Jim Long Pork Commentary, July 6th 2020

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Jim Long, President and CEO Genesus Genetics

“There are no problems,
there is just a lot of little problems.”

-Henry Ford-

Henry Ford was a man who went bankrupt more than once. It didn’t dissuade him, he kept going and in time built a business empire and became a legend in America/World business.

Henry Ford comes to mind as seven years ago this July 4th weekend, my family went to Detroit and toured the Henry Ford Museum, Greenfield Village, and the Rouge River Ford Assembly Plant, all legacies of his foresight. Of note, Henry Ford evolved the modern Car Assembly line after visiting a Hog Packing Plant in Cincinnati, Ohio where he saw hogs being carried by a moving line to stationary workers.

The U.S. hog industry is in a dark time. Prices and the losses associated with that are huge. Some estimates put potential annual U.S. producer losses at $5 billion total. Henry Ford statement “There are no big problems, there is just little problems.”

What are the little problems (little might be subjective) in the hog industry?

Lean Hog Price

Lean Hog Prices are in the mid 40’s.

Losses per head are $40-60 for many producers.

Coronavirus

Coronavirus tore up the Packing Plants. Now they appear to be back to near normal production. Can they keep going? Gross Packer Margins are excellent working as huge incentive to kill hogs.

Hogs backed up.

Certainly, the plant closures and slowdowns backed up Hogs. Our sense, most of Eastern Corn Belt is not backed up, Canada is not backed up, Eastern Iowa is okay. The dilemma is the 4-state corner of Iowa–Minnesota–South Dakota–Nebraska. There it’s a real issue.

Lean Hog Futures

Lean Hog Futures, seem to us, an indicator of speculation more than the reality of the pork industry supply-demand too many times.

Observation – almost all if not all world hog markets are higher priced then the U.S. None of the other markets have a lean hog future market.

Spain which has the third-largest hog production in the world has a unique way to set their national hog price. Every Thursday 1:00 pm representatives from the Producers, Packers, Processors and Retailers meet to set the price of market hogs for the week. We have attended the meeting in the past. Seems to us these negotiations have led to a continual balancing of each segment of the industry’s interests where each sector’s margins are respected. It takes away one sector losing $40-60 per head which another is making $60.

Pork Export 

Exports have held it. Appears U.S. to China exports were record high in May. With China hog prices above $2.00 U.S. a lb. they should buy lots more. The little problem is the U.S.–China political relationship. Ag products seem to get targeted in trade wars.

China has agreed to a Phase 1 deal to purchase U.S. ag products including Pork. It’s to the U.S. pork industries interest this is honored.

Mexico, the U.S. largest pork importer by volume, in May saw its hog price collapse. Since then it has recovered. This will lead to a recovery of U.S. pork exports to Mexico that had declined substantially.

U.S. Legislation

This past week U.S. Senators: Inhofe (Oklahoma), Burr (North Carolina), Tillis (North Carolina), Ernst (Iowa) and Grassley (Iowa) introduced new legislation.

The bill would:

  1. Compensate hog producers who are forced to euthanize or donate animals that can’t be processed into the food supply due to Covid-19 related packing plant capacity reductions;
  2. Increase funding for animal health surveillance and laboratories, which have been tapped to perform Covid-19 testing during this human health emergency.
  3. Revise the Commodity Credit Corp. charter so a pandemic driven natural emergency qualifies for funding.

All these points are a reflection of the current swine industry situation.

Scandinavian Farms and Genesus Collaboration in China

Jørgen Lindberg,CEO of Scandinavian Farms.

Genesus is pleased to announce the successful shipment of 3 plane loads of swine genetics from Genesus Nucleus Farms in the United Kingdom to Scandinavian Farms Pig Industries of Lianyungang, China.

 

Scandinavian Farms is a Danish Corporation which established a Danbred Nucleus Herd in China in 2013. Scandinavian Farms current production capacity is 14,000 sows.

In a recent magazine article in his native Denmark, Jørgen Lindberg, CEO of Scandinavian Farms was asked the following.

 

“Why do you switch now from Danbred to Genesus?” 

“It is an important decision when choosing which genes to build your herd on. Therefore, we have examined the market and the various suppliers very thoroughly. Overall, we think we get the best solution with Genesus, both when we look at the agreement and the terms, as well as when it comes to the pigs we get from Genesus.”

– Jørgen Lindberg, CEO of Scandinavian Farms

“Were you not satisfied with DanBred’s pig?”

“Yes – the pigs from DanBred have the best genes in the world, and it went well. We had both a nucleus herd with 1,600 DanBred sows that we owned together with DanBred, and a production herd with 14,000 sows and the production of 350,000 slaughter pigs annually. But we have learned that pig production in China is not the same as in Denmark. We cannot expect our employees out here to manage the pigs as we are used to in Denmark. That is why we are now switching to pigs that do not need near the same thorough care to produce good results.”
– Jørgen Lindberg, CEO of Scandinavian Farms

“What is it that the pigs from Genesus can?”

“With the Genesus sows we get about 16.5 piglets per litters compared to DanBred’s 17-18 piglets. In contrast, the birth weight of the Genesus pigs is quite a bit higher and the pigs are stronger. In Chinese conditions, we believe that it is an advantage with fewer, but in turn stronger piglets, which easier will get all the way to slaughter. As another important factor, feed is 60 percent more expensive in China than in Denmark. Therefore, it is important that the pigs are strong from birth so that they utilize the feed better and reach the slaughter weight faster.”
– Jørgen Lindberg, CEO of Scandinavian Farms

 

Source: Danish agricultural newspaper “LandbrugsAvisen”
Article Written by Einar Bo Thomsen

Scandinavian Farms and Genesus have established a Genetic Service and Marketing Agreement. Scandinavian Farms will work jointly with Genesus in selling Genesus Genetics in China.

“Genesus is proud to have the opportunity to work with Jorgen Lindberg and his team at Scandinavian Farms. The long-term genetic agreement we have entered into together will allow us to strongly market Genesus genetics in China and is proof of our commitment to the Chinese swine industry”

– Mike Van Schepdael, Vice President of Genesus

One of 3 planes being loaded.

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