Pork Commentary

Jim Long President – CEO Genesus Inc.

February 24, 2014

Lean Hog Futures and Cash Move Higher

The hog market is rolling.  The momentum is breath taking.  On Friday, June lean hog futures closed at 108, July 107.50, August 106, October 92.  All across the board lean hogs pushed higher with record prices. Cash meanwhile, moved to a 93.69 average Friday.  Up $30 a head from a little over a month ago.  This market is sizzling! Maybe you might remember a few months ago we called for summer to reach $1.10 or more…getting closer.  Don’t forget the Chicken Little economists that called for 88 – 94 summer market? It’s what happens when you have never owned a pig, never lost money owning pigs, never signed personal guarantees on pig loans, and never talked to a banker when you own pigs, it’s what you call disconnect from the real world.

Choice Genetics USA LLC Declares Chapter 11 Bankruptcy

Last week we learned that Choice Genetics USA LLC filed for Chapter 11 bankruptcy protection following an unfavorable arbitration award ($11.8 million) related to a patent dispute with the company Scidera. Choice Genetics USA LLC is a subsidiary of Groupe Grimaud of France. (Choice until recently was known as Newsham Choice Genetics).  In filing with the US Bankruptcy Court in Des Moines, Iowa, the company listed about $486,000 in assets, and more than $21 million in liabilities, $14 million of which are owed to creditors with unsecured loans. (Seems about a $20 million short fall)? In the Dow Jones – Daily Bankruptcy Review “The Company is also seeking emergency financing, claiming ‘a catastrophic disruption of its business operations’” if it isn’t able to feed its livestock and provide veterinary services over an upcoming long weekend.  The company said Thursday that in some locations it had less than four days of feed on hand. We received the Documents of Bankruptcy filed in Des Moines (they are public information).  It shows the list of assets and liabilities.  Lots of unsecured creditors including pig suppliers. When the company was still Newsham it sued Scidera in Iowa Federal Court seeking a declaratory judgment that it did not owe Scidera royalty payments for genetics assets under a contract Scidera says it inherited.  Scidera won an arbitration judgment of $11.8 million. A motion for authority to pay claims of employees was filed in the bankruptcy case of Choice Genetics LLC USA.

Swine Genetic World

In the last while we have seen Danbred leave North America, JSR shut down their only Nucleus in Canada – USA, Genetiporc sold to PIC, Fast Genetics – Hylife selling a large percentage of the company to Japanese interests, one of the other European companies is trying to sell its genetic business, and now Choice Genetics declaring bankruptcy.  A real upheaval and consolidation. The swine market over the last few years has been difficult for producers but obviously a challenge for genetic companies also.  Companies no matter what their nature, but especially technology companies as some genetics are, have to continually get better or die.  Business is Darwinian.  Some genetic companies haven’t evolved from the world of Commodore 64s.  Some don’t have the money to keep up genetically, being bankrupt would not be conducive to investing in genetic improvement let alone normal day to day operations.

Failing organizations are usually overmanaged and under-led.(Warren Bennis)

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This post was written by Genesus