Pork Commentary, Dec 18, 2017
Jim Long, CEO-President, Genesus Inc.
U.S. Small Pig Market on Fire
The cash price for U.S. early weans and feeder pigs is on fire. Last week the U.S. cash feeder price for a 40lb pig averaged $73.37 each. U.S cash early weans averaged $63.23 last week, up $6.00 per head from the week before, and up $45 from this fall low.
These prices reflect the huge demand for small pigs and the obvious lack of adequate supply.One thing for sure, there must be barn space for these pigs; as no one would pay prices this strong to put in marginal facilities.
Some of the demand can be attributed to health breaks. We understand there have been sow barn breaks of PED in Minnesota and Illinois. PRRS breaks are hitting in several places with some having devastating results.
To quote a prominent feeder pig broker: “Demand for early weans and feeder pigs is overwhelming with a short list of supply”
We look at these strong, small pig, prices as a positive reflection of lack of supply and augers well for the summer hog market. We believe summer lean hog markets will reach into $ 90’s
Manitoba Hog Day
Last week we attended Manitoba Hog Days held in Brandon Manitoba. The province of Manitoba is situated in the middle on Canada and has approximately 300,000 sows.
Four entities Control about 200,000 of these sows They are: Hy Life, Maple Leaf Foods, Pro Vista and Progressive Group. Hy Life and Maple Leaf have their own packing plants. Pro Vista and Progressive are major exporters of small pigs to the U.S. market.
The balance of producers are independents, with a large share of them from the Hutterite community. We have travelled the world and seen lots of pig production; some of the most productive farms in the world can be found in Manitoba.
In our discussion at Hog Days, we heard of some new farms to be built in Manitoba. To put in perspective, the previous provincial socialist government had imposed a ban on new swine barn construction for eight years. With the election of a new conservative ag friendly administration the ban has been lifted.
The cost of construction is quite high in Manitoba, with a finish barn space at $500 cad ($400 US). Sow barn, farrow to wean $4000 cad ($3200 US). Both numbers that don’t really work great in todays swine economy. It takes a leap of faith in the future to proceed with this amount of investment.
Canada and Manitoba exports 70% of its pork production. The current (NAFTA) North American Free Trade Agreement renegotiation is a factor in discussion. Continued access to the Manitoba’s largest market – The US – is a factor in producers’ decision making.
We do not believe there will be any significant expansion in Manitoba. Building costs are high, the pool of potential swine farm owners quite limited, most labor must be imported, market access ongoing, re NAFTA is a concern.
On the plus side; Manitoba producers are quite productive. The Canada dollar at 78¢ to the US dollar, certainly helps competition. Canada has good reputation to pork quality in foreign markets.
The new proposed U.S grading system that uses color and marbling to select, is certainly a factor for Canada and Manitoba producers. With the expectation that premium prices will be paid for Prime ( +4 color, +4 marbling) and Choice (+2 color, +2 marbling); while the select grade (-2 color; -2 marbling) will be discounted. The world pork export market will be changing their focus and direction. Manitoba is well positioned, with the huge percentage of farms using the Genesus Duroc that delivers over 90% Prime and Choice carcasses.
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Dr. Adam Schelkopf (right) and Dr. Charles Schelkopf (left), Pipestone Systems