Jim Long, President-CEO, Genesus Inc.
A Year Later
How much has changed!
Last year at this time we were at the start of the Covid crisis in our industry. A year ago Lean Hogs were 39₵ lb. Last week they were $1.01 lb. on a 215 lb. carcass an increase of $133 per head. We certainly noticed our cheques are bigger, as we expect you have to. “Surest cure to low prices is low prices.”
Last Friday U.S. Pork Cut-outs closed at $1.13 lb. A sign of real demand. Unlike lean hog futures which have a lot of speculation in their pricing, the Pork Cut-out is a true reflection of Right Now Supply-Demand. How high can it go? $1.30-$1.40-$1.50? Whatever, it will pull cash hogs towards it. The higher it goes, the Packer Gross Margin will continue to shrink.
Choice Beef Cut-outs closed Friday at $2.72 lb., up 50₵ lb. from where it had been. High Beef Cut-outs support Pork Cut-out prices. Pork Cut-outs are about $1.50 lb. less than beef. Why is Beef so much higher than Pork?
We believe Demand and Taste. Makes us shake our head the total inability of our industry to realize that Taste is the main driver of meat demand. Better tasting Pork would increase demand and Cut-out pricing = higher hog prices.
The chase to produce the “Other White Meat” was a total failure as we lost market share and capped pricing. We destroyed the taste of Loins and Hams chasing the ever-ever leaner pig. Now some think synthetic Durocs are the answer but most have no more marbling than the Pietrain derived crap that led to destroying Pork Demand and our Prices.
Producers and Packers have a vested interest to increase demand. A concerted effort to produce a better product is only good business. We are happy Pork Cut-outs are $1.13 lb. but when we see Beef Cut-outs $1.50 lb. higher we realize the missed opportunity that better tasting Pork would realize.
- Despite predictions by the Chicken Littles that there would be more hogs in 2021 than 2020, year-to-date slaughter is down 4.1%
- Last week Summer Lean Hog Futures pushed to new contract highs.
- U.S. sow slaughter the latest week was 65,127- a liquidation level.
- Reports continue to come to us from China of over 30% of sow herd knocked out by second wave of ASF.
China hog prices pushed down by rapid liquidation (sell before they die) putting more pork on market for now. $275 U.S. small pigs in China are a real indication of where their pork supply will be real soon. China will continue to import more pork. 200 million less pigs over the next year will mean less corn-soybeans needed.
In the coming weeks we expect fewer hogs to market in the United States. Why?
We are currently selling hogs bred last May-June. We have seen a smaller sow herd each month since that time, which means fewer hogs coming. Throw in the dynamics record sow mortality, PRRS and PED. Abracadabra fewer hogs for the summer and the fall.
This past week a producer asked us if $1.40 lean hogs would be seen this summer. That’s a reach but with the huge demand for meat protein domestically and throughout the world we would not be surprised.
Our industry has a huge equity hole to fill created by not only the pandemic months but several years prior of marginal returns for too many producers.
2021 is obviously shaping up well for pork producers. We believe it will last at a minimum until mid-2022. Supply-Demand will ensure that reality.
This post was written by Genesus