Jim Long Pork Commentary, U.S. Sow Herd Liquidation, March 30th 2020

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Jim Long, President and CEO Genesus Genetics

 

U.S. Sow Herd Liquidation

The U.S. Sow herd certainly showed significant liquidation in the March 1st Hogs and Pigs Report. 
On December 1st, 2019 the U.S.D.A. indicated the U.S. breeding herd was 6.471 million; 3 months later on March 1st it was 6.375 million. That’s a decline of 94,000 breeding animals in 13 weeks or about 7,000 head drop a week.

Go figure, the industry has been challenged to do anything but lose money the last while. We expect that in March similar liquidation levels have continued. It’s obvious as we cut the sow herd the amount of future number of market hogs declines.

March 1st Hog and Pigs Report indicates 4% more market hogs compared to a year ago. About 3 million more in total. When we divide that by 27 weeks (189 days) of the production cycle, it’s about 110,000 more per week. No shortage of hogs for sure.

Projected Farrowings. March-May are projected 100% of year ago, June-August 96%. Maybe a significant sign of what’s happening in breeding herd liquidation.

Year to date sow slaughter is 4,000 more a week than 2019. Also, many herds are not retaining gilts as they usually would and from what we can see, few if any new sow units are being built. With many projects being put on hold, losing money is not conducive to expansion, it leads to liquidation. Always has, always will.

Other Observations

U.S. Pork Exports the week of March 13-19, set a new record. 48,600 metric tonnes.  US Pork Exports to China were 23,000 metric tonnes, a new weekly record (a year ago 5,000 tonnes to China). Obviously Coronavirus is not slowing export demand. China Phase 1 Agreement to import more U.S. Ag products (pork) is working. Tyson and JBS removing Paylean is leading to more pork available and then going into China.

Logistic issues in China due to Coronavirus re: importing pork seems to be fixed. We expect U.S. pork exports will probably exceed 25,000 tonnes a week to China for the foreseeable future.

Rabobank estimates China 2020 production will be at least 20% lower than 2019. Current China Hogs at $2.30 U.S. liveweight a lb., is for sure a sign of a pork shortage.

The 53-54% lean hog price gained last week about 4₵ lb., last Thursday it was 65.62. The futures, on the other hand, continued their insane gyrations, dropping limit down in the face of record U.S. pork exports and rising hog market.

All meats got a surge in demand a week ago.  Retail consumer buying was hectic. Some Retail stores were stripped of meat inventory. We expect meat consumption will stay strong as many consumers stay home, have time to cook and have the money they used to spend in closed restaurants. Consumers can buy a lot of meat (pork) with what a restaurant meal costs.

Wildcard is to slaughter plants challenged by Coronavirus. All countries up to now have kept food chain moving. So far the first instances in U.S. plants have been handled and plants kept operating. In Canada, Olymel closed the plant for 14 days.

Summary

Challenging times. It will be a testament to our resolve to keep the pork chain and food chain moving.  We expect it will; America, Canada, the rest of the world needs to be fed.

We are essential.

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