Jim Long Pork Commentary, Drought!!, July 10th 2012
By Jim Long, President and CEO Genesus Genetics
The U.S. corn price rolled higher last week with spot corn hovering around $7.00 a bushel pushing the cost of production of hogs up due to feed prices by $15 – $20 per head in the last three weeks. This is not a business for the faint hearted. Widespread dry (maybe drought) and heat conditions have hit the market like a sledgehammer. If it rains it will be okay – if it doesn’t it will be miserable. It usually rains. Pray for rain!
*High price corn will cut exports
*Producers with irrigation are feeling quite wise
*High price corn will cut usage of corn for ethanol. We understand the ethanol plants have stopped production due to margin challenge. Corn ethanol plants are currently losing we have been told an average of 25 cents per gallon. If this continues, expect further plant shut downs as it’s a business that has an on off switch.
*There are also reports of corn being imported into the Southeast. Three ships from Brazil.
*Rumours last week that the U.S. government is looking at changing the mandate percentage on ethanol usage in gasoline. Who knows if it’s true? One thing for sure oil companies who have no corn ethanol plants will have no problem stop using something they are forced to buy from competitors. A drought could affect the insanity of burning food for ethanol forever.
This week we are speaking at the National Swine Industry Conference in Wisconsin on how the global swine markets affect the U.S. Following are some of our points:
*90% of all pigs in the world not raised in North America
*U.S.A. exports over 25% of its pork production. Canada does 50%
*Main pork importing countries from U.S.A. – Canada
Current Hog Prices
*A 240 pound hog in Japan is currently bring $450 U.S. per head
*In Mexico market hogs are 21.70 peso/kg or 74 cents U.S. per pound live weight
*China’s current slaughter price ranges depending on the region from 95 cents – $1.05 U.S. per pound. A 240 pound market hog is about $240.
*South Korea market hogs are $1.35 U.S. per pound (3900 won per kilogram). A 240 pound hog is about $320 per head.
*Russia a 250 pound market hog is $350 U.S.
As you can see, the hog prices of the major pork importing countries are real strong. Prices are always a reflection of supply and demand. When you have countries that all have lower disposal income (exception Japan) lower than the U.S. and Canada the hog price is obviously being pushed by demand not supply. We expect that U.S. pork exports will stay strong over the coming months and we need it.
Canada’s swine genetics industry poised to help feed growing population
Last week’s announcement that the Ukrainian market has opened to live swine and swine genetics is a step in the right direction, according to a genetics company executive.
“Anytime we have more markets to sell to, it’s a positive situation,” says Jim Long, president and CEO of Genesus Inc. Genesus produces more purebred pigs than any other company in the world. Long estimates that Genesus flew 37 plane loads of purebred pigs from Canada to various world markets last year. The company also exports some frozen semen. Genesus produces live pigs not only in Canada, but also the United States, Mexico, China, Russia, Spain, and the Czech Republic.
Expansion of the Ukrainian pork industry comes with challenges. Long explains that capital loans are hard to secure. He estimates that interest rates are around 18 per cent, with a fast paydown on the loans.
Despite these challenges, Long sees opportunity for Ukraine’s pork producers. Importing 25 kg pigs into the Ukraine adds up to $125 per head, including delivery. Long estimates Ukrainian producers could raise similar pigs for $60 a head. A population of about 50 million people, high pork prices, plentiful grain, and ample space for farms also tip the balance in the favour of Ukrainian producers.
“The high level of profitability in the Ukrainian market…is going to stimulate expansion, which should help us sell breeding stock in Ukraine,” says Long.
Long doesn’t necessarily see tight foreign regulations as a barrier for Genesus. Though lots of regulations make it more difficult to access a market, regulations also disqualify some competitors from the same market, making it more lucrative.
Canada’s competitive edge
As meat consumption grows globally, Canadian swine exporters seem to be in a good position to fill that need.
“Canada is the platform for high health genetics in the world,” Long says. Most of the major genetics companies base their herds in Canada, Long adds. He explains that the abundant space in western Canada helps reduce disease prevalence, making it an ideal location for primary breeding herds. Canadian regulations and Canada’s ability to export to so many markets also make it attractive.
The Canadian swine genetics industry is also very advanced, and other countries are looking to Canada for help to improve their own technology.
“They’re looking for the technology to lower their costs and increase their production. And part of it is how to efficiently produce food for a world that’s growing in population. So what we’re doing as the Canadian swine genetics industry is a technology transfer,” says Long.
Also you can find this article by clicking the following link http://genomealberta.ca/_pvwDB617E46/livestock/canadas-swine-genetics-industry-poised-to-help-feed-growing-population.aspx