Pork Commentary, March 06, 2018
Jim Long, President-CEO, Genesus Inc
Global Market Prices
This week we wish to look at some of the Global Market Prices.
Hog prices are still quite strong and quite profitable at 14.26 RMB/kg liveweight ($1.04 US/lb liveweight).
Though there is much written about large scale new sow projects in China, the reality is – due to tough environmental regulations and rural to urban registration – in 2017 China declined 2 million sows according to the Chinese ministry of agriculture. The extremely high prices is the real indicator of supply relative to demand. We expect Chines hog prices to stay high through 2018. China will continue to import significant amount of Pork throughout 2018.
Having import controls on Pork to enter Russia has lead to strong profitability in the Russia swine industry.
An 85 rubbles/kg liveweight (66¢/lb US liveweight) is leading to profits in the $35-50 per head range. Some expansion is underway, and Russia with abundant land and grain production costs, should be globally competitive. If Russia prices ever drop to below breakeven, we expect many old, low productivity farms will go out of business. This is a factor in our opinion, when people discuss Russia reaching self sufficiency in pork. The other factor re self sufficiency, is Russia per capita consumption at 20kg per person is half of Europe’s.
We believe if pork becomes cheaper and or Russian consumers have more money – Russia per capita consumption could increase significantly. Russia has 145 million people, an increase per capita consumption would mean the need for ever more pork production.
Spain is the leading pork producer in Europe, with hog prices at 1.146 Euros a kilogram (64¢/ lb US) profitability is good. Spain is expanding slightly, but tougher environmental rules are restricting development. The Spanish model of integrators with large contracting schemes has worked well in combination with the collaborative hog price discovery that the industry sets weekly.
The big challenge for Spain in export markets is that their hog prices are currently $50 US per head higher than Brazil and USA-Canada which makes it harder to compete by any measure.
Mexico producers have had a fantastic run of profitability the last few years. Prices are 30.12 MXN / Kg liveweight (72¢ US liveweight). Increased domestic demand, population increase, and incrementally increased exports has helped sustain good times.
The one thing we notice around the world is that the most profitable markets are countries that import pork. Self sufficiency and exports is not the key to producer profitability. The most profitable Global countries for producers, Japan, Korea, China, Russia, Mexico are all not self sufficient. The goal of self sufficiency of a country for pork production is not the key to better profitability.
Both countries have current prices at 46¢ US/lb liveweight. The industry is at about breakeven. Lots of money trading hands with not much left over. Current calculations for the next twelve months using futures of feed and hogs would lead to profits in the $8-10 US per head range – Ok but mothing to get excited about. Labor for farms is getting more difficult with stricter immigration and other measures. The challenge for labor will restrict the fever for expansion. Ongoing environmental rules will hang over development. The new packing plants that come on stream have narrowed the Pork Cut out price relative to the hog price. Packers gross margins have decreased substantially, but even with that, current hog prices are around breakeven. With pork exports over 30% of USA-Canada production, the key to profitability is global prices and market accessibility. With trade issues including NAFTA and TPP the industry has lots to pay attention to.
We have seen hog and futures decline over $20 US per head in the last few weeks. We expect as hog numbers decline seasonally, lean hog prices and futures will rebound. We still expect lean hogs to reach into the $90’s US this summer due to, seasonal hog supply decline, packer capacity chasing hogs, exports strong, domestic demand remaining solid.
Time will tell for sure but that’s what we expect.
“Stocks have reached what seems like a permanently high plateau”
Irving Fisher, economist (1867-1947) speaking three days before the 1929 stock market crash
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Genesus Inc. Purebred Registration
Table below shows that Genesus dominates Purebred Registrations in Canada. Canada, home of nucleus farms of PIC, Topigs-Norsvin, Hypor. Genesus is the largest register of purebreds in Canada and the world.
Question. If you aren’t buying registered purebreds, how do you know you are buying purebreds? If they are purebreds why can’t they be registered?
20 February 2018
TO WHOM IT MAY CONCERN:
RE: GENESUS INC. PUREBRED REGISTRATIONS
The following table represents the actual number of Purebred Pigs that were officially registered under the Animal Pedigree Act by Genesus Inc. between January 1, 2017 and December 31, 2017.