Jim Long, President-CEO, Genesus Inc.

U.S. Slaughter Continue to be Lower Year over Year

U.S. slaughter last week 2,551,000; a year ago 2,694,000. That’s 5.5% less.

U.S. Iowa – S. Minnesota slaughter weights are 2 lbs. higher year over year.

Certainly, appears to us less hogs around. The USDA September 1st Inventory report indicated 6% less hogs under 120 lbs. We should see those hogs coming to market near December 1st.

Lean Hog Futures have taken a big hit last few days. We will stick with our premise liquidation in China, Europe, and lower U.S. hog numbers will lead to cash prices in 2022 much higher than lean hog futures indicate now. Less Hogs. Less Pork. Higher Prices.

Some U.S. packers being challenged by lack of labor. This is restricting kills and ability for them to add value to carcass. This is hurting hog prices currently.

Crops

All have seen the roughly 50¢ bushel jump in corn the last while. We have been traveling the Midwest the last week and we saw lots of corn still to harvest. Producers we talked to were positive about yields. Corn and Soybean exports both below USDA projections for this new crop year. Soybean imports to China in September the lowest in seven years. If pigs are being liquidated in China it makes sense less soybeans and corn will be needed.

Less Pigs Getting to Market

MetaFarms Data for Quarter 3 of over 2,000 closeouts shows a steady increase in mortality in nurseries and finishers.

Quarter 3 Mortality
	2018	2021
Nursery	2.76%	4.03%
Finisher	4.08%	5.14%
Nursery – Finisher	6.4%	9.17%	Increase of 2.33%

If the 2.33% increase in mortality is indicative to the whole, we estimate that’s about 3 million more pigs going into nurseries and finishers dying than in 2018. Big number. Why? Speculation, more disease? Less labor and stockmanship? Weaker genetics? Not sure why but a lot less pigs getting to market.

MetaFarms Quarter 3 sow production data of 475 sow farms has an average of 25.9 pigs weaned mated female a year in 2021 vs. 26.3 pigs in 2020, a decrease of 0.4 pigs per sow. Certainly, an indication of productivity not getting better (-1.5%). If industry has 6 million sows x 0.4 = 2.4 million fewer pigs per year.

Some Farmer Arithmetic. Higher nursery-finisher mortality of 2.33% and 1.5% lower pigs per sow per year pushing 4% effect. No wonder slaughter numbers continue to rush lower than a year ago. No wonder USDA inventory indicates 6% less hogs in future

Summary

Not pretty now with lower hog prices and higher feed costs. We expect the multiple effects of lower hog numbers coming in China, Europe and USA in 2022. The world’s major swine production blocs. Prices will move higher.

Some good news from China signaling hog supply beginning to fall and an indication of the liquidation effect. Hog prices last week 16.24 RMB/kg ($1.17 U.S. liveweight a lb.), up from 12 RMB a few weeks ago but still under the cost of production of 21 RMB/kg. 15 kg feeder pigs now 24.17 RMB/kg ($57 for 33 lbs.) they were $20 not so long ago. We expect continually stronger prices over the coming weeks.

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