Pork Commentary, July 16, 2018
Jim Long President – CEO Genesus Inc.
National Pork Industry Conference Report
Last week we attended the National Pork Industry Conference held in Wisconsin Dells, Wisconsin. Our report:
There was Retail & Consumer Panel with representatives from Arby’s, Culvers and McDonalds fast food chains
- Arby’s = no doubt bacon is king
- All surveys show farmers trusted by consumers to give information for greater trust then news media, global corporations or government
- Farmers must remember Packers are not end user or the ultimate customer
- McDonalds serve 68 million people per day Globally – Largest restaurant chain in the world
- In 1940 30% of the U.S. population was involved in agriculture now its 2%. Many consumers have no idea what happens on the farm
- Age of Manufacturing 1900-1960 i.e. Ford, GE
- Age of Distribution 1960-1990 i.e. Wal-Mart
- Age of Information 1990-2010 i.e. Amazon
- Age of Customer – Empowered buyers demand a new level of customer obsession
Ernie Meier – Director of Quality for McDonalds discussed the following – 68 million customers per day
- Many consumers did not believe McDonalds only serve 100% Beef – even though they do
- All Pork for McDonalds will come from group housed sow farms
- See’s little customer acceptance with Gene Edited Pork
- His words “Chemical Castration” or as we know as improvest, has little acceptance
We were shocked that without prompting that Mr. Meier threw both Gene Edited Pork and what he termed “Chemical Castration” under the bus. We need to listen up as an industry when the world’s largest restaurant chain is basically telling us don’t bring us Gene Edited (GMO) and or “Chemical Castrated” to us because we don’t think our customers will buy! The reality is it’s not about science its what we can sell. If we produce Gene Edited and or Improvest pigs but we lose buyers the gains in productivity will be overwhelmed by declines in hog prices. We expect the Packers in the audience were paying attention, as they don’t want their brands compromised by negativity. McDonalds is a trendsetter for all global restaurant chains.
Joe Kerns spoke on the Grain Crop – he called it BIG – U.S. Corn Crop is ahead, with abundant moisture in many areas. He wondered if U.S. Corn yields could end up the highest ever – 183.4 bushels per acre
We spoke to many producers at NPIC – consensus crop looks great
Last week travelled through Michigan, Indiana, Illinois, Wisconsin, Minnesota, South Dakota, Iowa and Nebraska. We saw a lot of corn – soybean fields. Crops look great. The only issue we saw was a small area in Minnesota that had got too much rain. In Nebraska we talked to a farmer with several thousand acres. This has been the first year in forty years that he has not run his pivot irrigation. Rain makes Grain is an old adage. So far it’s the way this year. Bottom line the U.S. corn and soybean crop will produce abundant supply.
Steve Meyers spoke on the Hog Market
- Enough Packer capacity for 2018
- Capacity 483,835 head per day
- U.S. Retail price of Pork holding at $4.00 per lb.
- U.S. per capita availability meat and poultry – 220 lbs.
- Average cost of Production farrow to finish 64¢ lean per lb. Projecting $4.50 per head profitability in 2018
- Market projection for next twelve months – lean hog future prices
Our sense is we have a very wary industry. Dec. Lean hog futures at 50¢ lb. mean $30 per head losses. The tariffs China-Mexico have put on the Pork market probably has taken hog’s down at least $10 per head.
How wary? We had three producers ask us if we thought this year would be like the fall of 1998. That year hogs got down to 8¢ lb. and there were many producers financially devastated. We do not see that scenario but by just being asked the question is the illustration of the mindset.
We have become known as being optimistic. The type of attitude that believes there “Might be a Pony in the manure pile.” We are looking real hard right now to find that Pony!