World Pork Expo ReportLast week we attended the World Pork Expo in Des Moines, Iowa. Our observations:
- There was good attendance. The producers we talked to are feeling a lot better. Making money does that. Unfortunately, 130 weeks of losing money doesn’t get all cured with seven weeks of profits.
- The shortage of small pigs is getting feed companies and feeder pig brokers looking for people to put gilts in empty sow units. In our opinion, not much has happened yet on this front as credit is tight for operating and long term capital. We expect with existing sow units being valued at as little as 15% of replacement value, the first expansion when it comes will be in existing empty sow units; not sure when this will happen, but in our opinion it’s mostly talk now with little action.
- Producers from all over were quite confident in this year’s corn and soybean crop. This year when traveling along Highway 80 from Chicago to Des Moines we saw some corn near four feet high. Lots of moisture and heat are pushing this crop ahead.
- With lean hogs in the 70’s there was some concern of producers that we would have a hard time getting lean hogs over 80 this summer. Our answer was that we expected market hog supply to continue to drop through the summer months. Currently we are marketing hogs from sows bred last July-August. The U.S. breeding herd dropped from 5.968 million to 5.760 million from June 2009 to March 2010, or about 200 thousand sows. We expect this decrease will continue to push hog marketings lower. A sow buyer told us very very few piggy sows were marketed in the last year. Sows were farrowed then shipped during the liquidation. This in itself delayed the supply effects of liquidation.
- Mexican producers who we visited with told us that hog prices in Mexico City had touched 90¢ U.S. liveweight a lb. These prices are a reflection of the lack of hog supply in Mexico. Consequently, Mexico will continue to take large amounts of U.S. pork to cover the shortage. Bullish for U.S. hogs.
- Producers from South Korea that we visited with told us that the price of hogs there was $1.40 U.S. liveweight a lb. This too will lead to continued U.S. export opportunities.
- One of the major challenges for exports is the 10% appreciation on the U.S. dollar index since mid April. This in itself is making U.S. pork exports higher in price for foreign buyers. We see this is negative for our industry, but fortunately with price points like in Mexico and South Korea, the effect will be lessened.
- There were a number of Chinese producers at the World Pork Expo. It appears from conversations that the expansion of China’s swine industry continues. The H1N1 issue had stopped the export of pork and live breeding stock to China. Currently, no live breeding stock can go from the U.S. to China. Negotiations are underway for protocols for H1N1 testing and quarantine regulations. It will be interesting how this plays out with some U.S. breeders we talked to thinking that the U.S. should not capitulate to the Chinese Government on new H1N1 testing requirements. The U.S. in their opinion has healthy breeding stock and China should not be imposing unscientific demands.
- Also last week at the World Pork Expo the National Pork Board announced the phasing out of the Other White Meat slogan used for over twenty years to promote U.S. pork. We say, “Bravo!” this slogan was “old and stale”. It’s good to see the leadership of the National Pork Board is moving forward rather than living in the past. With the trust of about $50 million annually in producers check off money to protect and grow the pork industry, it’s wonderful to see a new dynamic direction.
SummaryThe World Pork Expo was well attended. Producers are feeling better. There is continued evolution and consolidation, but we see little evidence of liquidation turning the other way. In the coming weeks we believe week upon week of hog supply closer to 1.9 million head a week, then 2 million will push hogs up into the $80 lean.
Categorised in: Pork Commentary
This post was written by Genesus