Pork Commentary by Jim Long, Nov. 22, 2010

Eurotier Report

We spent the last week at Eurotier in Hannover Germany.  Eurotier calls itself the largest livestock exhibition in the world.  After seeing it for four days, we have to agree. Our Observations

• Eurotier is massive.  The site in Hannover is 100’s of acres.  The size of the buildings is mind bogling.  Some exhibitors such as Big Dutchman appear to have had thousands and thousands of square feet in exhibit space.  There were many other displays that were large with 100’s of thousands of dollars for space, display, hospitality, and manpower being spent by several exhibitors.  It was professional, and it was costly.
• To understand some of the scope of detail was the expense by several exhibitors to purchase and outfit their exhibit personnel in matching suits, shirts, and ties.  Nothing was left to chance as the bi – annual Eurotier event is the major livestock exhibit in the 14 million plus sow industry of the European Union.
• There were few exhibitors from the swine industry of North America at Eurotier.  Genesus was the only large scale swine genetic company based in North America that showed up to exhibit.  There were 51 Chinese based companies at Eurotier exhibiting their products.  It is not hard to see which national group is the most aggressive is it.  We never figured out why so many companies sit at home and wait for the phone to ring.
• The European exhibitor’s we talked to told us the show was excellent for them.  There are significant renovations of swine complexes and new buildings in central and Eastern Europe.  There was certainly a positive feeling to the exhibition.
• At the exhibition there was a large contingent of Russian people looking at pig production expansion and/or investment.  Russian pig producers should be making about $135 per head.  That is a great stimulus for thinking being a pig producer is a good thing.
• European 27 has about 14 million sows.  It’s a mature market like North America.  We went as we have come to realize that our company Genesus is more than competitive with all the major genetic companies from Europe that have come to North America.  Mature markets like Europe are margin challenged and the only way for producers to prosper is use all the technology and tools available to drive down costs and increase productivity.  We see great opportunities for Genesus in Europe.

Eurotier was a positive environment and if was good to see a swine industry with hope.  This despite high feed costs and having had to live with low margins.  The world pork industry is providing 44% of meat protein globally.  The opportunities for pork producers as global disposal income increases is a positive that should help to keep us going each and every day. Other Observations June lean hogs closed Friday at $89.15 lean.  This is getting closer and closer to 90 cent.  If liquidation continues, we expect to see $1.00 lean hogs next summer.  High feed prices are going to make less hogs.  The sad part is high feed prices are not making 90 cent hogs a bonanza! We have to watch chicken numbers.  That industry has been on a path of destruction with production jumping 5 – 6% year over year in the face of high feed prices.  Let’s see if they blink, last week’s year over year egg sets were only up 1%.  For all meat groups to have enhanced profitability in the coming months chicken numbers need to stay close year over year.  Last time corn hit $6.00 a bushel Pilgims Pride the world’s largest chicken producer went broke.  Maybe the chicken guys can open their history book. The old adage “this time it will be different” never seems to play out.

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This post was written by Genesus