Jim Long Pork Commentary, Japan – Russia Road Trip Continues, August 21st 2012

By Jim Long, President and CEO Genesus Genetics

This past week we spent time in Japan and Russia.  Following is our report.

Japan

*Just under 1 million sows in Japan

*Average farm size is approximately 170 sows

*Corn is hovering around $13 U.S. per bushel

*Market hogs are at an astounding price of $2.00 U.S. per pound live weight ($4.50 a kilo)

*Producers despite $13 U.S. per bushel corn are making good money

*Major focus and demand is meat quality, dark meat, good intramuscular fat, high PH, and high iodine scores (firm white fat).  Taste and flavor are major drivers of the industry

*Little expansion as lack of land, labor, and high feed costs make little desire for expansion into their 50s.  We all know working on a pig farm after 50 is not overly desirable.

*The new proposed Pacific Rim Free Trade Agreement that U.S.A. – Canada want to be part of is a major concern for the Japanese swine industry.  A truly free trade agreement which eliminates Japan tariffs and quotas on imported pork would be quite a competitive shock with pork products coming into Japan at significantly lower prices.  The potential trade agreement is also encouraging Japanese producers to look for productivity gaining technology which of course includes genetics to be one step ahead of the possible industry altering dynamics.

*Santa Catarina in Southern Brazil has been declared free of foot and mouth disease and now has the potential to export pork to Japan.  A Japanese pork buyer told us after visiting Brazil recently that the meat quality of pork was not as good as some other countries and was not overly confident Japan would import much from Brazil.  We were not surprised as we saw the same thing last year in Brazil.  Pork was white and tasted like cardboard.  Brazil has been supplying cheap pork to countries like Russia that have little focus on anything but price – quality is not important.  Brazil’s focus on using Pietrain’s boars with their little intramuscular fat, pale meat, and poor water holding capacity is the major reason for poorer quality.  North America and the major use of Durocs are far better positioned for the Japanese market.

Russia

            *Russian wheat is a major ingredient in swine rations.  It is $5.50 – $6.00 U.S. per bushel

*The hog price is $3.00 U.S. per kilo or about $1.40 U.S. live weight per pound.

*Good producers should be making $1.00 plus per head.

*African Swine Fever is causing major concerns.  Farm enterprises we visited had production units locked down.  Employees were not allowed to leave the farm and are sleeping in barn offices.  Thousands of pigs have been killed by Government Officials.  It is a great fear

*The African Swine Fever (ASF) dilemma is slowing expansion.  Producers and banks are nervous.   There has been little progress in stopping ASF’s spread.

*In one State we visited in Central Russia we met with the Minister of Agriculture.  State has 4.5 million arable acres.  3.3 million are being planted.  60% of soil is black 1 – 2.  This year had drought.  Wheat yield is 40 bushel to the acre – it should be 80 bushels or more.  The 4.5 million areas have approximately 20,000 sows.  Land is selling for $125 U.S. per acre.  The Minister discussed 37,000 acres available for swine farms.  Cheap good land is not going to remain dormant.  Of note, all of the land was planted in the Soviet Union times.  We expect $8.00 corn will lead to this one million plus dormant acres of big fields, flat land, and good soil will get planted soon enough.

Strange Reality – the last five years of U.S. corn ethanol policy has been a major catalyst for expanding Russian agriculture, as millions of acres of land have returned to production driven by high grain prices.  A competitor has reborn.

Summary

            We continue to appreciate the warm and thoughtful hosts we meet in all countries.  Being able to travel and get to know as many smart and good people is indeed a gift.  As we do business in country after country we observe more the common interests than differences.  Family, opportunity, and prosperity are key similarities.  I feel very fortunate to have my 15 year old son on this trip and for him to see the world as it is.

Genesus Shipping Hundreds of Pigs to China

850 head of Elite Genesus Registered Pure Breed pigs were loaded onto a China Cargo Airlines Boeing 747-400 freighter at the Winnipeg International Airport this week and flown non-stop to China. Giastar, the buyers in China, are located in Chengdu, Sichaun province. Giastar is a feed manufacturer with 1 million ton capacity.  Giastar also has 7000 sows in breeding stock production, formerly PIC, now moving to Genesus. These pigs will be placed into a newly constructed barn, specifically designed for use as a nucleus. Giastar’s goal is 5 million pigs in production. They also currently have a meat processing facility with 500,000 head capacity.

Genesus has the largest registered purebred herd in the world, with many Genesus herds producing over 30 pigs per sow per year.

Giastar Nucleus Farm

Genesus shipping to China  July, 2012