Jim Long, President and CEO Genesus Genetics
Summer month lean hog futures hit new contract highs last Friday at 87.20₵/lb. Significantly up from last June at 71₵ or mid-August at 74.50₵.
We remember mid-August as that was when a certain Ag-economist at NPIC projected no increase in lean hog futures because of future increased production. We disagreed vehemently at the time. The expert Ag-Economist said “CME average price for 2021 is currently 68.37₵. We believe the average price in 2021 will be 56-59₵. We recommend producers consider some hedging.” Current CME average for 2021 is 79.92₵.
Continued upside in future hog price
We expect continued upside in future hog price prospects.
Less hogs coming. Why? Lower sow herd- big disease issues cutting supply.
High feed prices
High feed prices will lead to further sow herd liquidation.
The latest weekly sow herd slaughter was 70,686.
Any number over 60,000 is definitely liquidation.
U.S. Pork Exports
U.S. Pork Exports latest week 40,800 metric tonnes.
An indication of continued strong demand.
This past week the U.S. slaughtered 2,738,000 market hogs. U.S. carcass cut-out closed Friday at $82.83. A very strong sign of demand in the face of maximum slaughter capacity.
Makes us very positive of where pork cut-outs can go when hog slaughter decreases 300,000 ± head a week in the June-July- August time frame. We will not be surprised if lean hogs reach $1.00
Europe’s hog market was quite profitable until March when the pandemic hit. It got a further hit in September when Germany got ASF and lost its market in Asia. Prices have dropped significantly while feed prices have increased.
Currently; German hog producers’ losses are in the $35 U.S. per head range. Liquidation has begun. Parts of Europe have many family farms in the 150-250 sow range. It is expected there will be significant numbers of these exit for multiple reasons – profitability, labor, family inheritance or lack of, high feed prices, more environmental and animal welfare regulations.
There conceivably could be 500,000 to one million sows exit. This will cut pork availability for both domestic and export markets.
Philippines purchased a record 4540 metric tonnes of Pork a week ago from U.S.A. Philippines has been devastated by ASF losing a large percentage of production. Market hogs are over $500 U.S. per head. The price confirms to us the lack of domestic supply. 108 million people in the Country.
Genesus Genetics are in a 2500 sow nucleus-multiplier on top of a small mountain in Luzon. It’s stayed clean. Luzon could have lost 80% of 500,000 sows. No one knows for sure but $500 plus market hogs and record export sale from U.S.A. indicate severity of ASF.
We expect Philippines will be importing a large supply of pork ongoing while they work to rebuild herd.
The world grain market has been pushed by the expectation of China importing even larger amounts, but since October has only had small purchases from U.S.A. We would not be surprised if China has already jumped in and bought most of their needs earlier.
Might be a communist country, but they sure understand capitalism. Corn still expensive in China at $11.08 a bushel but remember, they are used to $9-10 corn.
We read this week about continued issues with ASF in China and possible new variants related to illegal ASF vaccine use. For sure ASF hasn’t gone away.
China’s hog price is about $2.40 U.S. liveweight a lb., indicating a continued lack of supply and also to no increase in hogs being fed.
Top 20 producers in China 2020 according to report published by the Swine Communication Forum produced 78 million hogs.
Top 5 Companies
CFAP “Top-Up” Payments for Swine
~below from USDA website~
“USDA is providing an additional CFAP 1 inventory payment for swine to help producers who face continuing market disruptions from changes in U.S. meat consumption due to the pandemic. Swine with approved CFAP 1 applications will soon receive a “top up” payment of $17 per head, increasing the total CFAP 1 inventory payments to $34 per head”.
Expanded Eligibility for CFAP 2
Contract producers of swine, broilers, laying hens, chicken eggs and turkeys who suffered a drop in revenue in 2020 as compared to their 2019 revenue because of the pandemic, now are eligible for assistance. Producers could receive up to 80% of their revenue loss, subject to availability of funds.
For U.S. producers; good news. The $17 top-up could mean up to $750,000 for some. The Government assistance is a true reflection of the crisis the Swine Industry has suffered. It’s not a subsidy for pig producers but an investment by the Government to ensure a continual food supply.
No food – hungry and unhappy people