ent Swine News By Jim Long, President and CEO Genesus Genetics A week ago, summer lean hog futures went over $1.00 per pound; last week was a different story with June closing at 95.325. A surging U.S. dollar and concerns that China might not keep buying pork at 2011 levels were the major negatives. How these factors stake out is anyone’s guess. The U.S. dollar will go one way or another. Lots of smart people have lost fortunes betting wrong on currency. China pork imports will in our opinion stay close to where they have been in 2011. The demand for pork in China is strong. Only a small percentage of consumption in the world’s largest pork market is needed for it to still lead to significant imports. Price of U.S. gasoline retail sales have always declined when gasoline gets over $4.00 a gallon. It is almost there. That can hurt all meat sales – beef and pork.
ExpansionWe sense the U.S. and Canada swine herd is growing – not much but it is. Some sow barns are coming back into production while weekly sow slaughter is in the high 50 thousand levels compared to low 60s of a few months ago. Profits have been had by many over the last two years, and it is restoring some confidence and capital. Compared to other countries the U.S. – Canada per head projected profits of $5 – $10 per head in 2012 is miniscule but maybe what we lack in absolute profits people must think they make it up with volume? Or maybe more likely most are marooned in the swine industry, there are still very little opportunities to exit gracefully, existing sow units are still selling at a deep discount to new facilities, probably in the 25 – 35% of new range. At these low prices some of the existing units are being bought and started up. Consolidation continues.
Corn CropThe U.S.D.A. last week raised its estimate of Brazil’s corn crop by 1 million metric tonnes. Brazil and Argentina are now estimated at 84 mmt in 2012. Obviously more corn in South America is not bullish for corn. Now the market we expect will turn to the United States, if the U.S.D.A. is correct on acres projected and trend line yields the 2012 crop will be the largest in history. This coupled with large global wheat inventories and expected large crop in 2012 could lead to downward pressure on grain prices in the coming months all leading to lower feed prices. It is our opinion high prices such that grains have had will always lead to lower prices. Commodities always move up and down. Growing crops is relatively easy business. Capital intensive but basic plan with relatively simple technology to adopt. Greater use of hybrid seed, herbicides, and better equipment is driving global yields at a pace from our observations travelling the world faster than is comprehended by many observers. The bottom line: it is easier to grow corn – wheat than it is to raise swine!
Categorised in: Pork Commentary
This post was written by Genesus