Jim Long, President-CEO Genesus Inc.
January 9, 2017
Global Market Thoughts!
It’s the New Year and we are thinking about the China swine markets and how it will affect us.
China – current price: 17.51 CNY/kg liveweight (U.S. $1.14/ lb liveweight)
China’s producers continue to be in the black, black, black. The market hog price of $1.14 US liveweight lb., is pushing $300 per market hog. Profits, despite China’s lower productivity and higher feed costs, are still over $100 US per head.
Pork imports to China hit 1.5 million tons in 2016, which was 1.2 times 2015. What is extraordinary is that the China sow inventory has not started to expand despite record profits.
|China December 1 Sow Inventory*
*China Ministry of Agriculture
As you can see, despite profits exceeding $100 per head for over a year, official China Government statistics show no increase in the Chinese sow inventory in the last year.
The Chinese government is estimating 590 million market hogs in 2017. In 2015, China produced 708 million head. An over 100 million head shortfall. This shortfall will obviously support having strong prices in China over the next year while stimulating continued large pork imports from North American and Europe. All producers outside of China have reasons to rejoice, the huge pork exports China will have in 2017 will support every producer price in every country.
Breeding Stock Imports
In 2012, the China Market for breeding stock was dominated by the U.S. purebred breeders, with well over 50% of the market. Since then and the huge losses producers in China got hammered with (they dropped 11 million sows) the market has changed. Now, the survivors in China are looking for high producing genetics that live, grow, have big litters, and have tasty meat. Exports from around the world tell the story of the market evolution.
|2016 China Global Swine Breeding Stock Imports
|(Source: China Animal Husbandry)
|Porc Ex – Denmark
|Nucleus – France
As you can see, Genesus dominates the China import market. Porc Ex has now become a Genesus distributor. As you can observe, there are no imports from the USA purebred industry. In 2012, they were dominant. Today, the pressure to have better genetics after the financial losses in 2013-2014 creates a different story.
Some might ask why China has not expanded in 2016. Our thoughts:
- There were billions of dollars lost by Chinese producers in 2013-2014. 11 million sow plus decrease didn’t happen because people were making money. Indeed, we have seen few producers ever quit anywhere when they were making money. Surviving producers had big losses to cover to get back to where they were.
- Environmental regulation and government policy are making the process of building barns more difficult. This is slowing expansion possibilities.
- Disease challenges are a big issue. Also, human resource skills in modern hog production is in a shortage. Having some sows in the backyard doesn’t qualify you to run a 2500 sow unit. The general insistence that barn personnel have to live at the swine barn sites for weeks at a time without leaving is not conducive to hiring smart people with other career opportunities. It’s hard to believe, but despite 1.4 billion people in China, labour for pig producers is a challenge.
- We believe that China will import significant amounts of pork for a long time. Maybe 5-15% of their production needs. A significant amount.
Holidays are never good for hog producers. The loss of slaughter days gives packers leverage. This year was no different, with Christmas and New Years a week apart.
We expect the next two weeks will get hogs more current. After that, we expect a seasonal decline in hog numbers. With US pork cutouts at $0.80/lb and lean hogs about $0.55/lb, the $0.25/lb spread is great incentive for packers to kill, kill, kill. They will and they will make money. We expect though as seasonal decline in hog numbers come through, packer margin will narrow, lean hogs in the 60s soon is very doable.
Canadian pigs making their way into the European market
By: Kees van Dooren, Pig Progress
Genesus breeding material has become available for almost the whole of Europe exclusively through the Danish company Porc-Ex Breeding.
Only in Germany and Spain Porc-Ex is not a distributor; nevertheless sales of Genesus genetics can happen in these countries. Porc-Ex is also distributor for Ukraine and Belarus. Speaking to Boerderij, a sister title to Pig Progress, Porc Ex-Breeding director Holger Bøgebjerg Sørensen stated that he is happy with having become the distributor. As the result of a reorganisation of the sales structure of Danish DanAvl, all that would’ve been left for Porc-Ex would be sales agent. For that reason, he has started offering the Canadian genetics line.
Are Canadian genetics already available to European pig producers?
“Most certainly. At Yxia, the French cooperative AI organisation, there are already 25 boars, Landrace and Yorkshire for sow breeding purposes and Duroc terminal sires. Semen production started late last year. I expect that a 2nd shipment of 25 boars will be travelling from Canada to France in early 2017. These boars will be free from Actinobacillus pleuropneumoniae (App), Porcine Reproductive and Respiratory Syndrome (PRRS) and mycoplasma
. Pig producers can therefore also replace their own sows using Genesus pigs.”
Will you also start breeding F1 sows?
“Sure, we aim to start selling Genesus F1 sows early 2017. We do consider starting a sub-breeding farm in Denmark.”
What is the added value of Genesus pigs?
“In comparison to Danish sows the birth weight is higher; piglets under 800g are rare. This leads to a lower piglet mortality. Piglet mortality is an important social theme which the industry cannot ignore. I think DanAvl continues to focus on litter size without taking the ethical side into account.
“In addition, the gestation time of the Canadian sow is 2-3 days shorter than the Danish DanAvl sows. The advantage is that the lactation period takes longer and that the need for nurse sows is reduced. Nurse sows usually make it difficult to work with a more week system.
“Meat quality of the boars is also fine. Without a doubt, the Duroc terminal sire has proved that at global pork markets all over the world.”
Holger Bøgebjerg Sørensen, director of Porc-Ex Breeding, Denmark.
The number of piglets per litter must be lower then?
“True. The piglets of the Canadian sows, however, are more vital and mortality is lower. The sows’ good milk quality have added to significantly higher weaning weights. We have observed this at pig farms all over the globe, including Russia. In that country there are various large farms using these genetics.”
It doesn’t sound like an easy job – obtaining market share in a shrinking market.
“I agree. Nevertheless, I am convinced that it is possible to acquire that share on the European market for pig genetics, having a good product and knowledge of the local market and culture. To be a local partner, we cooperate with daughter companies in various countries. From Canada we receive a lot of support to acquire this position on the European market. In addition, aftersales is well arranged at Genesus. On top, we have experience with finding new markets, that is what we did before with Danish sows.”
What market share for sows is your aim?
“I couldn’t tell you. It’s just too early to say anything about that. We have just begun with Genesus pigs in Europe.”
Almost 1 million piglets for export
The Danish company Porc-Ex consists of 2 parts. Porc-Ex Breeding is the section selling pig genetics, with subsidiaries in various European countries. In addition, there is just plain Porc-Ex, which is a trading business focused on exporting piglets from Denmark. In 2016, the company exported almost 1 million piglets. Most important destinations are Poland, Germany and Italy.
Categorised in: Featured News, Pork Commentary
This post was written by Genesus