Pork Commentary, Jan 29, 2018
Jim Long, President-CEO, Genesus Inc
Iowa Pork Congress Report
Last week we attended the Iowa Pork Congress in Des Moines, Iowa.
Iowa is the number one hog producing state in the US. Our Observations.
The Congress was well attended. The first day was quite busy. The number of exhibitors increased from last year, probably as a reflection of vendor optimism for the pork industry.
The Iowa Pork Congress organisers do a very good job in running the event. It runs seamlessly, and this has lead to Iowa Pork Congress becoming, without doubt, the industry leading winter trade show.
Producers we spoke too are cautiously optimistic about profits for this year. A reflection, no doubt, of the lean hog futures that indicate such a scenario.
In Iowa the new Seaboard-Triumph plant is in production. Iowans also have the new Prestage Plant under construction, scheduled to open this fall. Iowa has lots of slaughtering capacity for the future.
While at the Congress, we presented a 2017 Global Mega Producer Plaque to Jeff Hanson, owner of Iowa Select. He told us they had expanded significantly last year and plan further expansion in the near future. We believe Iowa Select new farm expansion is the most aggressive of any US producer. Obviously, they are believers in the future of the US swine industry.
As far as US sow herd expansion, there is some; though, we are not convinced that net US expansion will exceed 60,000 sows in 2018. Issues that slow expansion are: the higher cost of labor and availability, environmental regulations to build and cost of building, and somewhat concerns on long term profitability. Also, when we speak net 60,000 expansion, part of this is the fact producers go out of business; so, net 60,000 is the plus and minus of the sow herd reality.
It appears the USDA’s proposed new Grade System is getting opposition from some packers and producers. Most of opposition is not change the status quo. Packers don’t want further government oversight. Packers, having profits that have been excellent the last three years, it is hard for them to want change. Some producers have build the production base on lean lean pigs, they too are afraid of change. The new Grade system would reward dark and more marbled pork. The lean, lean product would get discounted. The question for the opposers to the Grade System is; What’s your solution to loin prices languishing at a huge discount to Bellies? Indeed, the opposed know that more marbled and darker pork brings higher prices because lots of these are currently being sorted and sent to Japan at a premium price.
One person at the Congress told us one of the issues of the grade system acceptance is the dominance of PIC genetics in the US industry. He defined PIC as Pigs Into Chicken for the last sixty years. We found that funny, but also with a lot of truth in it, as they have had extremely white meat lean genetics. Not sure PIC executives will be keeling over with laughter.
On the grain front, we heard several producers speak about the general lack of moisture this winter, and how dry the land was. Early to discuss potential drought, but talk reflects sensitivity to conditions that can affect the market.
We don’t believe disease levels are usually market changers (except PED, 2015). Not sure if we are getting old or more sensitive but seems to us that there is significant PRRS and PED breaks; if true, this could lower summer hog numbers.
Demand for early weans and feeder pigs has certainly pushed prices to very high levels – $70 and $85 US. Coupled with, what we expect will be lower packer margins this summer, and what we expect steady pork demand; we expect summer lean hogs to reach into the 90’s
Finally, thank you for all attending Genesus Reception at the Iowa Pork Congress. It was a festive atmosphere that facilitated lots of pork industry dialogue.
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Get acquainted with the Global Mega Producer
Program sponsored by Genesus Inc. in collaboration with National Hog Farmer
Twenty-seven pork producers, with each managing over 100,000 sows, can claim the title of Global Mega Producers this year. The Mega Global Producers are as diverse as their geographic location.
Iowa Select Farms is the largest pork producer in Iowa with nearly 800 farms and managing over 180,000 sows with 1,200 employees and 650 contractors.
It was founded by Iowa Falls natives, Jeff and Deb Hansen. In 1992 Hansen had a vision to build his own farms. After obtaining financing and a contract for his first 10,000 sows, Iowa Select Farms was born. Their dream was to build a farming business that would produce high quality pork while benefiting Iowa through job and economic growth and they did.
Congratulations, Iowa Select Farms!
From Left to Right: Jim Long – President-CEO, Genesus Inc.; Noel Williams – Chief Operating Officer, Iowa Select; Jeff Hansen – Owner Iowa Select Farms; Jen Sorenson – Communications Director, Iowa Select; Steve May – National Hog Farmer