Jim Long Pork Commentary, Bacon Shortage? February 13th 2017

Jim Long, President and CEO Genesus Genetics

Over the last few years, the demand for Bacon in the North American market has greatly increased. Bacon on burgers, Bacon in all day breakfast programs such as McDonalds, Bacon on everything. What has that meant to US pork cut-outs? Below is some historical values.

 

As you can see, bellies were cheaper than loins until a few years ago. Now, belly prices outstrip loins by a significant amount.

 

The latest Pork in U.S. Cold Storage Report puts belly inventory at 17 million pounds, the lowest since 1957. Packers we have talked to report of a belly shortage. It’s amazing, considering the daily slaughter of 443,000 head, a number that tells us we are at maximum harvesting capacity. Where will the belly price go? Considering next to no bellies in storage and number of market hogs will decline weekly due to normal seasonal production. $2.00+? Wouldn’t bet against it.

 

One of the things as an industry we must be thinking of is why Bellies and also Ribs are the highest price of any item on U.S. Pork Cut-outs. Last Friday: Bellies 179.83, Ribs 123.62, Loin 73.87, Ham 61.09. In decade of 2000, Hams and Loins were mostly higher in price than Ribs and Bellies.

 

In the 1990’s, Bellies got down to $0.28/lb. Remember a friend of mine in the Packer Industry saying “Bellies are $0.28/lb, if they get to $0.20/lb, they are dog food.” How things can change.

 

We believe the reason Bellies and Ribs are the highest price is because they taste good! They have flavour, and consumers vote with their money. That creates the demand. As an industry, our infatuation to produce lean pigs has wacked demand for hams and loins. Tasteless, dry pork with no marbling, light in colour, and with little water holding capacity has been a fool’s gold. Most grade systems do not reward better tasting pork, but quite contrary. The lean tasteless crap that some produce but in turn don’t want to eat themselves.

 

Better tasting pork is not a niche industry. It’s what our industry needs to get focused on. Add $0.20/lb on hams and loin cut-outs, you put $20 on the carcass value of a market hog. That’s not a niche. Produce better tasting pork and have every American eat one more meal a month of pork. It’s equal to 8 million hogs. That demand is equal to what PED did for our market (minus 8 million head), probably added $30 per head to market hog value.

 

Better tasting pork creates demand (bellies, ribs, etc.). We have better pork available, the choice is for our industry, to drive profits or chase the fool’s gold of lean dry non-juicy pork. Flavour is not a niche but a universal demand driver.

 

PIC

 

We are in the swine genetic business. It’s our passion and livelihood. We pay attention to our competitors. Genus-PIC is a publically traded company on the London Stock Exchange and is by far the largest swine genetic company in the world. We reviewed their financial statements.

 

Some Observations

 

  • PIC reports they influence about 136 million hogs per year, which would be about 10% of the world’s pig production. This tells us at 10% global share, the market is still fragmented with a lot of growth potential.
  • Karim Bitar, CEO – renumeration was 1.606 million pounds last year (2,005,492 US dollars). That’s a nice package!
  • PIC Revenue 176.5 million. Adjusted operating profit 64.2 million (pounds). Profit is before group overhead. It’s a very good profit!
  • Substantial Shareholdings. As of September 1, 2016, we were aware of the following material interests in the Genus company ordinary shares.

 

  • Not exactly a who’s who of farmers as shareholders. Obviously, lots of smart money investing in the genetic business and looking for good returns. Doubt if many in shareholder group have ever bred a sow, weaned a pig, pulled a dead sow, done chores Sunday morning. Probably these weren’t relevant points, we just believe understanding the real nuts and bolts of our industry does matter.
  • Maybe when you have such an elite shareholder group, the idea of PRRS gene-editing for your own financial gain is more important than what it could do to consumer and export pork demand and market access. For most of us, the pork industry is where all our investment and passion is. Not a place we stick some money and expect a return.
  • Genus is on the London England Stock Exchange. Question – will England approve the Gene Edited Pigs for human consumption? We doubt it, but the London England based company has no qualms pushing the product into other countries, jeopardizing producers’ market and consumer acceptance.
  • “The real discipline comes in saying “no” to the wrong opportunities.” – Peter Drucker

 


 

 

Dabaco of North Vietnam Imports Boeing 747 Load from Genesus

 

 

DABACO GROUP, based in the North of Vietnam, is multi field group of which specializes mainly on animal feed, castle and poultry breeding and food processing. In addition, Dabaco also invests in building industrial zones, urban zone facilities and infrastructure, and real estate. Dabaco is proud of being the first name in animal feed in Vietnam and being one of the ten biggest enterprises specialised in animal feed nationwide.

 

Formerly founded from state-owned enterprises in 1996 and an IPO in 2005, Dabaco has since made outstanding achievements in developing chain value from breeding, animal feed, contracted farming, and meat processing.

Genesus is proud of its long relationship with Dabaco and its staff, as well as the high level of pig performance they achieve by using Genesus breeding stock.  Genesus pigs are known for their ability to perform in the hot and humid climates of S.E. Asia, enhanced by the high feed intakes of the breeding stock and their progeny.

 

This 747 charter is Dabaco’s forth import of registered purebred Genesus Yorkshire, Landrace and Duroc breeding stock.

 

Genesus is the largest breeder of high health registered purebred swine in the world. Genesus is also the global leader in exports of proprietary swine genetics.


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