More Corn-Soybean from Brazil-Argentina

Last Friday the USDA released their estimates for the crops in Brazil-Argentina that have begun harvesting.  More Corn – More Soybeans compared to a year ago.

	(Million metric tons)
	2012-2013	2011-2012
Brazil Corn	72.5	73.0
Argentine Corn	27.0	21.0
Total Corn	99.5	94.0
Brazil Soybeans	83.5	66.5
Argentine Soybeans	53.0	40.1
Total Soybeans	136.5	106.5

If USDA projections prove correct 30 million more metric tonnes of soybeans (1.2 billion bushels) than a year ago and 3.3 million more tonnes of corn (225 million bushels.) year over year.  Better weather better crops.  It should help keep grain and oilseed prices in check while we wait for the US crop and its weather.

 Markets

• 52-54% National Daily Base Carcass is about 89₵/lb., last year same time it was 87₵/lb.  A little stronger now.  We have to laugh at May lean futures at 93.5₵ while February cash is 89₵, as if May will be only 93.5₵ when we can get 89₵ now.  No way there won’t be significantly less hogs in May and prices will be definitely higher
• USDA reports feeder pigs are averaging $80.27 for a 40lb. pig.  A reflection of continued strong demand with lowered supply.  Cash early weans average $52.12.

China Visitors

This past week we had visitors from China, the senior representatives of a major agri-business in China of which Genesus has supplied and is managing their nucleus genetic program.  The Chinese company has currently 55,000 sows with 20,000 more under construction and another 30,000 finished and being placed.

Some Observations

• China produced about 700 million market hogs in 2012 about 50% of global production.
• Approximately 70% in commercial facilities – 30% backyard, 60% of all Chinese meat is Pork.
• The senior manager of the Chinese company expects that in the future China will go from 2-3% imported pork to 10-20%.  That would be 70-140 million equivalent market hogs per year.  The reason for greater pork imports would be pork demand outstripping Chinese production capacity.  He cited Japan of which 30 years ago was self-sufficient but now imports approximately 50% of Pork.  If 10-20% imported to China in the future the logical source North America-Brazil.
• The Chinese market prefers Duroc Boars bred to Yorkshire-Landrace sows.  There appears little demand for synthetic or Pietrain type boars.  (They don’t want to eat pork that tastes like cardboard) Pig Production per sow in the country is approximately 14 and the need for better genetics is paramount.
• Last year (2012) many commercial producers made about $30 US per head with a 225 lb. hog – Cost of production is at least $200 US per head with China feed costs about 30% higher than the USA.
• Our Chinese visitors also import pork.  They were hosted by Maple Leaf Foods, Brandon Plant.  90,000 head per week.  They were quite impressed by the efficiency, cleanliness, scale and organization of the Maple Leaf facility.  Indeed the technology of the plant was a testament to the efficiency of Maple Leaf but also the modern scope of North America.  Made us proud to be part of such an industry.
• Our guests also visited some Genesus customers producing over 30 pigs per sow.  The senior China representatives were quickly calculating the huge profit potential of such results in China.  They wondered jokingly if they could load the barn and staff and ship it to the Chinese mainland, true technology transfer.

As usual meeting with smart people from different countries is a true learning experience; like all pig farmers everywhere there was a discussion of labour, feed costs, health issues, market price etc.  All countries are different but the same.  We think China will be the wildcard for Global pork prices in the near future.  Sudden importation of pork will be market movers.  China like Russia will not except pork from Paylean fed hogs.  We expect Improvist (Improvac) like Paylean will likely become another trade inhibitor if it reaches significant usage in North America.  Right or wrong the customer dictates what they buy.  With many packers now having their own production, customized need for customers can be adjusted rather quickly, i.e. No Paylean, DDGS  level for fat firmness etc.

To the Farmer in All of Us

Chrysler made an Ad for the Super Bowl.  It’s called “God made a Farmer’.  This commentary goes around the world.  It’s read in 43 nations weekly.  Most in American has seen the Ad but we think it’s appropriate for all farmers – everywhere to look and see for themselves.  We are all farmers – This is to the farmer in all of us.

http://www.youtube.com/watch?v=AMpZ0TGjbWE&feature=player_embedded

 

Categorised in: Pork Commentary

This post was written by Genesus