CSHB Initiatives Add Export Value to Hogs
19 October 2012


 



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.

CANADA - An independent third party assessment of swine health initiatives undertaken by Canadian Swine Health Board has determined those activities add roughly 15 per cent to the export value of Canadian pork, writes Bruce Cochrane.

Ernst & Young has completed an independent third party assessment of the Canadian Swine Health Board.

 Shazmin Dosani, the Senior Manager Advisory Services with Ernst & Young, told those on hand for the 2012 Canadian Swine Health Forum, the assessment was conducted on behalf of the CSHB to assess relevance and performance of the agency's activities within each of its three organizational pillars, biosecurity, research and long term disease risk management.

Shazmin Dosani-Ernst & Young:
 
The team actually set out to quantify the marginal benefit of CSHB programming so specifically we calculated the fluctuations and gains and value of per exported unit swine generated from CSHB activities. We assessed that through survey data and also looking at export data.

 In terms of our survey data we found that the CSHB activities and programs will yield roughly about 15 percent expected annual payoff in Canadian pork and pork product export values.

 To translate that into an actual dollar value, using economic data from 2009 to 2011, we estimated that the net economic benefit per export unit from CSHB activities and programs would range between 13 and 16 dollars per unit.
 
Based on the assessment several recommendations have been made, including continued operation of the Canadian Swine Health Board beyond its current March 2013 mandate, that the board should consider broadening its mission to include a global focus on swine health through enhanced biosecurity initiatives, monitoring and surveillance system development and emergency response protocols and that it communicate outcomes achieved through it's research funding.

Hog Markets Contine to Move Higher
25 October 2012



Jim Long is President &
CEO of Genesus Genetics.

CANADA - The hog market lows of mid - September appears to be behind us. After wallowing around 65 cents lean per pound in September last week 53 – 54 per cent lean hogs were over 83 cents, writes Jim Long.

 Low to high gain in a month (counter seasonal) of over $30 per head to the better, that change is huge. In mid – September many pundits were projecting a deluge of hogs that would keep prices below 70 cents per pound through the fall; the recovery to 83 cents and the $30 per head gain means $30 per head less in losses. That is about $75 million a week to the industry to the better.
 
Just looked back at a projection we received from a Commodity Broker in mid – September. They predicted the pork USDA cut – out last week would be 75 cents per pound – it was actually 89 cents, which equals $28 per head to the better. Of note, they projected 2.385 million market hogs last week and the actual was 2.388 million. They nailed supply but really missed demand. In our opinion too many pundits are missing the global pork demand surge. We are continually looking at foreign hog prices that are all higher to USA – Canada hog prices; demand - pull is pushing our prices higher. That is why we have hogs in the mid 80’s. We would not be surprised if lean hogs hit 90 cents sooner rather than later.
 
The latest weekly US sow slaughter was 67,304 – these are liquidation numbers. We expect USA – Canada sow herd dropping up to 10,000 a week currently.
 
Not only sow slaughter is up but also gilt retention is down. We observe in our business cut backs in gilt purchases. Many are early wean producers, which mean their herd is shrinking as they have no other sources of gilts. We believe that the Canada – USA sow herd will be 200 – 250,000 head smaller on the 1 January compared to 1 June. This decrease in production capacity of four to six million hogs will be major drivers in leading in 2013 to the highest historical hog prices.
 
Early wean and feeder pig prices are moving up, last week cash early weans averaged $34.86 that is a big improvement from the $8 a head they were a few weeks ago. Cash 40 pound feeder pigs were $30.40 up from mid-teens a few weeks ago (10 weeks under $20). We doubt if anyone can make money at $34.86 for early weans but the bleeding that $8 pigs were causing has been greatly diminished. The price increase on small pigs is seasonal but it also reflects the lack of supply due to liquidation of sow herds. The same number of finishers chasing fewer pigs always leads to stronger prices. Always have – always will. Farmers hate empty barns.

 Big Sky update: Canada’s second largest hog producer has received an offer to purchase (about 44,000 sows). The offer has come from Olymel a packer with a plant in Red Deer Alberta that needs the hogs. We understand other offers can still be received for about 60 days as part of the bankruptcy proceedings. Rumor has it the offer is in the $60 million range, Big Sky’s debt is over $80 million.
 
Puratone of Manitoba is in receivership (25,000 sows) has received it has been reported two offers. Reportedly both have been rejected as too low. The process of looking for purchasers continues.
 
It is a sad testimony to our industry the liquidation and financial difficulties many have been inflicted by. While farmland values appreciate at break neck speed sow units continue to wallow at cents on the dollar. Hopefully when the dust settles our industry rationalises to a supply – demand equilibrium that allows our industry to prosper and receive reasonable returns.

 


Author: Jim Long, President & CEO, Genesus Genetics

Pork Commentary: Canadian Pork Industry Threatened
31 October 2012


Jim Long is President &
CEO of Genesus Genetics.

CANADA - The Canadian sow herd has decreased already 20 per cent (300,000) over the last four years, writes Jim Long.

Canadian Pork Council Press Release: At a national meeting of provincial pork associations this past week, it was confirmed that Canada is threatened to lose many of its hog farmers in the coming year, according to a report from the Canadian Pork Council (CPC). This decline could equate to a shortage of Canadian produced pork products for its consumers and jeopardizing $13.4 billion in economic activity associated with hog production.
 
“It was clear to me from this meeting that provincial hog producers expect the Canadian Federal Government to adjust existing programs and not put a risk to the entire pork chain complex.” States CPC’s Chair Jean – Guy Vincent. “The historic drought in the United States corn belt this summer resulted in a drastic change in the economic situations facing hog producers.”
 Our Observations
The Canadian sow herd has decreased already 20% (300,000) over the last four years. It has not been a good business over that time frame.
 
The Canadian dollar at par with the U.S. dollar has been a real handicap for Canadian producers over the last four year period with U.S. country of origin regulations compounding the situation.
 
The CPC is correct that feed prices have appreciated further since the U.S. drought but they were already historically high. Many Canadian hog producers are also grain producers and for many this year their yield to price for grain combination is their best ever. The high price of feed is not only a Canadian phenomenon but global in nature.
 
The problems for Canada’s swine industry are very real. You need to only follow the financial challenges of Canada’s second and fourth largest hog producers Big Sky Farms and Puratone Corporation to see that there are fundamental challenges to profitability.
 
We expect Canada’s swine industry has shrunk and will continue to shrink as producers leave the industry. Canada will not be short of pork as about 50% of Canada’s production is exported. What the shrinking herd does is it cut pork and pig export volume. Less supply always has and always will lead to higher prices in a world of increased demand.

Other News

 Small pig prices continue to rise from the pit of hell. Last week cash early weans averaged $39.07 up from only $8.00 less than 6 weeks ago. 40 pound feeder pigs have jumped from the mid - teens to $39. That $30 per pig increase on early weans is a life saver for many producers as it pushes them to break even. The price increase is a reflection of seasonality, strong hog future prices mid-2013, and decrease in supply from sow herd liquidation. We expect cash early weans to reach $50 in the next few weeks.
 
Sow prices are increasing. Last week sows went up 6 cents per pound to the mid - 50s after being in the 30s a few weeks ago; sows are still 10 cents a pound less than a year ago. The latest U.S. weekly sow slaughter total was 62, 699 a level we believe indicates liquidation of about 5,000 per week.
 
After a summer of drought, the U.S. mid – west is getting good rains. The price of corn and soybeans where they are is it premature to start discussing 100 million acres of U.S. corn next year? We farmers can’t stand prosperity, corn farmers like hog farmers will reach to pricing opportunities, they will produce.
 
This crop year’s total U.S. corn exports of 422,000 metric tonnes is almost half of last year’s same time frame of 805,000 metric tonnes. High prices are cutting demand.
 
When the U.S. federal election is over and Iowa is not in play in the Electoral College will there be ongoing support for mandated ethanol use?
 
In a couple of weeks we will be attending and exhibiting at Euro Tier in Hannover. You can visit us at the Genesus display within the Canadian Swine Exporters Exhibit. Europe has been increasingly important for Genesus with genetic production facilities in Spain, Czech Republic, and Russia.

 


Author: Jim Long, President & CEO, Genesus Genetics

Pork Commentary: When is it Going to be Good?
14 November 2012


Jim Long is President &
CEO of Genesus Genetics.

CANADA - We write as we travel to Germany to attend Euro Tier. In flight and away from phones, emails, etc… It allows us to think macro not micro about our industry. We ponder the question “When is the pig industry going to be good again?” It is the billion dollar question, writes Jim Long.

As we reflect it seems there has been no golden time of pig production in North America for the last decade. We have had micro moments of excellent profitability but they don’t last. Our industry seems to be on a roller coaster of profits then losses. Over the last five years the balance of profit and loss has been one of trading dollars, there has been a war of attrition with producers living off their equity and wits with many succumbing to the economic reality and quitting. Consolidation continues as producers quit or fail. In the last year Maschoffs takes over Nebraska Pork Partners, and Maple Leaf Foods taking over Puratone Corp. There will be more consolidation in all aspects of our industry: producers, feed companies, packers, drug companies, genetic companies, etc… Consolidation will continue. Size and scope of all parts of our business continues to get bigger. It appears linking with larger buying groups, marketing groups; corporations are a sign of the times.
 
A dilemma we see in our industry is what we would characterize are government producers that seem to handicap our profitability. US Government corn ethanol policies have cost the swine industry billions of dollars in increased cost. There is no legitimate argument in our opinion how 5 billion bushels annually of US corn being mandated into Ethanol has not cost our industry dearly. Corn Ethanol is not only a poorly devised program but in itself is destroying U.S. and Canada’s Global pork production competitiveness. It is sad and we suspect after the recent US elections little change in the corn ethanol policy.
 
So where is the silver lining? The only best hope, pork supply drops to a level that hog prices rocket higher and feed prices become next to irrelevant. We have been aggressive since the first part of July that US hog prices will be the highest in history the summer of 2013. Hog to corn ratios of 8 – 10 to 1 will always lead to liquidation – always have always will. We believe the North American breeding herd is getting smaller each and every day. In the coal mining industry they place canaries in the mines to warn of dangerous gases. In the swine industry we believe cash small pig sale prices are our canaries. In mid - September early wean pigs were $8.00 per head. They had next to no value. Last week the USDA reported cash early weans averaged $47.58 that is a change of $40 per head in eight weeks. In mid – September when early weans were $8 anyone who said they would gain $40 in eight weeks would have been sent for psychological analysis. The early wean canaries are telling us liquidation of sows has been real. Last week USDA reported small pig sales were about 70,000 last year the same week about 140,000 small pigs that is a big difference. Liquidation has happened and is happening. There is no logical reason producers will pay $47.58 per pig, it doesn’t pencil to a profit. Markets are not necessarily ever rationale. Finishing barns are empty, producers can’t stand empty barns, they cost money to sit empty. Big reason small pigs are going higher. There will be lots of empty finishing in the months ahead as pig supply drops further.

Summary
 
When is it going to be good? Last July we predicted the highest prices ever next summer July, we still believe it will happen. Last week we met with a commodity trader, he believes corn will be $4.50 a bushel by February – March. Why? Brazil will have a huge crop, less corn exports, less ethanol use, and less livestock – poultry use. The US by Feb – March will be expecting to plant a huge crop. Let’s play the scenario: $4.50 corn - $1.00 lean hogs for true big profits and it will be our turn in “high cotton”.
 
This week in Hannover Germany is Euro Tier. We will report our observations next week.
 
Quote: "Pessimists are usually right and optimists are usually wrong but all the great things have been accomplished by optimists." Thomas Friedman

 


Author: Jim Long, President & CEO, Genesus Genetics

Pork Commentary: Small Pig Prices Surge Higher
28 November 2012


Jim Long is President &
CEO of Genesus Genetics.

US - Sow herd liquidation is attributed to be driving prices higher as cash early weans have risen from averaging $8 in mid-September to $55 last week, writes Jim Long, CEO of Genesus Inc.

It’s phenomenal the rapid surge in small pig prices. Cash USDA early weans averaged $8 in mid-September while cash 40lb feeder pigs were $15. Both prices were terrible leading to losses of $30-$40 per head.

Last week USDA cash early weans averaged $55.71 and 40lb feeder pigs averaged $60.53. It doesn’t take an MBA to see the huge difference in cash flow this has brought to small pig producers.

Why the rapid price increase?
 
Sows are now being priced for May-June 2013 delivery. With Lean Hog futures May 99.100 and June 101.025 the small pig market reflects these higher prices.

 53-54 per cent US National Market Hog Prices last Friday closed at $77.05 – June Lean Hogs are 24 per cent higher than current cash hogs or $50 a market hog higher.
•We believe the liquidation of the sow herd is greater than most if not all analysts believe. This in itself is cutting small pig supply.

 As we suspect much of liquidation was in small pig producers, we have lots of finishing barns in North America looking for pigs to fill their pens. Finishing barns are a fixed cost. Farmers hate empty barns. The chase for small pigs to fill the barns is pushing prices higher. It’s simple; less supply and greater demand.
 

•We also believe the hottest summer on record has cut the number of pigs born. Smaller litters and fewer litters have cut small pig production.

We also believe that the hottest summer on record lead to increased sow mortality. This is another factor in fewer small pigs available. Less small pigs, fewer market hogs next summer = Record high market hog prices.
 

•We talked to a major feeder pig broker this past week; they said more buyers than pigs are available. They expect cash early weans will reach $70 and feeder pigs $90. Long way from $8 and $15.

Other observations
 •The latest US weekly sow slaughter was 64,188. Anything over 55,000-57,000 per week are liquidation levels in our opinion. We are in the swine breeding stock business. Sales are slow. We think its industry wide.

Producers have been trying to maintain cash. You do that by not putting gilts in. Many herds have shrunk in inventory by less gilt retention and attrition.

We expect USA-Canada sow herd will be 200-250 thousand smaller on January 1, 2013 compared to June 2012. We had hogs hit $1.00 last summer. There is a reason the sharpies in Chicago have Summer lean hogs over $1.00.
 

•On top of less pork in 2013, all indications are of less Beef and Poultry. Latest estimates of boneless equivalent US per capita consumption of Total Meat, Poultry and Seafood is 180.3 lbs. in 2013, down from 200 lbs. in 2008 and down almost 4 lbs. in 2012.

 Per capita consumption will be down mostly from total supply being lower. The lower supply will push prices higher for all consumable proteins.
 

•When we think of Corn markets, the conventional sentiment appears to be high prices for ever. There are many facts to prove high corn prices forever. We don’t have any clue when the corn market will collapse, but it will. No market stays at record highs forever.

 When it does collapse, the livestock sector will be blessed by record returns as hog profits could hit $50-100 per head. It will happen; not if, but when. The challenge is to stay in the game long enough until the chance of a generation hits us. The world will plant the crop.

If it rains = lots of corn. When that happens lower corn demand caused by record high corn prices cutting livestock and poultry production will lead to corn under $4 a bushel. Maybe we are crazy and delusional but it is what we believe.

Pork Commentary: Manitoba Hog Days!
11 December 2012


Jim Long is President &
CEO of Genesus Genetics.

CANADA - This past week we attended Manitoba Hog Days, the annual conference and exhibition for Manitoba’s swine industry. Hog Day’s was held at the convention centre in Winnipeg this year, writes Jim Long.

Our Observations
 •The last Manitoba census of swine inventory was on 1 July – It was 316,000 sows and 2,573 million market hogs. Manitoba has about one quarter of all the sows in Canada.
 

•We expect that due to the high feed prices and low small pig prices that Manitoba has liquidated or is in the process of liquidating 25,000 plus sows. Most if not all of the herd liquidation in Manitoba is by producers of early weans and feeder pigs.
 

•Last week at Manitoba Hog Days there was many a feeder pig broker scouring for pigs. All we talked to had the same mantra, “Looking for pigs”. It doesn’t take a rocket scientist or ag-economist to figure out the reason USDA’s average cash early wean price last week was $58.79 a pig with highs just under $70. Pigs are scarce relative to demand.
 

•Manitoba farrow to finish producers who grow their own grain have weathered the negative margins much better. Crop yields were generally good. This has given them staying power as their own feed is fed creating a decent whole farm income. Little of the liquidation in Manitoba is in this sector of the industry.
 

•Puratone Corp in Manitoba (26, 000 sows) had gotten into financial difficulty and was recently sold for just over $40 million to Maple Leaf Foods, far under Puratone’s debt of nearly $90 million. A big haircut for debtors, smart move by Maple Leaf, as they garner hog supply at a discount with rising hog inventory values coming. A good sign for all Manitoba’s producers as Maple Leaf’s purchase of Puratone indicates Maple Leaf’s commitment to maximize throughput at Canada’s largest hog plant which they own in Brandon Manitoba. Maple Leaf is now Canada’s largest hog producer with approximately 60,000 sows.
 

•In Manitoba there is a moratorium on new hog barn expansion, due to environmental concern. It’s been in place for about four years. It is strangling the industry as infrastructure deteriorates and ages, there is no means of replacement. Industry leaders have been working tirelessly to get opportunities for barn constructions. The industry has also been proactive and has cooperated financially with the Canadian Government and University of Manitoba to build and develop the National Centre of Livestock and Environment. The newest swine research centre in the world is focusing on new environmental solutions for hog production and other research. All research is done with Genesus Genetics.
 

•In general the mood of customers and others we talked to was positive. Many of our genetic customers are farrow to finish and grow their own feed. They see 2013 coming to be a good year. There will be no expansion in this market; it will be a holding pattern after the current liquidation.
 
There is a saying that “Strengths are our weakness”. In the context of the swine industry the natural optimism of swine producers keep us all going in bad times. “We know it’s going to get better.” The flip side of the optimism is we keep going with relatively little herd liquidation in the context of the financial losses many have incurred. This in itself helps keep margins low. That being said, we find it fulfilling every day to meet and work with optimistic pork producers striving to improve. We are a resilient group. If we ever went to war, we’d want to be in a platoon of pig producers. There is no group that would fight longer and be harder to kill that than the Pig Platoon. Survival despite the odds is in the genes of hog producers.
 



Author: Jim Long, President & CEO, Genesus Genetics

Pork Commentary: How to Get the Most out of Feed
20 December 2012


Jim Long is President &
CEO of Genesus Genetics.

CANADA - The world swine industry has been traumatized over the last couple of years by record-setting grain and oilseed prices, which have significantly cut profits or have made financial losses in the swine industry, writes Jim Long.

This very real situation has many hog producers looking at how to cut or lower their feed costs or improve feed conversion. Recently we came across what we believe is a very good article on this subject by Vern Pearson, PhD and Mariela Lachmann, PhD.
 
The article as you will see lays out 20 major factors impacting feed conversion. We are in the swine genetic industry and we hear about feed conversion every day. Of note their number 20 is genetics with relatively little total impact. We agree with this as we see small variation in feed conversion in the over 200 performance tested boars we do a week. Genetics has a much greater impact on litter size, growth and carcass. On the whole, the aggregate of health status has a much greater impact on feed conversion than specific genetics according to Pearson and Lachmann, PhDs.
 





Ingredient Prices by Improving Feed Conversion
 Vern Pearson, PhD and Mariela Lachmann, PhD
Currently, the highly fluctuating ingredient prices are encouraging producers to evaluate their feeding program. The worst parameter that can be used in feeding program evaluation is feed cost per ton. The feed cost per ton does not account for the effects on pig growth performance. A good parameter that can be used in the evaluation is the cost of feed per pound of gain. Therefore, any improvement in feed conversion can be considered as an opportunity to fight the increasing feed prices.



In order to optimize feed conversion (F/G), it is important to recognize the factors that can affect it and their effects (potential to increase or decrease F/G). The following factors can have a significant influence F/G.

It is important that producers identify the management practices that can help them optimize feed conversion while maximizing profitability

Efficient feeder management and biosecurity practices can have dramatic effects on improving feed conversion This includes rodent control. (see factors 1 to 13).

Manipulation of nutrient levels in the diet need to be oriented to match pig nutrient requirement, and to improve pig nutrient utilization (see factors 14 to 19).

As feed costs increase the best way to maximize your profit is to optimize feed conversion in the finishing hogs. Feed cost is 55 to 60 per cent of your annual cost of production. Utilizing inexpensive or poor-quality diets is being 'penny-wise and pound-foolish.'
 

Markets
 •US hog prices are hovering around 80¢/lb. lean. Historically a good price, but with current feed prices calculates to us a per market hog loss farrow to finish of $25-30 per head.
 

•The latest weekly sow slaughter was 64,525. This is liquidation level. The sow herd continues to shrink as we believe anything over 55,000 to 57,000 a week leads to a smaller sow herd.
 

•Summer lean futures are around $1.00/ea but we still expect cash will reach beyond this pushing closer to $1.10. A big reason is the USDA latest projection of total red meat and poultry supply being down 2.4 billion pounds fro 2012, or five pounds less per capita. The way to ration less supply is higher prices. We had $1.00 lean hogs in 2012. Hard to believe less red meat and poultry will not lead to higher hog prices in 2013.

 


Author: Jim Long, President & CEO, Genesus Genetics

Pork Commentary: Why Are Europeans Not Meeting Stall Ban Time?
27 December 2012


Jim Long is President &
CEO of Genesus Genetics.

CANADA - Data published in Brussels the capital for the European Union indicates that the January 1st legal ban on gestation stalls will not be met, writes Jim Long.

Numbers indicate France is only 33 per cent compliant, Germany only 48 per cent and Ireland only 57 per cent. Several other countries (80 per cent of EU Countries) including Spain (3 million Sows),Italy and the Netherlands are far from meeting the 1 January Deadline.
 
Britain’s National Pig Association believes 40,000 “illegal” pigs per hour will be entering the European food chain in January. How the EU handles this issue will be very interesting. If we assume 40-50 per cent of Europe’s sows have not been converted from gestation stalls, we could be discussing 6 million sow spaces. At either side of $300 to convert per sow that’s about $2 billion dollars needed to be invested in an industry that has not shown significant financial returns recently. How is EU Pork going to be handled from gestation stall produced pigs? Will there be a discount? Will there be fines? Will some buyers in pork chain refuse to buy gestation stall raised pork?
 
Unfortunately all the above speculation is the result of social engineering by elitist groups bent on mandating other people’s food choices. Going forward the EU handling of the non-compliance will be a template for the mess we can look forward to in North American. Like Corn Ethanol-- Gestation Stall Barns is another slap by Government on Swine Producers.
 
Other Observations
 •US Hog weights are dropping fast reflecting a quite current inventory. Last Thursdays National Day Lean Hog Carcass was 204.03 lbs. down 4 lbs. from the week before (208.11). The 4 lb. drop over 7 days is one of the largest we have ever seen. Liquidations started in July, 6 months ago. The frond end of the liquidation’s hog supply droop could be upon us.
 

•We read last week where some of experts continue to believe there is next to no sow herd liquidation ongoing. We don’t agree with latest weekly US Sow number of 65,526, it is our opinion that anything over 57,000 per week is probably indicating liquidation. Also gilt sales have been slow with many producers forgoing the investment and letting their herds shrink. The industry has not been good, hog to corn ratios of 10 to 1 will always lead to a smaller sow herd.
 

•PRRS is ripping again. Maybe nothing new but on the other hand the devastation is not abating, keeping in itself production restrained. Noone is immune, breeding stock companies have to have PRRS negative pigs or they are unsalable. In the genetic industry the saying “Those who live in glass houses shouldn't throw stones” is really true. No one is bullet proof. Just recently a huge boar production unit of on the major companies blew up. With such disasters,economic losses are big,which are then compounded by genetic lag. PRRS is ugly and nasty for all and the pain continues with always production gaps.
•


•Last week March Corn closed down on the week 28.75 as bushel, January Soybeans down 65 cents a bushel. Corn closed near $7.00/bushel, the lowest its been since early July. Lower exports, lower Corn ethanol production, and lower feed usage are diminishing demand. The old saying “surest cure to high prices in high prices” is still true.
 

•April Cattle closed last Friday around $1.37/lb., very strong prices. Also on Friday the USDA released the 1 December Cattle on Feed report. Down 6 per cent year over year. 12.055 million Versus 11.328 million over 700,000 fewer cattle on feed. Cowboy Arithmetic 700,000 cattle times 700 lbs. carcass about 500 million fewer lbs. Less meat leads to high prices and price support for Pork.
 
Summary
 
It’s Christmas. It’s a time of giving, a time of reflecting. We have seen misery this past year with some producers. Losses have been big while at the same time we have been hit by continued high feed prices, government (hello Country of Origin Labeling) special interest groups (animal welfare), etc. This business is a war of attrition. The adage we heard a few years ago from an industry leader is apt, “The women and children are dead, only the warriors survive”. It the warriors indeed, “Last Man Standing” the possibility that “Destructive Capitalism” is at work has a ring of truth.
 
We like to think we are realists. In the last year we visited several countries. Seen first hand the pork industry and done business there. The world’s total poultry and meat consumption is 44 per cent Pork. We are champions of demand. But it’s a hollow triumph if you are losing money. As we look to 2013 we see less Beef, no more poultry and less Pork. We expect hog prices to sky rocket to record levels next summer. It’s Pork turn for high profits!
 



Author: Jim Long, President & CEO, Genesus Genetics

Canadian Hog Markets
11 January 2013

 

CANADA - As we begin the New Year we continue to do what we all do, look to the future, particularly in our business the markets, writes Bob Fraser, Genesus Ontario.

Canada – Peering into the New Year
 
Will they go up? Will they go down? What about feed, corn, soybean meal, will it be up, down or sideways? And who would have ever thought not long ago that we would have to pay attention to such things as the price of crude oil per barrel, as it bears on ethanol and ultimately corn and DDGS. Also in Canada because of our closer economic relationship to the US, exchange rate is another very important dynamic in driving overall margins. So we all spend a great deal of time looking at all these factors and speculating to their directions and effects to the industry’s wellbeing going forward. This commentary and I expect all future Genesus Market Commentaries will continue to primarily do that. However as we begin a New Year and peer into the future, which we can’t see (which is probably a good thing) and perhaps reflect on the past year I will suggest we consider that we do it in the following context.
 
I have the great pleasure in my job to meet many CEOs & Presidents of multi-million dollar operations at their kitchen tables in their homes because for the bulk of my clientele of that’s what doubles as their “head office”. With these opportunities you get great insight into their families and their values and beliefs. Recently I was struck with one particular call where there was a beautiful picture of a rural farmstead from the past with the following inscription. “Write your troubles in the sand; carve your blessings in stone”. Probably an excellent filter as we look both forward and back at the turning of the year and one I expect a great many pig producers already use. That’s why they’re so resilient!
 
Wishing you & yours the most Happy & Prosperous New Year
 
If we take a look at the OMAFRA Weekly Hog Market Facts compiled by John Bancroft, Market Strategies Program Lead, Stratford OMAFRA john.bancroft@ontario.cawe see some further improvement of estimated margin after feeder pig and feed for the last five weeks from –($6.30) to $10.38
 



The Ontario Market

7-Dec-12

14-Dec-12

21-Dec-12

28-Dec-12

4-Jan-13
 


Average price ($/ckg, DW total value)

$169.89

$173.42

$168.74

$170.59

 
 


Low price ($/ckg, DW total value)

$152.46

$155.50

$152.02

$154.10

 
 


High price ($/ckg, DW total value)

$189.27

$201.30

$198.34

$194.29

 
 


Weekly Average Dressed Weight (kg)

97.47

97.47

97.23

97.73

 
 


Market Hogs Sold

97,229

95,146

97,884

54,598

 
 


Market Hogs Sold - % of Previous Year

105%

99%

111%

82%

 
 


100% Formula Price ($/ckg, 100 index)

$151.05

$149.83

$146.32

$147.82

$147.93
 


Previous Year - 100% Formula Price ($/ckg, 100 index)

$158.41

$160.14

$155.74

$151.46

$150.54
 


Weaned Pig Value (C$/pig) - Formula Value

$39.27

$38.96

$38.04

$38.43

$38.46
 


Feeder Pig Value (C$/pig) - Formula Value

$62.31

$61.80

$60.36

$60.98

$61.02
 


Est. Grow Finish Feed Cost for Current Week

$96.66

$95.51

$94.35

$93.49

$91.38
 


Est. Margin after Feeder Pig and Feed

($6.30)

($2.14)

$0.02

$8.16

$10.38
 


The Ontario Feed Market (Friday's Closing Prices)

7-Dec-12

14-Dec-12

21-Dec-12

28-Dec-12

4-Jan-13
 


Chicago Corn (US $/bushel) - Mar'13

$7.3725

7.30.75

$7.0200

$6.9400

$6.8025
 


Chicago Soybeans (US $/bushel) - Jan'13

$14.7225

$14.9600

$14.3075

$14.2400

$13.6725
 


Soybean Meal ($/tonneHamilton + $20)

$546.91

$561.36

$561.36

$561.36

$481.55
 


Old Crop Corn ( farm price - $/tonne) based on Mar'13

$266.62

$264.06

$252.74

$249.59

$250.09
 


Western Ontario feed Corn ($/tonne) - based on Dec'13

$280.40

$279.02

$268.89

$265.74

$260.72
 


New Crop Corn ( farm price - $/tonne) based on Dec'13

$223.51

$219.67

$211.31

$208.55

$197.53
 


DDGS FOB Chatham/Sarnia/Almer ($/tonne)

$267.50

$287.50

$302.50

$302.50

$292.50
 





Genesus Global Market Report
Prices for the week of December 31, 2012
 


Country

Domestic price
(own currency)

US dollars
(Liveweight a lb)
 


USA (Iowa-Minnesota)

81.18¢ USD/lb carcass

60.07¢
 


Canada (Ontario)

1.48¢ CAD/kg carcass

54.46¢
 


Mexico (DF)

24.57 MXN/kg liveweight

87.52¢
 


Brazil (South Region)

3.28 BRL/kg liveweight

73.00¢
 


Russia

70 RUB/kg liveweight

$1.03
 


China

14 RMB/kg liveweight

$1.02
 


Spain

1.303 EUR/kg liveweight

77.17¢
 


Vietnam

39,000 VND/kg liveweight

85.01¢
 


South Korea

4,500 KRW/kg liveweight

$1.92
 

Pork Commentary: Western Canada’s Hog Industry Restructures
15 January 2013

Jim Long is President &
CEO of Genesus Genetics.

CANADA - Three of the largest Hog Operations in Canada (Western Canada) have had major changes in ownership in the last few weeks, writes Jim Long.

All in our opinion due to what was a broken business model. Puratone 26,000 Sows purchased while under financial duress by Maple Leaf Foods, Big Sky 45,000 sows it appears will be purchased by Olymel Corporation out of receivership and then last week HyLife 47,000 Sows, slaughter plant, Fast Genetics sold one third of their shares to Itouchu Corporation of Japan.
 
Common thread, all three farrow to finish operations purchased their feed and sold hogs in the Canadian Market. All three without deep enough pockets to prevent change of ownership structure when hit by the last five years of a high Canadian dollar, high feed costs and negative profit hog prices. All three now purchased by companies that are looking for pork for their slaughter plants and pork markets.
 
Over the last five years negative cash flows have affected production targets and efficiencies. Feed rations were cheapened, that cut production results, good employees left as they saw the writing of the wall, maintenance and repair was not kept up in the buildings, while swine genetics suffered from lack of investment and poor decisions. Maybe most importantly the corporate farrow to finish structure, buying feed while selling hogs at a lower price was unprofitable. 10’s of millions of dollars were lost, while family farrow to finish operations that grow their crops and provide themselves significant management and labour could produce at a lower breakeven.
 
Now, all three production companies are tied to deep pocketed Corporations, Maple Leaf Foods, Olymel and Itouchu. They will now be long term relevant. We would not be surprised if Itouchu a huge Japanese trading company takes majority control of HyLife sometime in the future.
 
The sad part for the former shareholders of all these production companies is little money got to them. Invested it, and then lost it, a real bad scenario. The money of new owners has gone to pay debt.
 
Moral of story, can’t continually lose money and stay whole, but maybe Henry Ford said it best:
 
“Failure is simply the opportunity to begin again, this time more intelligently”
 
Markets
 
The US Hog market continues to hover around 80? lean which is leading to producers losing up to $40 per head at current feed prices. In the next few weeks the back log of hogs from the shortened marketing weeks of the holidays will clear up and we expect lean hogs to head towards 90? lean per pound.
 •It appears to us Market hog’s weights are currently running about 2lbs liveweight lower than a year ago. This reflects a more current market hog inventory and allows prices to spring up.
 

•US Pork exports remain strong and will stay there with major Global Hog Prices significantly higher that the US it give a real competitive advantage while giving room for good demand. Global Hog Prices, US dollar liveweight a pound, Mexico 87¢, Brazil 73¢, Russia $1.03, China $1.02 and Spain 77? per pound.
 
Summary
 
Big Sky, Puratone and HyLife have had big shareholder changes, all due to huge financial losses. We find it hard to believe that in such a grim circumstances of an entire industry currently losing $100 million per week that we are to believe there is new sow herd expansion. If so we must have very positive bankers and thy must be extremely bullish about the future of the hog industry.
 
This week will be at Banff Pork Seminar, Next week Iowa Pork Congress and the following week Manitoba Pork Seminars. Visit us at our receptions listed below.
 



Author: Jim Long, President & CEO, Genesus Genetics


 

Better Nutrition in Pregnancy Improves Piglet Health, Sow Longevity
24 January 2013



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.

CANADA - Research conducted by the University of Alberta has shown altering the diet of the sow during the last third of pregnancy will result in healthier piglets and increased longevity of the sow herd, writes Bruce Cochrane.

As part of research being conducted on behalf of Swine Innovation Porc, the University of Alberta has been examining the nutritional requirements of the sow herd.
 
Dr Ron Ball, a professor emeritus in swine nutrition with the University of Alberta, observes the physiology of the sow changes dramatically during late pregnancy.
 
Dr Ron Ball-University of Alberta
 
The sow actually becomes a totally different animal.

She is one kind of animal up until about day 75 or 85 of pregnancy when you only need to feed the sow for maintenance.
 
She doesn't really need to grow but in the last section of pregnancy she's growing many piglets very fast and she's actually a completely different animal from a nutritional point of view.
 
She requires a very different balance of amino acids, a different type of protein, in late gestation.
 
That's because the amino acid requirements of a fetus are totally different than the amino acid requirements of a sow for maintenance.
 
She also needs a lot more energy so that she can grow those 15 or 16 piglets up to maturity.
 
You can not feed the same diet and just feed more of it in the last third of gestation.
 
It has to be a new diet, different amino acid balance, higher energy, more available vitamins.
 
We need to move to phase feeding of sows just the same way that we moved to phase feeding of grow finish pigs 15 to 20 years ago.
 
Dr Ball says improved sow nutrition will result in stronger, more even litters and better piglet survival.
 
He notes, many sows only remain in the breeding herd for three or four litters but with better feeding we could get at least one more cycle which would have tremendous economic implications.
 

Pork Commentary: More Corn-Soybean from Brazil-Argentina
12 February 2013


Jim Long is President &
CEO of Genesus Genetics.


CANADA - Last Friday the USDA released their estimates for the crops in Brazil-Argentina that have begun harvesting. More Corn – More Soybeans compared to a year ago, writes Jim Long.
 


 

(Million metric tons)
 


2012-2013

2011-2012
 


Brazil Corn

72.5

73.0
 


Argentine Corn

27.0

21.0
 


Total Corn

99.5

94.0
 


 
 


Brazil Soybeans

83.5

66.5
 


Argentine Soybeans

53.0

40.1
 


Total Soybeans

136.5

106.5
 

If USDA projections prove correct 30 million more metric tonnes of soybeans (1.2 billion bushels) than a year ago and 3.3 million more tonnes of corn (225 million bushels.) year over year. Better weather better crops. It should help keep grain and oilseed prices in check while we wait for the US crop and its weather.
 
Markets
 •52-54 per cent National Daily Base Carcass is about 89?/lb., last year same time it was 87¢/lb. A little stronger now. We have to laugh at May lean futures at 93.5¢ while February cash is 89¢, as if May will be only 93.5? when we can get 89? now. No way there won’t be significantly less hogs in May and prices will be definitely higher.
 

•USDA reports feeder pigs are averaging $80.27 for a 40lb. pig. A reflection of continued strong demand with lowered supply. Cash early weans average $52.12.
 
China Visitors
 
This past week we had visitors from China, the senior representatives of a major agri-business in China of which Genesus has supplied and is managing their nucleus genetic program. The Chinese company has currently 55,000 sows with 20,000 more under construction and another 30,000 finished and being placed.
 
Some Observations
 •China produced about 700 million market hogs in 2012 about 50 per cent of global production.
 •Approximately 70 per cent in commercial facilities – 30 per cent backyard, 60 per cent of all Chinese meat is Pork.
 •The senior manager of the Chinese company expects that in the future China will go from 2-3 per cent imported pork to 10-20 per cent. That would be 70-140 million equivalent market hogs per year. The reason for greater pork imports would be pork demand outstripping Chinese production capacity. He cited Japan of which 30 years ago was self-sufficient but now imports approximately 50 per cent of Pork. If 10-20 per cent imported to China in the future the logical source North America-Brazil.
 •The Chinese market prefers Duroc Boars bred to Yorkshire-Landrace sows. There appears little demand for synthetic or Pietrain type boars. (They don’t want to eat pork that tastes like cardboard) Pig Production per sow in the country is approximately 14 and the need for better genetics is paramount.
 •Last year (2012) many commercial producers made about $30 US per head with a 225 lb. hog – Cost of production is at least $200 US per head with China feed costs about 30 per cent higher than the USA.
 •Last year (2012) many commercial producers made about $30 US per head with a 225 lb. hog – Cost of production is at least $200 US per head with China feed costs about 30 per cent higher than the USA.
 •Our Chinese visitors also import pork. They were hosted by Maple Leaf Foods, Brandon Plant. 90,000 head per week. They were quite impressed by the efficiency, cleanliness, scale and organization of the Maple Leaf facility. Indeed the technology of the plant was a testament to the efficiency of Maple Leaf but also the modern scope of North America. Made us proud to be part of such an industry.
 •Our guests also visited some Genesus customers producing over 30 pigs per sow. The senior China representatives were quickly calculating the huge profit potential of such results in China. They wondered jokingly if they could load the barn and staff and ship it to the Chinese mainland, true technology transfer.
 
As usual meeting with smart people from different countries is a true learning experience; like all pig farmers everywhere there was a discussion of labour, feed costs, health issues, market price etc. All countries are different but the same. We think China will be the wildcard for Global pork prices in the near future. Sudden importation of pork will be market movers. China like Russia will not except pork from Paylean fed hogs. We expect Improvist (Improvac) like Paylean will likely become another trade inhibitor if it reaches significant usage in North America. Right or wrong the customer dictates what they buy. With many packers now having their own production, customized need for customers can be adjusted rather quickly, i.e. No Paylean, DDGS level for fat firmness etc.
 
To the Farmer in All of Us
 
Chrysler made an Ad for the Super Bowl. It’s called "God made a Farmer". This commentary goes around the world. It’s read in 43 nations weekly. Most in American has seen the Ad but we think it’s appropriate for all farmers – everywhere to look and see for themselves. We are all farmers – This is to the farmer in all of us. [Click here]
 



Author: Jim Long, President & CEO, Genesus Genetics

Pork Commentary: Hog Market in Doldrums
20 February 2013


Jim Long is President &
CEO of Genesus Genetics.


CANADA - The US hog market appears to be mired in the doldrums. USDA carcass cut-outs averaged 80? last week while 53-54 per cent USDA lean hog prices were 86.48?, writes Jim Long.

It is not only hog farmers that can’t produce for 86? at a profit but packers have negative margins also. Not a very good scenario; Lose-Lose. It doesn’t take an ag-economist to calculate that this business isn’t looking too shiny.
 
Other Observations
 •Last year same time 53-54 per cent lean National price was 85.86?. This year 86.48?. Unfortunately corn was $6.40 a bushel versus $7.00 (was $7.40) and Soymeal a year ago $322 a ton versus, $409 ton this year. Higher costs and no more money for hogs! Lose even more money.
 

•USDA 40-50 lb. feeder pigs are currently averaging $75.00, a year ago they were $85.00. The lower price a reflection of higher feed prices this year but in our opinion not from more supply.
 

•US Pork exports were 5.38 billion pounds last year. A new record (+3.7 per cent). We expect continued strong exports in 2013 as global pork demand continues to increase while USA-Canada currently has the cheapest source of pork.
 
Corn-Grains
 
Over the last couple years we have written about how on our travels to Russia, Ukraine, Brazil and China we have seen the tremendous push to bring un-cultivated lands into production and increase yields. In the past when US corn hovered around $2.00 a bushel there was no incentive to bring land into production and push yields higher. Recently we saw data that indicates the world has in the last five years brought 123 million new acres into crop production. The US has shifted 20 million acres to corn from other crops on top of this 123 million.
 
In 2004-2005 the US produced 300 million metric tons of corn, (Approximately 12 billion bushels), the rest of the world 405 million metric tons of corn (approximately 16.2 billion bushels). In the year 2004-2005 total world production was 705 million tons or approximately 26.2 billion bushels.
 
In 2012-13 the US produced 10.7 billion bushels while the rest of the world produced 600 million tons (approximately 24 billion bushels). Put it together 34.5 billion bushels. So despite the drought in the US the world produced in 2012 about 8 billion more bushels of corn than 2004-05. Get a decent crop year in USA, then 2013 world production could hit 40 billion bushels without a doubt. That would be a 50 per cent increase over 2004-05.
 
The US dominance of world corn production has slipped, whereas the US was about 40 per cent of the world’s production it now will be about 30 per cent. Demand for corn to produce meat protein around the world has increased demand and pushed corn prices higher. While the massive diversion of corn to produce ethanol in the United States has not only increased corn prices but has taken US corn out of the global export markets allowing other countries to fill the void. You only have to look at this year’s free fall of the US corn exports to see that his is happening.
 
Markets
 
We have to say we are perplexed. The December USDA hogs and pigs report indicated an increase in the breeding herd last quarter. This happened despite financial losses of up to $40 per head in the Sept – Nov quarter. Expansion in the face of Armageddon? We doubt it. On the flip side have we got an industry convinced it will rain and the US corn crop will hit 16 billion bushels and combined with world production drive corn to below $5.00 a bushel? My father always told me our strength is our weakness. Is the optimism we all have that it takes to survive in the hog industry our curse that we are by nature too optimistic? We know it will rain?
 
Though we have some doubts. We still believe hog numbers will be lower this summer compared to last. We know the US has only five droughts in the last 42 years. None were back to back years. Despite the talk of climate change it was 23 years since the previous drought. The odds are it will rain. It appears to us we are in a majority of how hog producers see the future. More grain – fewer hogs. Much needed profits coming.
 



Author: Jim Long, President & CEO, Genesus Genetics

Pork Commentary: Lean Hog Price = Losses
06 March 2013


Jim Long is President &
CEO of Genesus Genetics.


CANADA - At the beginning of March the USDA National 53-54 per cent lean hog price average was $87.09 a lb. and was moving close to the breakeven area in the low 90’s. At the end of last week the 53-54 per cent National lean hog price was $77.78, a $20 per head decline. We expect many farrow to finish hog producers will be losing up to $30 per head at this price. Last year same time 53-54 per cent was averaging $86.28 and feed was cheaper, writes Jim Long.

Why is this happening?
 •Paylean issues with Russia and China makes pork exports more challenging and hurts demand and optimism.
 •Seasonal trends are a factor but last year with about the same amount of pork production, prices were $20 per head higher.
 •Secretary of Ag, Vilsack’s continual discussion on meat inspectors being cut because of the US government sequester with their subsequent budget cuts. This does not help confidence in general and we wonder if foreign buyers begin to distrust the US ability to deliver and look for other sources?
 •Possible lower domestic pork demand because of lower disposable income from increased gasoline prices and increased income tax deductions.
 
Last Week
 
Last week we attended the 30th annual Bethany Swine Health Services Production Meeting.
 
Bethany under the guidance of Charlie and Mike Schelkopf DVMs and their team operate and or manage approximately 35,000 sows farrow to finish. We were there as many of the herds use Genesus Genetics. Every year the Production meeting ranks sows and finishers while showing trends in production. It is very interesting to see the gains made over the years in all production characteristics. This year the cost of feed and how to best utilize was a paramount discussion. Like all production groups there is variation from top to bottom. The real good thing is all involved know where they rank and see what is possible.
 
At the meeting Steve Meyer, President of Paragon Economics gave a talk Economic Trends in the Swine Industry.
 
There was no text but this is what we think we heard from the talk:
 •If it rains – we will have cheaper feed – Below $5.00 a bushel – If it doesn’t rain $8.00 or more.
 •We will plant lots of corn – probably will rain
 •Paylean issues are hurting pork exports – China – Russia
 •Currently breakevens are in the low 90’s per pound, producers not liquidating sows hoping to get to cheaper feed and subsequent dropping break evens.
 •US oil and gas supplies increasing while gasoline demand has dropped significantly – This could affect corn for ethanol demand overtime.
 •Expect lean hogs to get to $1.00 lean a lb. this summer.
 •US Country of Origin labelling (COOL) has continually lost all court challenges. At the end of May Canada – Mexico can legally impose retaliatory tariffs. US wants to encourage global free trade for pork but Cool flies in the face of this. Retaliation could be on pork imports damaging US Pork Price. US Pork industry didn’t want Cool but got it anyway.
 
We enjoyed Steve’s presentation as it was thoughtful and concise. None of us knows for sure what the future is, but it’s good to hear smart people like Steve speaking of our possible destiny.
 
Summary
 
Lean Hog Prices have taken a big hit over the last 30 days both cash and futures. The industry is losing money at a rate of maybe $75 million a week. It’s ugly.
 
We do believe that both cash and futures will recover. Like Steve Meyers we believe Summer hogs will get to $1.00. Unlike Steve we see more upside pushing to near $1.10. Less Beef, Less Pork in the summer months will push prices higher. As far as consumer acceptance $1.00 / lb. gets us almost to, but not quite to China, Russia and far lower than Japan-Korea in hog prices. Their consumers with far less disposable income voting with their money to buy pork.

 


Author: Jim Long, President & CEO, Genesus Genetics

Pork Commentary: Hog Markets Continue to Get Hammered
19 March 2013


Jim Long is President &
CEO of Genesus Genetics.


US & CANADA - The US-Canada Hog Market continues to face dauntingly negative margins with average losses farrow to finish of $35-$40 per head, writes Jim Long.

The Facts
 •The average US Base Lean Hogs 53-54 per cent are at 76?/lb. a year ago same time 86?/lb. A lower price of $20 per head. A month ago 53-54 per cent lean hogs were 87? /lb. Also a drop of $20 per head.
 •Cash Early weans last week averaged $29.30- cash 40lb. feeder pigs averaged $61.66. Both down $20-30 per head from recent highs.
 •Iowa-S. Minnesota Average weights 276.9 lb. latest week, a year ago 276.3 lb.
 •June lean hogs peaked over $1.00 in the first part of December. Last Friday June Lean hogs closed at $89.32. June futures have dropped over $20 head since December.
 •Last week the US marketed 2,203 million hogs – a year ago same week 2.179 million. A few more this year.
 •The US dollar has gained strength versus other foreign currencies, since 1 February. On 1 February, the US dollar index was 78.915 a measurement of its value against a basket of the world’s currencies. On Thursday the US Dollar Index was 83.180. A 5 per cent gain in just over two weeks making US products (Pork) more expensive for foreign buyers. (e.g. US hogs were $20 per head higher a month ago).
 
The sum of the above is not pretty. They lead to an industry being challenged by real financial issues. Compound all the above with grain prices that are significantly high historically and you have a cocktail of real challenges.
 
Do we see price relief? Possibly. The liquidation of sows began last July, it takes ten months for hog numbers to be lower which is this May. Some say there wasn’t liquidation. We believe there was. We also expect the Global Grain picture should become more livestock friendly in the coming months. South Americas crops are good. The US and the rest of Northern Hemisphere will be planting record acreage for Grain and Oilseeds. The chances of two consecutive years of drought are low. The swine industry needs a break.
 
China – Dead Pigs
 
There has been a huge story this past week about dead pigs floating in a river by Shanghai. We were in New York City this past week and it was a major story on both TV and Newspapers there. It was reported, part of the reason could be China clamping down on pigs dying from disease from being used for food. This leads to river disposal? All seems quite bizarre. One of the people we work with called it "Porcine Aquaculture".
 
Its interesting how such a story catches Global attention. Make Large New York Funds looking a funding of swine project in energy markets nervous. All we ca say is, if this makes you nervous best not get in the Pig business. The Pig business is not for the faint hearted or the non-committed, but it might lead you to become committed in another context.