Jim Long, President and CEO Genesus Genetics
Last week we travelled to Sioux Falls, South Dakota to attend the South Dakota Pork Congress.
South Dakota is one of if not maybe the fastest growing U.S. states for sows. In the last year 215,000 to 255,000, Up 19% versus U.S. Average of 2%.
South Dakota has land for expansion, closeness to a number of slaughter plants and feed prices lower than the U.S. average.
It was the first time I have been to the South Dakota Pork Congress. I was amazed by the large number of attendees and exhibitors. Sioux Falls in the South-east corner of South Dakota is close to the borders of Iowa, Minnesota, and Nebraska, and had numerous visitors from these states.
The exhibit area which Genesus was a participant was full. We understand 30 potential exhibitors were turned away due to no space available.
The attitude of attendees was reserved optimism. With current farrow to finish operators losing around $20 per head. It’s not a time of happiness. It’s hard and has been hard. 2018 was a time of no profits. The optimism there comes from the strength of the lean hog futures. If correct, the current lean hog prices in the mid 50’s will be the lowest of the next year and a half.
Lean Hog futures closes:
Feb – 62.65¢; April – 67.350¢; May – 72.87¢; June – 79.90¢; July – 81.07¢; August – 80.82¢; October – 68.75¢; December – 63.35¢.
Feb. – 67.20¢; April – 70.90¢; May – 76.82¢; June – 80.82¢.
It appears the market is also moving more and more to Duroc Boars. When the world’s largest Genetic company PIC puts a push from its traditional base of synthetic hybrid breeds to a Duroc like product it’s a reflection of the trend and demand. There was numerous discussions about Duroc since last week. It’s nice to see. Fifteen years ago Genesus decided to focus all of our sire line resources on producing only Durocs. At the time we were almost alone in that dedication. Now with 4100 Duroc Registered Purebred sows throughout the world it’s nice to see we were ahead of the market.
At the show we spent some time speaking and listening to people from the National Pork Board and National Pork Council. We have to say it was refreshing their positive attitude towards our industry and our challenges. They have identified the action plans whether it be foreign animal disease risk, tariffs, and the drive to producing better tasting pork. They need our support and lobbying to make check off etc. evermore effective. It is our business and we must fight for it!
A year ago 53-54% lean hogs were 68₵ lb. Last week 55₵ lb. We believe the difference is the tariffs from Mexico and China that are holding down U.S. prices from year ago like levels. The U.S. pork industry has been to a large extent a supporter of Trump and his policies. Certainly the implications of the retaliatory tariffs from both Mexico and China has in the short term hurt U.S. hog producers financially!
The African Swine Fever (ASF) issue in China is not improving. We are getting first hand reports of large levels of liquidation. Some speculate that China’s sow herd has decreased 10% (4million sows). The disease continues to spread. Some feed companies reporting from ranges of 10-30% decrease in feed sales. This is becoming what some may call Black Swan Event- high profile, hard to predict rare event that is beyond the realm of normal expectations in history, science, finance and technology.
The implications of ASF in China is having and will have major implications in China and the world. We expect massive levels of pork will be imported. We expect this won’t happen until Chinas liquidation ceases. The first indication of liquidation ceasing will be a rapid rise in the average hog and chicken price in China.