Pork Commentary

Jim Long President – CEO Genesus Inc.


May 12, 2014

US Pork Exports Remain Strong

Despite record high hog prices being reached in March, US pork exports in the first quarter (Jan – March) this year were more than 10% higher than a year ago. Mexico (up 28%), China (up 82%), and South Korea (up 18%). The reality of exports is it’s not how high the pork price is in the US but what’s the price of pork in the importing countries. Mexico last week was $1.01 USD/lb. live weight. The US hog price was about 83₵ per pound. The 18₵ per pound difference is almost $50 per head difference. Pork importers in Mexico benefit from the $50 per head difference, they work the pork price spread and make money. In a more dramatic difference, market hogs in South Korea and Japan are $600 – $700 USD per head. Hard to believe numbers. PED has ripped Mexico, Japan, and South Korea, dramatically lowering production. Their high hog prices reflect the extent people will pay to get pork. It’s our belief with strong export markets, lower domestic pork production over the coming weeks, lean hog prices will push back towards $1.00 in the coming weeks.

USDA Crop Report

Corn – USDA last week projected 13.935 billion bushels of corn to be produced this crop year. The estimate will probably change going forward but current corn prices of $5.00 a bushel will encourage planting’s in the US and everywhere else in the Northern Hemisphere. After planting the only thing left is what the weather is? Soybeans – USDA projects the US to produce a record 3.635 billion bushels. If that happens there is big chance that the large level of production will push soybeans closer to $10 a bushel. The prosperity that has swept through grain growers the last few years leading to higher land values, new tractors – equipment and other technology uptake leads to aggressive plantings not only in the US but many other countries. The millions and millions of acres that have come into production from fallow land, pasture, and other is leading to huge grain production increases in the world. World corn production has increased 50% since 2006. One of these days the dog is going to hit the end of the chain in grain markets.

Magical Times

It is almost magical times for the hog industry. Some sows bringing $600, cash feeder pigs $125, and market hogs over $1.10 per pound. Never thought we would see prices like this, it is almost beyond belief. But cash is reality, it’s not some speculated price, the cheques we are seeing are real. The profits we are seeing will and is leading to sow herd expansion. The question is, will PED breaks become a regular occurrence just like PRRS. Will some farms just continually fight it? Will 4 – 7 million dead pigs annually become an animal market reality? It’s a wild card. The fact is the US industry has gotten ripped hand by PED and PRRS. The PED losses have led to record high hog prices. We expect that PED will not be a large factor in the future much like TGE has become, but what if it doesn’t? Billion dollar question.

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This post was written by Genesus