Jim Long President – CEO Genesus Inc.
January 27, 2014
Iowa Pork Congress ReportLast week we attended the Iowa Pork Congress held in Des Moines. It is the major winter pork industry show with Iowa the leading hog production state in the US.
- The congress was well organized, attended and had many exhibitors.
- The Genesus Exhibit and Genesus Reception were both busy.
- Producer sentiment was positive with all expecting 2014 to be quite profitable.
- PED was the major topic of conversation. Many we talked to have had it. The ones that haven’t had it are worried about getting it. Huge losses of baby pigs are casting a negative scenario.
- All indications we have are that most, if not all of the pork powerhouses (largest producers) have been affected. The indications are that over 40% of the US sow herd has been hit. New PED breaks are still occurring, so the percentage of the US sows affected could increase significantly yet.
- We heard an interesting observation at the congress:
- Assume 40% of the US sow herd has PED or approximately 2.5 million sows. On average 2.5 pig per sow are lost. That would total 6.25 million dead pigs. Assuming a baby pig is worth $50 each. The loss to the industry is 6.25 million X $50 = 312 million dollars!
- The next part of the scenario: The loss of 6.25 million pigs will cut US production by 5%? This would probably increase the US profit per head by $10? $20? As lower supply pushes prices higher. Assume 110 million US market hogs in 2014 at $10 per head increased profit…$1.1 billion increase? At $20 per head more profit…$2.2 billion? The point is a $312 million projected loss from PED will in all likelihood lead to increased profits for the industry. Certainly more profits for those who don’t get PED and probably more that have gotten PED. All these numbers are cowboy arithmetic, plug in your own guesses we expect you find a plus financially overall to PED. It’s somewhat insane calculating but appears to be the grim reality.
- We continue to hear of almost no new sow buildings underway. Not only does it take capital and courage, we believe a consequence of PED is that an industry in day to day crisis is not thinking expansion. We believe PED in the end will delay expansion and preserve profitability for the industry longer than we might expect in a normal hog cycle.
- At the Iowa Pork Congress the price of cash early weans ($85.16) and feeder pigs ($98.58) got significant discussion. Lots of finishing barns empty, chasing pigs; producers need pigs to fill contracts, feed prices have moderated, PED holes to fill, etc. More demand than supply. Unprecedented prices for small pigs. In the coming weeks we expect cash early wean prices to moderate, but stay strong. We expect cash feeder pigs to stay around current prices for the next couple months.
- The last two weeks we have been at the Minnesota Pork Congress and Iowa Pork Congress. We talked to several regular readers of this commentary. It was really nice to hear their comments that in the really tough times they got some courage to continue producing by reading this commentary. They were happy they hung in and see a proverbial light at the end of the tunnel. It was really nice to hear such comments. Thank-you.
SummaryThe industry is optimistic. PED is scaring people. Profits will be strong in 2014, probably approaching $30-40 per head. 2014 – Year of the Pig Farmer.
Categorised in: Pork Commentary
This post was written by Genesus