World Pork Expo 2011
This past week we attended the world Pork Expo in Des Moines, Iowa. Our report and observations:- The World Pork Expo was well planned and well attended. The organizers of the NPPC did a good job.
- World Pork Expo main theme – PRICE OF CORN – The price shock of plus $7.00 bushel corn, was the major discussion point. It’s ugly with pork cost of production continuing to move up.
- There appears to be some sow herd liquidation with one major sow buyer reporting ten herds pulling the plug in the last two weeks.
- The reality of high corn prices and the fear of the future is the trigger for such liquidation.
- The industry is getting weary of living on the knifes edge. Producers are wondering why indeed they are in the business. Mostly it’s like being on Gilligan’s Island, marooned with no options. Exit strategies are profit potential limiting. Mostly you quit….you’re dead.
- Part of this less than euphoric attitude is the reality of current cash 90 cent plus lean market hogs hovering around record high prices while current feed prices create only breakevens for producers. Its like “what do we have to do to get a break!”
- Last Friday Iowa – S. Minnesota closed $91.41 lean a lb. while USDA cut-outs were $90.23. The world is upside down with packer margin negative. A few weeks ago Packers were making mucho money with margin well over $20 per head. Everyone has their turn in the barrel.
- We would not be surprised if U.S. lean hogs reach $1.00 in the next four to six weeks. Not saying it will happen but with what we believe is tightening hog supplies, it just might.
- At the World Pork Expo our industries dismay over the corn ethanol industry was also discussed continually. Most people hope the U.S. congress will pull all subsidies for corn ethanol in the next budget to put hog producers on a level playing field with the food business. This week’s vote in the U.S. senate on a motion by Senator Coburn to stop Corn Ethanol subsidies and tariffs could be helpful.
- At the expo, building and equipment sales people were mostly focused on renovations and equipment replacements. There are few, if any, new sow units being built, some new finishers.
- Seemed like there were several groups from Mexico and South America, appears that their profitability is better. There will be some new sow barns built is this region.
- Our last commentary on vaccine castration, received several comments at the expo. Appears it will be more than a simple dilemma for producers and packers. As one packer said “two shots will it get done?” “Who’s going to pay for missed vaccine shots and what’s the cost to our industry of boar taint from missed vaccine shots”. Stay tuned this could become interesting.
Corn Prices and lack of profitability dominated the World Pork Expo conversations. It appears there is some sow herd liquidation. No surprise with a 12 to 1 hog to corn ratio. Every time we historically see lower than 15 to 1 there has been liquidation. We expect pork exports will stay strong in the coming months and with any sort of break U.S. cash lean hogs could get to $1.00 lean a lb.
Categorised in: Pork Commentary
This post was written by Genesus