Pork Commentary

 

Jim Long, President-CEO, Genesus Inc.

January 10th, 2022

 

U.S. Lean Hog Futures reach $1.00 a lb.

 

This past week, U.S. lean summer futures exceeded $1.00 a lb. They then fell Friday supposedly because of a “scare” that hogs won’t get slaughtered due to lack of labor.

 

Latest weekly Iowa/S Minnesota average weights this year 291.4 lbs., a year ago same week 291.6 lbs. Appears to us hogs are current compared to a year ago. IE not that backed up. Key over the next three weeks is watch weights, that will reflect supply and ability of packers to get them killed.

 

The December 1 USDA Hogs and Pigs Report indicated 4% fewer market hogs than the year before; 68.021 million vs. 71.136 million a difference of 3.115 million hogs. If you assume 26 weeks birth to market that is 120,000 fewer hogs to market weekly year over year.

 

From what we can gather on the strong demand for small pigs. There seem to be lots of barn spaces chasing fewer pigs. Farmer Arithmetic 120,000 fewer pigs a week is 120,000 spaces a week without pigs. No wonder small pig prices are strong. Last week's USDA report - Cash Early Weans at $64.59 and 40 lb. feeder pigs at $82.43.

 

Fact Iowa/S Minnesota lean hog price was over $1.00 a lb. lean starting April 7, 2021 – August 24, 2021. Hard for us to believe 4% fewer hogs (-120,000 a week) won’t match or exceed that price high in 2022.

 

Production is being eroded by: record-high sow mortality (dead sows don’t have pigs), record-high wean to finish mortality. PRRS 144 has hit again cutting production, PED has been devastating in some areas, labor issues are eroding production. Not enough people in sow barns to do a proper job, industry short of knowledgeable pig people leads to less pigs produced.

 

We know of few new sow barns under construction. We would ask anyone who knows of new sow barns under construction (contemplated construction please report as such). We will report our findings. All respondents will be protected by cone of silence and anonymity.

  

U.S. Carcass Cut-out Values
Last Friday

Carcass cut-out value

85.90¢ lb.

Primal Rib

$157.15 lb.

Primal Belly

$139.74 lb.

Primal Butt

$112.00 lb.

Primal Loin

82.10¢ lb.

Primal Ham

53.31¢ lb.

 

It’s interesting the highest valued cuts Rib, Belly and Butt are the cuts with the most marbling. We believe consumers vote with their money and it's obvious they want pork cuts with marbling which gives a better taste. Taste is what matters. It’s sad to see where Loin and Ham prices are. They used to be at the top of cut-out value until the insane quest of our industry to produce lean pigs that made Loins and Hams devoid of taste and flavor. Farmer Arithmetic, if Loins and Hams were $1.00 on cut-outs now, a price still below current Ribs, Belly and Butt prices, the total pork cut-out value would be above $1.10 lb. compared to 85.90¢ lb. That’s an increase of over $40 per carcass. That’s real money.

 

We need to think as marketers. The facts show what consumers prefer to buy. We need to improve the quality of our Loins and Hams to meet our customers' needs. Some think any brown boar called a Duroc is a solution. Unfortunately, some of the mongrels called Durocs with European genetics have no better taste or flavor than any of the other synthetic products they sell. At the end of the day it’s the taste of the pork that creates real demand not the breed of a boar. If we want to drive pork demand and revenue the path is to better-tasting pork.

 

Quote: “Denying the truth doesn’t change the facts.”

 

NPPC has new leadership. They represent 60,000 producers. Last week the Biden administration announced a billion-dollar program for the meat-pork industry. We haven’t seen any comment from NPPC. NPPC position on this initiative? Did they lobby for this funding?

 

Final Thoughts

 

·         U.S. – Canada hog price is below cost of production. There is no sow expansion and maybe contraction. USDA indicates less hogs in 2022 than 2021.

·         Europe hog price is below cost of production – losing about $30 U.S. per head. Cull sow price has been at record low for the last 15 weeks. A reflection of large volume of cull sows. Europe is liquidating at a current rate we believe of 25-50,000 sows a week.

·         China’s producers are losing money. Our estimate about $50-75 U.S. per head. Sow liquidation continues with ongoing large disease challenges. China, we expect is culling about 200-300,000 sows a week.

These three areas produce over 75% of the world’s hogs. At some point when liquidation stops (it hasn’t yet) the global price will explode.

 

genesus.com