Why are Europeans not Meeting Stall Barn Timeline?

Data published in Brussels the capital for the European Union indicates that the January 1^st legal ban on gestation stalls will not be met.  Numbers indicate France is only 33% compliant, Germany only 48% and Ireland only 57%.  Several other countries (80% of EU Countries) including Spain (3 million Sows), Italy and the Netherlands are far from meeting the January 1st Deadline. Britain’s National Pig Association believes 40,000 “illegal” pigs per hour will be entering the European food chain in January.  How the EU handles this issue will be very interesting.  If we assume 40-50% of Europe’s sows have not been converted from gestation stalls, we could be discussing 6 million sow spaces.  At either side of $300 to convert per sow that’s about $2 billion dollars needed to be invested in an industry that has not shown significant financial returns recently.  How is EU Pork going to be handled from gestation stall produced pigs?  Will there be a discount?  Will there be fines?  Will some buyers in pork chain refuse to buy gestation stall raised pork? Unfortunately all the above speculation is the result of social engineering by elitist groups bent on mandating other people’s food choices.  Going forward the EU handling of the non-compliance will be a template for the mess we can look forward to in North American.   Like Corn Ethanol– Gestation Stall Barns is another slap by Government on Swine Producers.

Other Observations

• US Hog weights are dropping fast reflecting a quite current inventory.  Last Thursday’s National Day Lean Hog Carcass was 204.03 lbs. down 4 lbs. from the week before (208.11).  The 4 lb.  drop over 7 days is one of the largest we have ever seen.  Liquidations started in July, 6 months ago.  The frond end of the liquidation’s hog supply droop could be upon us.
• We read last week where some of experts continue to believe there is next to no sow herd liquidation ongoing.  We don’t agree with latest weekly US Sow number of 65,526, it is our opinion that anything over 57,000 per week is probably indicating liquidation.  Also gilt sales have been slow with many producers forgoing the investment and letting their herds shrink.  The industry has not been good; hog to corn ratios of 10 to 1 will always lead to a smaller sow herd.
• Prrs is ripping again.  Maybe nothing new but on the other hand the devastation is not abating, keeping in itself production restrained.  No one is immune, breeding stock companies have to have Prrs negative pigs or they are unsalable.  In the genetic industry the saying “Those who live in glass houses shouldn’t throw stones” is really true.  No one is bullet proof.  Just recently a huge boar production unit of on the major companies blew up.   With such disasters, economic losses are big, which are then compounded by genetic lag.  Prrs is ugly and nasty for all and the pain continues with always production gaps.
• Last week March Corn closed down on the week 28.75 a bushel, January Soybeans down 65 cents a bushel.  Corn closed near $7.00/bushel, the lowest it’s been since early July.  Lower exports, lower Corn ethanol production, and lower feed usage are diminishing demand.  The old saying “surest cure to high prices in high prices” is still true.
• April Cattle closed last Friday around $1.37/lb., very strong prices.  Also on Friday the USDA released the December 1^st cattle on feed report.  Down 6% year over year.  12.055 million Versus 11.328 million over 700,000 fewer cattle on feed.  Cowboy Arithmetic 700,000 cattle times 700 lbs. carcass about 500 million fewer lbs.  Less meat leads to high prices and price support for Pork.

Summary

It’s Christmas.  It’s a time of giving, a time of reflecting.  We have seen misery this past year with some producers.  Losses have been big while at the same time we have been hit by continued high feed prices, government (hello Country of Origin Labeling) special interest groups (animal welfare), etc.  This business is a war of attrition.  The adage we heard a few years ago from an industry leader is apt, “The women and children are dead, only the warriors survive”.  It the warriors indeed, “Last Man Standing” the possibility that “Destructive Capitalism” is at work has a ring of truth. We like to think we are realists.  In the last year we visited several countries.  Seen first hand the pork industry and done business there.  The world’s total poultry and meat consumption is 44% Pork.  We are champions of demand.  But it’s a hollow triumph if you are losing money.  As we look to 2013 we see less Beef, no more poultry and less Pork.  We expect hog prices to sky rocket to record levels next summer.  It’s Pork turn for high profits!  

Categorised in: Pork Commentary

This post was written by Genesus