Jim Long Pork Commentary, World Market Update, July 12th 2022

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Jim Long, President and CEO Genesus Genetics

This week we spoke at the National Pork Industry Conference (NPIC) being held in Wisconsin. The talk was on a World Market update.

World Markets

  • Our Premise – The three major hog-producing areas in the world USA, China, and Europe are all cutting production at the same time. This has never happened before.

Feed Prices

  • Feed prices have pushed the cost of production to record levels all over the world. Some relief in sight.
Contract Highs Now
Corn December $7.66 $6.07
Wheat July $12.84 $8.31
Soybeans September $16.06 $14.16
  • Spain 370 Euros/ton or over $10.40 a bushel, was $11.60 a bushel
  • China 3128 RMB = $12.50 a bushel, was $13.70 a bushel

Europe

December 1
2020 2021 # down Percentage
Breeding Pigs 11,415 11,004 – 411 – 3%
Total Pigs 145,877 141,516 – 4,321 – 3%

 

Europe Pork decline 5% Q1 – was 7% lower in March

Germany

  • 1.48 million sows May 2022
  • Germany has declined 6.2% since December 1 (-100,000) down to 1.48 million. Down over 200,000 in the last 18 months.
    • High feed prices
    • Loss of exports due to ASF
    • New animal welfare regulations
    • 12% less pork in Q1 vs. a year ago

Spain

  • The largest producer in Europe
  • Business model – contracting unlike rest of Europe it has been the only country in Europe to expand in the past two years
  • Last ten weeks slaughter has declined year over year
  • Has the highest price on record – just over cost of production

Netherlands

  • Livestock industry under huge pressure for nitrogen pollution
  • $27 billion USD budgeted to radically reduce livestock production through farmer buyouts – voluntary to start with
Sow herd (1,000 head)
2014 2019 2021
1,106 1,047 910
  • Huge protests underway – some estimates sow herd will be cut by 30% -300,000 sows. Less hogs coming

China

  • Sow liquidation began last July – 10 months later is March-April.
China Average Hog Prices
Price per lb. 35 lb. Feeder Pigs
Low was March 18 85¢ lb. $59.60
Week of July 7 $1.38 lb. $103.29
  • The only reason the price increased is because of fewer pigs. China just had its 1998.

USA

June 1 USDA Hogs and Pigs Report
  (1,000 head)
  2020 2021 2022
Kept for Breeding 6,236 6,220 6,168
Market 71,038 66,933 66,356
Pigs per Litter Dec.-May 11.00 10.95 10.97
Sows Farrowing Actual Dec-May 6,329 5,964 5,904
June-November 6,425 6,098 6,025

 

 

 

 

 

 

 

 

 

Why less Hogs?

  • Financial losses during Covid crisis
  • High feed costs
  • Difficulty to get labor
  • High building costs – $4,000 sow farrow to wean
  • Breakeven?
  • Generational change

USA – Demand

  • Chicken production lower year over year with prices now $1.60 lb. a year ago $1.05 lb.
  • Beef cow liquidation and lack of Heifer retention at record combined levels. USDA projecting almost 2 billion lbs. less Beef in 2023 then 2022 (-7%). Equal to about 4 weeks of hog production.
  • Inflation – we don’t think it will cut U.S. Pork demand – consumers will cut out other items. Beef $2.60 cut-outs – Pork $1.08 cut-outs.

Fake Meat

Beyond Meat stock (Nasdaq: BYND)

  • 234.90 High in 2019
  • 27.17 Last week

Market capitalization – down -$15 billion from peak

Down -$1.74 billion since January 1, 2022

Taste does matter

Gene-Edited Foods

  • Survey by Iowa State of 2,000 U.S. residents
  • Quote “Around 60% of the women in the survey said they would be unwilling to eat and purposely avoid gene-edited food.

Our Concern – Gene-Edited Foods

  • We support technology but we need to have customers for our Pork.
  • I.E Paylean legal product – one customer China says no. Now no Paylean. What happens when one customer says no to Gene-Edited?

Pork Exports

  • Challenge of Euro to U.S. dollar
  • A year ago, 1.18 Euros to $1 USD – Now 1.03 Euros to $1
  • This makes U.S. pork less competitive in World Markets at an almost 15% change
  • Year to date exports down -24%
  • Thank god for Mexico as it’s up 11% and is the leading export country
  • China starts up most U.S. plants approved unlike Spain and Canada

Summary

  • Our premise is China, Europe, and the USA are the major hog-producing areas with 75% of the world’s production all down at the same time, probably the first time in history.
  • U.S. hog prices in our opinion are at minimum the same as this past 12 months with significant upside as global pork supply craters.

2022 NPIC

Jim Long President & CEO of Genesus gives a presentation on World Markets

Spencer Long of Genesus gives a presentation on the Genesus Jersey Red Duroc

Genesus hosted reception at the 2022 NPIC