Pork Commentary, April 17, 2018
Jim Long, President-CEO, Genesus Inc.
Road Trip – Great Britain, Netherlands and Denmark
Last week we visited Great Britain, Netherlands and Denmark. Our report.
We had been invited to speak to the producer owned marketing group named, Thames Valley Cambac. The group began 26 years ago, it now markets just under 3 million head per year to several different packers in England.
Great Britain produces about 55% of its pork consumption, with the balance imported from European Union countries. Great Britain hog prices currently are 145.85 GBP/kg carcass (73.59 ¢ US/ lb. liveweight); which, is significantly higher then in Denmark, a major source of its imports, 1.342 Eur/kg carcass (59.92¢ US / lb. liveweight).
Of the 400,000 sows Great Britain has in production, about 180,000 are outdoor field farrowing production. Also, no boars are castrated, and all hogs are sold intact. This is primarily driven by retail-consumption market wishes for animal welfare.
Great Britain farmers are receiving significantly more money than Danish farmers ($30 per head). Great Britain imports pork, Denmark exports pork. It is becoming increasingly apparent to us that farmers do better financially in countries that import pork, rather than the ones that export.
British farmers face the question about Brexit. What will rules be after Great Britain leaves the European Union. At this point no one knows what the new trade rules could be for pork. It’s anyone’s guess. The best way we can describe the British Pork Industry’s status, is, they are “soldering on”
While in Britain, we visited with Genesus’s two soldering swine genetic production cooperators. W.E Shute Ltd. And Bridgehouse Farms. Genesus is producing purebred registered Yorkshire, Landrace and Duroc, and F1’s for the British, E.U. and other export markets. We are told by some British pig authorities that Genesus registered purebreds production will be the largest in Great Britain of all genetic companies.
Genesus UK will be present at the biannual British Pig Fair in mid-May. We look forward to becoming a viable genetic option for the British pig Industry.
Dutch farmers are challenged by continual environmental pressure, including legislation to place scrubbers to clean air from the pig farms. This is an expense that could be up to $500 per sow. With many already burdened by heavy debt load, and for some, the cost of hauling manure up to 300km to find arable land; all this will lead to lower swine numbers in the future.
With the swine genetic company Topigs-Norsvin based in Netherland and with their financial losses over the last three years of over $10 million, producers are looking for options. The market for swine genetics is global and smart operators look for genetic alternatives with a future.
Producers in the Netherland also face the issue that the hangs over the whole E.U. industry, and that is African Swine Fever (ASF), currently in European Union countries of Romania, Lithuania, Czech Republic, Poland and others. The big fear is that it will reach Germany. If it does that, Germany, a huge pork exporter, will lose its Non-EU markets (i.e. China, and rest of the Asian countries). The Pork will stay in the EU and will put big pressure on markets. One estimate would be that the German market would face a 0.3 Euro/Kg (16 ¢/lb.) decrease and the ripple effect would be harsh through all of Europe. Big efforts are being made to stop the spread of the decrease, which is believed to move in the wild pig population. One person we spoke to, believes its not if, but when ASF gets to Germany.
We hadn’t been to Denmark for over twenty years, and it was interesting to see dynamic changes going on in their swine industry.
The 2008 global financial collapse has had a lasting effect. Farm land value fell dramatically and have not recovered, which has lead to loss of equity and large farmer debt loads. The swine industry has consolidated with producer numbers decreasing dramatically.
As most of you know, the Danish swine genetic business was organized as one entity. A few months ago, 44% of that entity (Danbred) left to form Danish Genetics while another producer left to go with PIC. Since then, it has been interesting to see the battle unfold between the groups.
While in Denmark, we saw both Danish Genetics and Danbred farms. Once they worked together, but now their families and modern large-scale farms compete with each other. It’s a civil war, with lawsuits and recrimination going in all directions.
The split has led to a smaller genetic base for all parties and less supply for markets. Genetic improvements are already, we are told, slowing. When all entities have for all intents and purposes the same genetics, it is a price war. The desire of the producer owners is to sell genetics from Denmark and restrict or eliminate genetic production in other E.U. countries, and so, increase their on-farm revenues.
Denmark exports 13 million feeder pig per year out of a sow herd of just over 1 million. They too are worried about ASF and their government is planning on building a wall on the German border to keep wild hogs out (Denmark has few wild pigs). The wall will be significantly costly.
In summary, all of Europe has the concerns of African Swine Fever as it’s a wild card that hangs over the whole market.
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