Pork Commentary

Jim Long President – CEO Genesus Inc. info@genesus.com

Huge Marketings Last Week

December 7, 2015

Well, we found out how many hogs can be marketed in a week in the US when 2.424 million were handled last week. Big, big number, almost 200,000 more than the same week a year ago.
  • It tells us packers are making good money. USDA pork cut–outs 73.73 – Lean hogs 54.38. Our farmer arithmetic tells us that $40+ per head packer gross margin. Almost $100 million per week margin for all packers to cover costs of operations and overhead. Good time to be a packer! You need any other reason to know why new harvesting plants are going up in Iowa and Michigan.
  • The 2.24 million head also tells us pork is moving domestically and for export markets. If there was no market and profit Saturday’s harvest number would not have been 241,000 head (a year ago Saturday 95,000).
  • Another sign pork is moving is the decrease of pork in cold storage. In October down 50 million pounds from September, this despite a huge hog supply this October.
  • We are happy packers are making money when the hog supply declines seasonally; we expect they will fight to keep market share and supply. They will bid higher quickly as the gross margin of $40 per head is not sustainable. We would not be surprised to see lean hogs jump 10₵ per pound and packer margins go to $20 in the next while. Packers are like farmers, they can’t stand prosperity. The chase for market share and shelf space is their kryptonite.
Other Observations
  • It’s good to see Maple Leaf Foods publicity pushing back on meat being a bad protein. They have enacted a marketing program. “Protein Builds” which features Olympic Gold Medallist in hockey (also a mother) Hayley Wickenheiser.
  • Maple Leaf, Canada’s leading Food Company is taking a leadership role in aggressively promoting pork’s role in a proper and healthy diet. It is a positive initiative that other pork companies should consider emulating.
COOL Crunch Day The Word Trade Organisation this coming week could rule on the retaliation amount Canada and Mexico could pursue for damages from the US Country of Labeling dispute. Canada and Mexico have asked for $3.1 billion in damages. Of note, the NPPC (US National Pork Producers) supports the revoking of COOL. The WTO has ruled four separate times that COOL violates international trade rules. The US House of Representatives have voted to repeal COOL. The hang up is the US senate, which seems unable to get this sorted. It is a sad testament to the defiance of the rules of International Trade. Four times WTO has ruled against COOL. If trade sanctions are imposed, the big losers will be the US–Canada pork industry. As Canadian producers will still have the effects of COOL and US pork producers will face tariffs for pork into Canada–Mexico, two of its biggest markets.  

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This post was written by Genesus