Pork Commentary by Jim Long, January 31, 2011

Iowa Pork Congress Report

Last week we attended the Iowa Pork Congress the premier winter trade show in the United States. Our Observations
  • Attendance was good the people that showed up were interested and engaged.
  • The attitude of producers was cautiously optimistic.  Future Lean Hog Prices pushing near $1.00 per pound creates optimism, while $6.00 plus corn per bushel scares the crap out of many.
  • There is no expansion.  We see or hear nothing of significance happening.  There is no big surprise the huge equity hole has not been backfilled.  Hog to Corn ratio 12 to 1 will never lead to expansion.
  • Talking to builders and equipment people we heard that most of the activity is renovation and equipment replacement.  Any equipment company counting on new buildings to pay their bills – won’t.
  • We sense that sow feeding stations are becoming more of a factor in the industries scenario.  Animal welfare issues are pushing producers to look at them as options.  We are seeing good results from sow feeding stations with one Genesus customer over 30 pigs weaned last year and another over 28.
  • We talked to packers at the Iowa Pork Congress who said pork was moving faster to South Korea.  There is no surprise about Foot and Mouth if you have been reading us the last few weeks.  Market hogs in Korea are over $400 a head and over 15% of the national herd exterminated. U.S.A. – Canada exports over 50% of all of the Global pork.  Where else is Korea realistically going to get more pork from?  This will push hog prices higher.
  • We had several people visit us to talk about markets.  It seems many have noticed we called $1.00 lean six months ago when June was $82.  June hogs closed at 99.425 last Friday.  We are almost there.
  • More than one person asked if our quote last week of ag – economist Ron Plain’s projection for the second – third quarter 2011 was a misprint.  Mr. Plain projected at Banff 76 – 82 lean.  2nd quarter, it is hard to believe but as we wondered last week does Mr. Plain know something all the money in Chicago doesn’t?  Maybe tenure gives you supreme wisdom compared to people with skin in the game?
  • Builders and equipment people are somewhat active adding farrowing crates to increase age and weaning weights.  Very expensive exercise maybe people should look at their genetics.  Switching to a high milking genetics would be a cheaper investment.  We said that to one builder and he said ‘Probably so but bad for my business.’
  • We had a Genesus reception at the Iowa Pork Congress to celebrate over one million gilts placed globally.  We had a great attendance and discussion.    We thank all who attended.
  • PRRS was well discussed at the congress.  Many think this year is the worst ever.  We are not sure if that is true but it seems there are lots of people getting hurt.
Summary The Iowa Pork Congress was well run and attended.  Cautious optimism is the word. Markets
  • June lean hog futures hit new contract highs last week with closing at 99.425 Friday.
  • Iowa – S. Minnesota’s lean hog price averaged $79.42 last Friday up from $67 a year ago.
  • Last week’s U.S.D.A. cash early wean pigs averaged $59.36(high $65); cash 40 pound feeder pigs averaged $79.37(high $86.50).  Demand remains strong.  A producer told us at the Iowa Pork Congress he had paid $83 for feeder pigs last week and had ­penciled a good profit.
  • From the U.S.D.A. Meat and Poultry Projections the U.S. per capita meat and poultry supply in 2011 will be down for the fifth straight year.  Less is not more!
  • The U.S. per capita beef supply will be the lowest since 1952(59 years).  Any wonder live cattle futures are above $1.17 a pound?  This is bullish for hog prices.
  • The 2011 U.S. per capita pork supply will down to 1978 levels for a perspective 1978 June live hog futures went from 33 cents in September 1977 live weight per pound to 56 cents live weight a pound high.  56 cents a pound in 1978 was a real good price.
  • News out of the European Union is of financial crisis in the hog industry.  Reports of per head losses of $30 per head.  High feed prices, deadline of removing gestation stalls, dioxin issues in German pork are part of the trigger.  Losses never lead to more hogs.
  • On a positive note we had four contracts last week from China for pork meat (Jim Long commentary translated into Chinese weekly and on the internet).  My father taught me that you can see market trends from “who’s calling who”.  China’s live hog price is above $1.00 U.S. liveweight per pound.  Prices are always an indication of supply and demand.  We have a sense that there will be more pork sent to China in the coming months.
Summary We called June $1.00 lean hogs six months ago when June was $82.  We are almost there.  We had seen no herd expansion.  We saw high global hog prices and no expansion in the rest of the world.  U.S.A. – Canada provide half of the world’s pork exports.  Why wouldn’t hog prices go higher?  It seems like it has happened.  As an industry we need profits.
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