Pork Commentary, October 9th, 2018
Jim Long, President-CEO, Genesus Inc.
Is it a Miracle?
A Month ago, 53-54% lean hogs were 44¢ lb.
Just coming out of August which is traditionally a time of year of strong hog prices, the 44¢ lb was meaning losses of $40 a head for producers, this painted a dismal future as nine out of ten years October- December have the lowest annual prices.
Then did we have a miracle?
Since the first Part of September we have a relentless increase in lean hog prices with last week 53-54% lean hogs at 68¢ lb. In a month a 24¢ lb increase, or a jump of $50.00 per head.
We Can’t explain the reason. Hog marketing’s are hovering at record levels. Pork supply is ample. The September USDA hogs and pigs report indicates 3% more pigs in inventory. There are tariffs on U.S. pork from both Mexico and China which are not conducive for higher prices.
Despite all this U.S. pork cut-outs are strong around 79¢ lb compared to a year ago when they were at 73¢ lb. More pork but higher cut-out prices. A year ago, 53-54% lean hogs were 54¢ lb. U.S. lean hogs are now $30 per head higher than a year ago.
Gross Packer Margin
Bottom Line: The only obvious answer? Demand is strong despite increased pork supply.
Maybe the lowest U.S. unemployment since 1969, a booming economy, has increased income that is driving stronger pork consumption!
But how does that explain a $50.00 per head increase in a month? It can’t!
The only thing for sure– Cut-out price, lean hog price, supply is all higher year over year.
Best to just say thanks for today’s prices and hope it last through the fall.
If we look at average lean hog price for the next twelve (12) months on the Chicago futures last Friday, they average 70.5¢ lb. October – September. At today’s feed prices and average production that should mean average profits of $10 – $15 per head range. A few weeks ago, the same calculation had a loss per head.
Things look much brighter now.
Gene Edited Pigs
In our recent Travels we have spoke to many industry participants about Gene Edited Pigs.
It appears that many are aware of the European Courts Ruling that Gene Edited is Genetic Modified and will be subject to rules pertaining to Gene Modified Development and Approval.
Our Summary of discussions is that most are quite aware of the risk Genetic Modified (Gene Edited) Pigs could do to pork demand.
One packer laughed when asked how they would explain to retailers and said, “Maybe the wise guy genetic companies who want to push this on our industry want to come to that meeting and explain why retailers and consumers would ever want GMO Pork. We have no interest in going there but if some of our competitors do, we see that as an opportunity to take their business”.
Antibiotic free, GAP, Organic etc. are niches developing in the pork industry.Where would GMO pork fit in this?
We go back to MacDonald’s executive speaking at National Pork Industry Conference, MacDonald’s 14,000 restaurants. We paraphrase “Don’t expect us (MacDonald’s) to explain Gene Editing, consumers see no difference to GMO” If that isn’t a tell-tell warning, not sure what else would be.