Combined USA-Canada Inventory: 4 Million fewer market hogs than December 2008 Last week the U.S.A. – Canada Hogs and Pigs Inventory was released. The decrease in the breeding herd and market numbers are remarkable. December Inventory U.S.A. – Canada (Thousands)
The decline in sow numbers and market hogs reflect the grim reality of our industry over the last three and a half years. A decline of 560,000 sows, in the last two years means U.S.A. – Canada has averaged 5,000 sows a week going out of production. Unfortunately, almost all exiting was followed by a trail of tears. There has been few who have exited for any other reason other than not enough capital and/or courage.
The market inventory has gone down the last two years 4 million. If we use a 25 week cycle from birth to market (175 days) that means we can expect about 160,000 less market hogs a week combined U.S.A. – Canada over the next few months compared to 2008. This is a huge decline.
310,000 less sows farrowed U.S.A. – Canada last quarter with a pig crop 1.630 million less than the same quarter two years ago. All statistics are a stark reminder on how bad the business has been.
560,000 sows and 4 million less market hogs; if we value sow units @ $1,000 a sow and nursery – finishers @ $100 a space. Our farmer arithmetic comes up to a potential one billion dollars of facilities (or at least minimum invested) of idled production capacity. Bad news for all the people who have money invested (including banks). It’s going to take a while for money to come available for new facilities due to the above scenario. In the meantime all present infrastructures are getting older. The swine facilities that sit idle have a short shelf life in our opinion. If they sit empty very long they rust out.
Why are we using statistics comparing a 2 year snapshot? Last year H1N1 (swine flu) dramatically altered demand domestically and globally. Hog prices would have been dramatically higher if not for a wall of swine flu talk from our media and government from April until November. Having your product (pork) associated with a perceived global pandemic that could kill 100’s of thousands of people is not a pork demand driver. This year 2010 there will be no swine flu scares and we have 4 million less hogs in inventory (U.S.A. – Canada) than two years ago. This can only enhance domestic and global pork demand. Keep in mind U.S.A. pork exports were up 15% in December year over year. Last year swine flu did not hit until April when pork exports fell in the next few months 20 – 30 %. Maybe we are too optimistic but we expect U.S.A. – Canada pork exports to be 30% higher this spring – summer compared to last year. The biggest limiting factor on pork exports could be availability of hogs (4 million less). You can’t sell what you don’t have.
Another positive factor is the improvements being seen in the North America and global economies. The U.S.A. GDP last quarter was up over 5% year over year, no matter how you cut that, it is going in the right direction with 25% of the world’s GDP a U.S.A. economy growing helps many other countries. What this means to pork demand is that with 46% of all meat protein consumed in the world a stronger global economy will stimulate pork demand. There is an absolute correlation between increasing per capita income and protein meat consumption. Bottom line: in most of the world, higher incomes do more for hog farmers than carrot growers. Most people want to eat meat not be vegetarians.
According to The Food and Agriculture Organisation (CFAO) of the United Nations published on the February 18. We quote:
“Rising incomes, population growth and urbanization are the driving forces behind a growing demand for meat products in developing countries – and they will continue to be important. To meet rising demand global annual meat production is expected to expand from 22.8 currently to 46.3 million tonnes by 2050.”
That’s doubling of global meat production over the next 40 years, or about 6 million tones more a year each and every year. Folks aren’t producing wagon wheels for covered wagons. We are producing pork for a dynamic and growing market. There is a future in pork production.
We all know what swine flu (H1N1) did to our industry. It cost us $2 – 3 billion in North America maybe $10 billion globally in lost revenues. It was a disaster. We can’t but think of the poor producers in Alberta Canada who got his farm quarantined for swine flu. He was put in purgatory. No one to help him – caught in between government regulations and consumer fear. He was left hung out to dry – just as our industry was by our Government. We all lost boat loads of money due to it. If there was ever a time we must be aware of disease sensitivity it is now. Any reckless statements by industry participants relative to diseases in swine must be thought through. The Mass Media loves disease stories. Swine are up on the media radar. All government agencies, university researchers and producers must be responsible. It is our livelihood. Think before you publish!
|2007||2008||2009||2007 compared to 2009|
|Kept for Breeding||7,745||7,457||7,185||-560|
Categorised in: Pork Commentary
This post was written by Genesus