US Industry losing $40 per Head!

Sterling Marketing of Vale, Oregon does a weekly calculation of farrow to finish profitability. The latest weekly calculation was a loss of $40.38 per head. Nasty, Nasty, Nasty. If correct, a loss for the industry approaching $100 million a week. Last year the same week the loss was $16.12 per head. Feed costs for the week ending December 28th were estimated at $123.54 for hogs placed into finishing. It’s amazing that despite the huge financial losses that have been ongoing, the USDA December 1st Hogs & Pig Report indicates the breeding herd was expanding. We don’t believe it, no way. Maybe we are crazy but the industry will never expand when going back a billion dollars in the last few months. We are in the breeding stock business. We see who’s buying and who’s not. There is no expansion of significance, a handful of new units, while many units shut down or cut numbers. No way that there will be more net sows when the dust settles. Never has there been and never will there be expansion when hog to corn ratios are 10 to 1 and losses amount to 100’s of millions of dollars. Who is funding the expansion? Banks? They give you umbrellas on sunny days. This is not a sunny industry.

Other Observations

  • March Corn closed on the Chicago Board of Trade last Friday at $6.80/bushel significantly lower than high reached on August 21st of $8.39. The last time March 2013 was as low as $6.80/bushel was the first week of this past July. If it keeps snowing and raining in the Corn Belt, replenishing the ground water, corn exports stay low and domestic demand lags, there is a further downside for corn prices.
  • Soymeal closed last Friday at $398/ton down significantly from the peak reached mid-September of $530/ton. The last time soy meal $398/ton was at the end of this past June. If crop conditions continue to be favourable in Brazil and the bumper crop of 81 million metric tons or more comes through, look for further pressure on Soymeal prices. Brazil’s harvest has begun but won’t get going hard until February.
  • Iowa Southern Minnesota market weights the latest week were 275.8 lbs., 2 pounds lighter than last year’s 277.9 lbs. This reflects a current market inventory.
  • The latest US Cash early weans averaged $59.82 (high to $65.00) and Cash 40 lb. feeder pigs $70.87 (highs to $77.00) Both very strong prices considering feed prices and lean hog futures. These prices reflect the lack of supply relative to buying demand.

Latin America

We all have our goals and dreams. The reality is goals and dreams are easy; the challenge is to execute them. Many of you who read this commentary are businessmen who have the responsibility to assemble the best team possible. We all have similar challenges and opportunities. Many of you have seen over the last decade that our business travels takes us to many new countries and continents. In turn you have read how Genesus has and is doing business globally. We have done business in Latin America; our next goal is to grow our presence and deliver the best product to customers in this region. To this end we are really pleased to announce the appointment of Carlos Peralta as President Genesus Mexico and Roberto Carlos Rodriguez as Vice President both with extensive experience in the Swine Genetic business. Carlos Peralta, DVM was formerly President PIC Latin America for the Pig (PIC) and Shrimp (SyAqua) divisions of Genus PLC. Carlos played a significant role in the PIC company’s growth and the establishment of its leadership position in Latin America. Roberto Rodriguez, DVM managed the Production department as well as being Operations Manager for PIC Mexico. Roberto is well versed in Swine Genetic sales and distribution. We are truly excited about Carlos & Carlos joining Genesus. Experienced, knowledgeable and with a passion for the swine business. They both look forward to the opportunity to show the industry why Genesus is the total package.

“Without continual growth and progress, such words as improvement, achievement and success have no meaning” ~ Benjamin Franklin

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