Pork Commentary, July 23
Jim Long President – CEO Genesus Inc.
The future of U.S. markets especially this fall looks far from optimistic. December hogs in the 40’s would mean lots of people losing upwards of $30-40 per head.
Early weans and feeder pigs
One thing we find interesting is the dynamics happening in the small pig market, both early weans and feeder pigs. The average USDA price of cash early weans are $15 and 40 lb. feeder pigs $30. Both prices below breakeven and certainly far from profitable. Early weans project to January market hogs while 40 lb. feeder pigs go to market the end of November.
Last week the breakeven for buying and finishing to market a 40 lb. feeder pig on the DTN feeder pig index was $7.00 per pig while the USDA average cash selling price 40 lb. feeder was $30. Obviously a big difference. We wanted to know why the big spread. We talked to four feeder pig brokers.Their observations:
- Demand for early weans and feeder pigs is greater then supply
- This time of the year is usually the buyer’s time with supply outstripping demand. One broker said most years he might as well go golfing as try to sell pigs
- Feeder Pig Brokers tell us there is a significant amount of empty finishing spaces in the U.S. Midwest
- On June 1 the USDA Hogs and Pigs Report indicated 2.3 million more pigs in the market inventory then a year ago
With all pigs and hogs in either nurseries and finishers now that will be marketed by the end of the year would make you think that the facility infrastructure should be at near or at capacity. Why empty spaces? Why is demand outstripping supply?
No way the finishing infrastructure grew 2.3 million spaces in the last year. The buyers of small pigs we were told are independents and larger integrators.
No matter how you figure it, small pig prices are significantly higher then what they pencil to buy and finish to market. No one pays more then they have too, small pig prices are higher then finishing breakeven because the demand is outstripping supply
Question – If empty barns? If demand is greater then supply? Are there less pigs then expected? Will fall market hogs be stronger then futures indicate?
The global rise of Durocs as the terminal sire of choice continues. Last week PIC announced the introduction of PIC 800 – a Duroc. This is interesting as PIC has built a global brand on synthetic lines 337, 327, 380, 280 etc.
In the PIC press release they said the new PIC 800 will improve robustness, growth and pork quality. The PIC press release said, “This summer PIC has started to directly select for eating satisfaction (tenderness) and primal carcass cuts in addition to using indicator traits such as pH, loin depth and back fat.”
This is an amazing statement from PIC (Pigs Into Chicken). They have now discovered after 60 years to think “eating satisfaction” matters. To put in context all factors PIC says this summer started to directly select for is what we at Genesus have done for twenty years. Two decades. We welcome PIC to the concept that consumers eating satisfaction is an important consideration. No one wants to eat pork that tastes like cardboard. If you want chicken buy chicken.
Also in the PIC press release, July 2 of this year, PIC entered into a strategic relationship with Mollevang, a premier nucleus breeder of Duroc, Large White and Landrace lines in Denmark.” What is not said in the press release is that Mollevang until recently was one of the largest Nucleuses of Danbred in Denmark. It is amazing that PIC with huge expenditures in Genetic research is reaching for Genetics that were until very recently Danbred. Is a compliment to Danbred that PIC by far the world’s largest genetic company has pursued their genetics.
The sad part for Danbred is the dissolution of there genetic base Mollevang leaving and the planned creation of the new company Danish Swine Genetics has almost halved the size of Danbred genetic base.
The Duroc breed continues to ascend globally as the terminal of choice. Grows fast, robust and with better pork. Genesus has 4200 purebred registered Durocs. We believe it’s the largest registered purebred Duroc population in the world. We are expanding another 850 Duroc sows this fall in a new Super Nucleus. We register our Durocs – they are purebreds. Many competitors so called Durocs cannot be registered. If they can’t register are they real Durocs? Or just Red Pigs?