.

DON might be present as one of the mycotoxins but there's also a likelihood that there will be the presence of other mycotoxins that will act synergistically with DON to exert the effects that we see between one set of pigs from the other.

Dr. Nyachoti notes genetics may also play a role but he is not aware of any studies to confirm that.

He suggests having suspect grains analysed to get an idea of what you're dealing with.

[mikey]

Pork Commentary: Having 'Jim Long Optimism'
CANADA - This week's North American Pork Commentary from Jim Long.

Jim Long is President &
CEO of Genesus Genetics.
Farmer’s like us everyday believe in the future. We plant a crop, we believe it will rain, be warm enough (there won’t be a drought, flood, hail, frost, etc...) and prices will work out. It takes faith and optimism. It is no different with hog production. We breed a sow, we hope we don’t get disease, hog prices will be okay, feed will be available and priced fairly, etc… Ten months after breeding we sell a hog to market. It takes faith and optimism. All producers by nature are optimistic. Unfortunately, in times like now it’s hard to maintain optimism. Twenty four months of losses, H1N1, and corn ethanol, the global financial crisis pounds us all into negative territory.

In the current conditions there are producers quitting or cutting back their sow herds. In the last two weeks the USA sow slaughter has averaged 70,000 – an indication of real liquidation. Producers are running out of capital and courage. When you have no cash to pay bills, it is only a matter of time until it is over.

For the record, the USA hog slaughter year to date is 3 per cent less than a year ago. Lean hog prices last August were over 80 cents. H1N1 has devastated our domestic and global demand, while feed price spikes have increased our cost of production over the last two years.

We predicted the market to hit 90 cents this summer. We were wrong. Most of, if not all other commentators were around 80 cents. No one predicted 45 cents lean. No one predicted H1N1 (unfortunately tagged swine flu). The point is no one knows the future; the doomsayers who tell us we will lose money for another nine months, don’t know. We never heard any of them tell producers to jump on 2009 October lean futures when they were 80 cents.

We understand one of the celebrity banker’s in our industry as part of his presentations is exclaiming ‘Don’t get caught up in Jim Long’s optimism’. We think it’s a compliment. This industry was built by optimistic people; by nature we are all optimistic, we have to be. If you are breeding a sow today, you are optimistic next July hog prices will be a plus. If not, why bother?

Why do we have Jim Long Optimism?
Liquidation is ongoing in the USA and Canada. We expect since the first of June 150,000 sows have been liquidated or the decision has been made to.


Feed prices are coming down. The USA corn crop is “bin” busting. This will lower breakevens.


The weather this summer through the Midwest was the coolest on record. Hogs have grown faster – one week? Ten days? Whatever it is, it’s pushed weights up and hogs to market. You only market them once. We believe one million hogs have been pushed 3.5 days ahead, despite higher market weights. Prices would have been totally different this summer if we had 100,000 less a week marketed (one million divided by 10 weeks). We expect marketing’s this fall to be lower than expected.


H1N1 (swine flu), has hammered our demand. We expect that it will by Y2K. A lot of noise and then nothing much happens. It’s winter in the southern hemisphere, they have H1N1, and it’s not a disaster. It’s a flu. We have them every year. We expect it will take 90 – 120 days, and when there is not a disaster the all news networks and the drug lobbies will move on to other manufactured crisis’. Demand will then pick up, as consumers, packers, retailers, and foodservice regain confidence in pork.


Feeder pigs on DTN Agdayta Livestock Margin have gone from 0 value to $23 in the last three weeks. We expect 45 pound feeder pigs to exceed $55 by January as pig supply dwindles and the feed prices stay in the current range.


We do moonlighting swine consulting support for a large firm in New York City. There is a lot of off farm inquiries (hedge funds) for advice on sow liquidation, hog supply, and market prices. The last time we had as many inquiries (China exports) was last summer just before hogs hit record prices. The funds are looking at the scenario for a big run up. We expect they will jump in and push lean hog futures. They don’t care if it’s steel, lumber, corn, etc...


Our contacts in Brazil tell us producers have been losing $50 US per head. There has been sow liquidation. How much nobody knows because there are no official statistics. Brazil is a major pork exporter; cut backs in Brazil only help hog price prospects for all.


Hams have gone up in price in the last few weeks. Mexico is the USA’s largest importer of Hams. In Mexico hogs are 65 cents USA live weight per pound (19.5 pesos per kilogram). Reports from Mexico tell us up to 35 per cent of the sow herd has been liquidated. More Hams will go to Mexico, especially after the H1N1 scare is over.
Yes we are Jim Long optimistic, it is brutal today but we see recovery coming. Not only for supply cut backs, but from demand pick up over the coming months.


Author: Jim Long, President & CEO, Genesus Genetics 

[mikey]

Study: Pork Quality Varies According to Compartment
CANADA - A just completed transportation study shows the quality of pork will vary depending on the compartment of the truck in which pigs are transported, writes Bruce Cochrane.





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

Farm-Scape is a Wonderworks Canada production and is distributed courtesy of Manitoba Pork Council
and Sask Pork. 
A team of scientists looked at the transport of market pigs in summer and winter in eastern and western Canada using conventional pot bellied trucks used for moving cattle or pigs.

Dr. Harold Gonyou, a research scientist in animal behavior with the Prairie Swine Centre, says the effect of different variables on meat quality such as temperature in the 10 compartments, the difficulty of moving pigs into and out of each compartment and physiological measures of the pig at slaughter where examined.

Dr. Harold Gonyou-Prairie Swine Centre
We wanted to look at really the effect of different compartments on the truck.

We know that during transport there is a significant loss of pigs and also of pork quality.

We lose several thousand pigs a year within Canada.

Although it's usually less than a half a pig per load on average, it does amount to considerable amounts of losses overall.

But probably the greater losses are in the reduction of pork quality, of meat quality in pigs due to the stress that occurs while they're being shipped.

That's very important in terms of the quality that comes back so we have both a strong economic concern and we also have a strong animal care concern in terms of improving conditions for shipping.

Dr. Gonyou says we see variation in temperature within the different compartments, in the ease of loading and unloading and in terms of stress on the pig.

He says studies are now being conducted looking modifications aimed at improving the movement of pigs into and out of the different compartments and improving air flow to balance temperature.

For more information on the study visit the Prairie Swine Centre web site and search transport gonyou.

[mikey]

Japan Remains Priority Market for Canadian Pork
CANADA - Manitoba Pork Council is assuring Japanese buyers of pork that, despite reductions in Canadian hog production, Japan remains a high priority market that will continue to be well served, writes Bruce Cochrane.





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

Farm-Scape is a Wonderworks Canada production and is distributed courtesy of Manitoba Pork Council
and Sask Pork. 
Approximately a dozen representatives of the Canadian pork industry, including two from Manitoba, returned earlier this month from a 12-day trade mission to Japan, Hong Kong and China.

Manitoba Pork Council director Rick Prejet says, as a result of significant reductions in Canadian hog numbers, a key concern among Japanese buyers right now is availability of Canadian pork supply.

Rick Prejet-Manitoba Pork Council
Canada is regarded as the number on quality pork in Japan.

Pretty much everybody we talked to, everybody from meat traders, journalists, meat managers, restaurant owners pretty much all agreed that Canadian pork is number one in quality.

The competition over there basically is the US pork and domestically produced pork in Japan.

But of course the amount of pork produced in Japan is not a huge amount and it doesn't look like that's going to be increasing or decreasing anytime soon so basically the competition is the US

Also one of the messages that we had to bring over there too because there was some concern about this is that they know we are in tough times here in Canada financially as pork producers.

There was some concerns about us being able to continue to serve that market.

I think that was a big message we had to bring to them is that we're not going to be decreasing the amount of pork that we have able for export to the Japanese market.

If anything that may increase.

We've lost a lot of production in Canada here but a big chunk of that loss in production means less live swine exports to the US so we had to get that message across to the traders, the buyers in Japan that we will continue to serve that market.

Mr Prejet acknowledges, as good as our quality is, there are times when it's not as consistent as the Japanese would like.

He says it's important to make sure when Japanese consumers buy Canadian pork that the quality is the same from one time to the next.

[mikey]

Pork Commentary: Huge US Corn and Soybean Crop
CANADA - This week's North American Pork Commentary from Jim Long.

Jim Long is President &
CEO of Genesus Genetics.
The USDA released their estimates for the USA. corn and soybean crop. US corn is predicted to be the second largest in history (13 billion bushels), soybeans at 3.25 billion bushels – the largest in US history. Bountiful US feed grain supplies are a huge plus for the swine industry in our pursuit of keeping feed costs down from the ridiculous prices we have seen in the last twelve plus months. It’s not just hog prices that drive our profitability potentials but the cost of our major input feed. Unfortunately, even with lower current feed prices the hog to corn ratio is only 11.5 which is well below the feed ratio for hog breakevens. Last year in the quarter June – August, the US liquidated 70,000 sows. The US sow slaughter this year has certainly ramped up in August and all indications are gilt retention this June – August quarter this year is running significantly less than last year. We expect the September USDA hogs and pigs report to indicate a decrease of at least 100,000 sows from 1 June when it is released later this month. The financial losses that have brutally hammered our industry the last 2 years are leading to a real decrease in the breeding herd.

We believe the hog growing conditions this summer have been extraordinary. This has pulled hogs ahead. If we are correct, the 1 September market inventory will be significantly lower than a year ago. We expect the US market inventory will indicate approximately 2.3million fewer market hogs compared to a year ago. This is manifested by a combination of not only rapid growth, but sow liquidation and fewer pigs coming from Canada. If we are correct that the market numbers are down approximately 2.3 million this will be significant enough to push positive psychology.

Other Observations
China’s hog price has risen for 13 straight weeks, going from 64.5 cents a US pound on 6 May to 79 cents a US pound. Reports from China indicate some liquidation and less fear on H1N1 has given market support. Whatever the reason, higher prices are always a combination of better supply – demand scenarios. Higher hog prices in China may lead to US pork export opportunities.


Reports from the field tell us there are some major Pork Powerhouses liquidating sows. It’s supposed to stay hush – hush so everyone won’t get bullish. As if that alone will get bullish fever happening!


It appears Canada’s Government announced a plan to fund sow herd liquidation and guarantee loans for producers is not getting off to a roaring start. There was the big bang announcement a month ago but still at writing no policy or rules in place. We understand one of the big sticking points is the per centage of producer loans the government will guarantee. The Government wanted to do 50 per cent, the banks want 90 per cent plus. Imagine, it will be near 90 at the end or there will be little or no bank participation in new loans. Too bad the Government couldn’t get their stuff together before they made the initial announcement.


US Ag Secretary Vilsack must be back from holidays. He chastised the media last week for continuing to use Swine Flu terminology instead of H1N1. We’re glad he did it, unfortunately it is six months too late. Too bad President Obama didn’t do it he’s promoted giving millions to Wall Street and the car industry for the recession. The swine industry has gotten a pittance for pork purchases. The President has the bully pulpit. Our industry is losing millions and a few words about H1N1 versus swine flu from the President could help us immensely and at no cost to taxpayers. He’s working on a health program we need and some help to make our industry healthy.


I had an interesting call from one of the Pork Powerhouse people last week. Their data says hogs are ahead 2 weeks. A combination of cool weather, more space in barns, and good health. Their premise was that we will market 2 weeks more production in 2009 then we should have (4 million hogs). They believe we will see no drop off in marketing’s this fall because the better growth will continue. If the growth rate is this extraordinarily (or near it), we will see a significantly lower year over year US market inventory in 1 September USDA report.
Conclusions
Liquidation continues. Sow marketing’s the last three weeks average 70,000 which are well above equilibrium. Feed supplies and prices should be satisfactory. Feeder pig and early wean prices are coming off the floor. Canada’s small pigs to USA. are running about 60,000 a week less than a year ago (145,000 – 85,000) with no supply to replace these for US finishers. There will be significantly less hogs in the future. The challenge when you’re gassing $30.00 per head for what seems like forever will it be soon enough? When you’re out of cash – you’re broke.

Genesus Annouces its First Genetics Mulitplier in Mexico

16 September 2009: Genesus Genetics is pleased to announce its first genetic multiplier in Mexico. DP Farm is a new 2400 sow facility on an isolated plateau in central Mexico.

This state of the art biosecure operation will produce Genesus gilts for existing and new customers in Mexico. Jim Long, President – CEO Genesus Inc, "We have been sending breeding stock to Mexico for 15 years. Current transportation costs and logistic issues made it necessary for us to find a Mexican location and facility that would meet Genesus’ commitment of delivering top quality, healthy swine genetics to our customers. Mexican swine producers have been financially pressured, like many in other countries by H1N1, high feed prices, and financial losses.

Genesus believes that the future success in swine production is the adaption of technology that maximizes productivity and producer returns. Genesus’ Mexican genetic production is our commitment and belief in the future of Mexico’s swine industry."

Author: Jim Long, President & CEO, Genesus Genetics