Jim Long President – CEO Genesus Inc. info@genesus.com

US Lean Exceed Price a Year Ago

February 16, 2016

There was some welcome news this past week when 53-54% lean hogs averaged 65¢ per pound, while a year ago the same week they averaged 63¢ per pound. It’s been a long time since we have had lean hogs surpass the same price the year before. With June lean hogs now over 80¢ per pound lean the market will see continual price increase over the coming weeks. A month ago, 53-54% US lean hogs were 55¢ per pound. We gained over $20 per head the last month. Last week US cash early weans averaged $62.26 and 40 pound feeder pigs $74.48. Strong prices and in our opinion a true reflection of supply and demand. Supply being cut by PRRS, PED, and problems associated with AI extender. The subsequent decline in pig numbers is leading to buyers chasing fewer pigs to fill finishing barns. • US pork exports in December were the highest since April with Mexico setting a new monthly record for volumes. China /Hong Kong had the highest volume in two years. • China/Hong Kong pork imports from all supplies set a new record of 1.937 million metric tonnes. Unfortunately, for US producers the European Union has 70% of the market share. We figure 1.927 million tonnes is equivalent to about 30 million market hogs. • The US exported to China/Hong Kong 340 million metric tonnes, not even 20% of China’s imports. • One of the wildcards in the China/Hong Kong market is supply levels available from EU countries in the coming months. Reports of financial losses throughout much of Europe’s swine sector we are learning regularly. We have about 12.5 million sows or double the US sow herd of 6 million. Any major liquidation would not only support Europe’s swine prices but also cut the amount of pork for exports. • Loses of $20-$40 per head are being reported in Europe for many months now. There is definitely sow herd liquidation happening in parts of Europe. Reports of up to 150,000 sows out in Germany, Netherlands down 50,000 etc. The cumulative effect could be up to 1 million sows out of production when the dust settles, some of the slack will be picked up by higher productivity but it won’t be an 8% improvement. We all know what it’s like to lose money, raising swine. When it’s happening, it can be devastating. Tremendous pressure personally, financially, and socially. We expect as always, there will be rationalism of the industry, Europe will be no different. Everyday around the world there are fewer hog producers, it’s the way it is. It’s not better, it’s just reality of Darwin Business.

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