Pork Industry Round Up?

The Enviropig, developed over a decade ago at the University of Guelph, has had its ongoing funding stopped by the Ontario Pork (Producers group). The Enviropig was genetically altered by an added gene of a rodent which in turn lowered the Enviropig’s phosphorus production.  The end of funding for this ill conceived project has been a long time coming.  Ontario farmers had funded this loser with too much money for too long.  We can remember telling the well meaning professor, who developed this project over a decade ago, “Your pig is dead on arrival.  Not one packer, retailer or restaurant is going to use or sell pork with a rat gene in it!”  Enough said.  Sometimes you wonder if anyone thinks the end game before they squander time and resources.

The U.S Food and Drug Administration (FDA) are encouraging producers not to use antibiotics in livestock production, this as a defensive measure by FDA.   Pressure from pseudo-scientists/congress people, are pushing for antibiotic restrictions beyond voluntary control.  Such restrictions in Europe have significantly increased the cost of meat production and food costs. U.S Lean Hog Price Futures took a whack at the end of last week with June closing at 90.525 lean a lb.  Current lean hog futures would, in our opinion, reflect little profit in the coming months with current feed prices.  Lots of trading of dollars with little show for it. We expect now that Easter is over and we move in to the seasonal hog supply decline to see a rally in cash hog prices.  The mildest weather in history has lead to higher carcass weights which has increased pork tonnage.  As hot weather comes, we expect a rapid decrease in carcass weights.  In our opinion hogs are not backed up.  All hogs that need to be marketed are finding homes. Corn is being planted early.  Soil temperatures in the 60F plus range in Iowa, Minnesota, Illinois etc.,   are high for this time of year.  The earlier corn gets planted the better chance of higher yields and more total acres.  We need a big crop for supply and possible chance of lower prices. Sun Capital, as U.S. investment firm, announced last week it was selling their Burlington Ontario hog slaughter plant and business called Fearmans to Sofia Foods of Canada.  The Fearmans plant has a capacity of 42,000 head a week, (it’s not running at capacity).  Sofia Foods markets pork, turkey and chicken.  It has about 1200 employees prior to this acquisition.  We assume it’s good news for Canadian producers.  No one buys something without seeing value.  Sofia is knowledgeable in the meat and pork business.  They are Canadian.. Sun partners, a huge investment firm, have a history of flipping businesses for a profit. (Good for them.), they came, they left.  Life goes on. As Cargill goes, as goes Agriculture?  Cargill in the first nine months of their fiscal year, had earnings from continuing operations of $1.1 billion.  Not as good as the previous year but still pretty swell.  These profits are a reflection of not only U.S and Canada but Cargill’s global reach and involvement.  Everywhere we travel in the world, Cargill is there.  Can still visualize travelling out in the middle of nowhere in Russia, heading into town miles from a major center coming up on a huge elevator, painted on the side “Cargill”.  We thought we were the first westerners there, not by a long shot.  Cargill is a great example of American know how, aggressiveness and push to success.

Reports this last week say China is going to cut back pork inputs, maybe.  Hog prices in China are around $1.07 US liveweight a lb, U.S liveweight prices are $0.61 US. a lb.  That is about a $0.46 a lb difference or about $124 per head.   We do business with China.  They understand the economics of business.  We would bet the farm a $124 per head difference for Chinese entrepreneurs, packers, meat distributors keen on importing with such a huge margin to work with.  Also the Chinese proof of hogs is a direct reflection of the real supply versus demand.  Chinese prices of $1.07 lb hogs = strong demand = hog shortage.  We expect exports will be strong to China for the next few months supporting U.S hog prices.

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This post was written by Genesus