Pork Commentary

Jim Long President – CEO Genesus Inc.

March 10, 2014

Hog Market Not Hot, It’s an INFERNO!!

Last fall when we predicted the U.S. lean hogs would reach $1.10 (at the time summer lean hog futures were $90).  We contemplated if lean hogs would reach $1.20.  We thought there was a chance but to be honest we thought it was beyond crazy to think it could happen.  Well we were wrong, we weren’t bullish enough.  June closed at $120.50 last Friday.  The lack of sow herd expansion, and lower beef supply all compounded by at least 5 million pigs dying of PED has to the opportunity of profits of $100 per head this summer.  This is truly the Year of The Pig Farmer.  It’s a red hot inferno! The Pig Farmers that stuck it out and believed when the banker didn’t, the wife wondered, the children thought crops were more golden have the chance of a generation to bury debt and replenish equity.  We salute all the survivors who hung in when there were many doubters.

Other Observations

  • U.S. hog marketing’s last week were estimated a 2.072 million down 120,000 from the same week a year ago.
  • U.S. cattle marketing numbers last week 548,000 down 50,000 from the same week a year ago.
  • Put the cattle and hog numbers together and we end up with millions of lbs less red meat year over year.  Less meat will always lead to higher prices.
  • DTN –Agdayter Feeder Pig Livestock Margin calculates you can pay $113 for a 45 lb. pig marketed in July.
  • Last Thursday 53 – 54% U.S. lean hogs were $102.97 a lb.  A year ago $76.41.  Almost $60 more per head year over year.
  • Last week’s U.S.D.A. cash early wean price was $88.87 and 40 lb. feeder pigs $114.03 (very close to the $113 DTN calculates can be paid).


This coming week we will be in Denmark, Germany, and Italy.  We will write some observations in the next commentary.

Choice Genetics U.S.A. Bankruptcy

The Choice Genetics LLC USA bankruptcy continues with $21.8 million in debts, with $14 million due to unsecured creditors, and $486,000 in assets.  Where this shakes out is anyone’s guess but it’s hard to spin this as a small blip and business as usual.  We are aware of producers taking other roads for genetic supply.  Why wouldn’t they – a bankrupt company? Warranties? Service? Supply? Genetic Development?  It will be interesting to see if Group Grimaud the French owners of Choice Genetics will make good to the U.S. creditors or put up a white flag?

Hog Market

We are not sure there is much further upside to the summer market.  Already we are at the highest prices in history.  One of the downsides (if there is) of this market is the margin calls producers who have hedged more had to cower.  We expect there has been $10’s of millions in margin calls.  Some leaders have been quite aggressive in pushing producers to hedge, hopefully they will continue to finance the strategy they encouraged and to some extent mandated. Sow herd expansion we think has not happened to a great extent.  Some empty sow units are being restocked in USA – Canada.  We guess 20 – 30,000 sows in this group.  We do not believe many more sow units are being built.  PED has had all of the top 25 largest producers in the U.S. This in itself has created a significant amount of time and energy to manage.  It is a crisis scenario.  A scenario that doesn’t lead to real expansion.

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This post was written by Genesus