Jim Long President – CEO Genesus Inc.
November 24, 2014
US Supply & Demand
The most recent US hog numbers show a decrease of 5.2 million hogs – fewer hogs marketed in 2014 year to date compared to 2013 (99.520 – 94.320 million). Live hogs averaged 63₵/pound in 2013 and are expected to average 77.6₵/pound in 2014. That is about a $30 per head increase year over year. That increase coupled with lower feed prices has made 2014 the most profitable year in hog production history. Hallelujah! In 2013, the US produced 23,396 billion pounds of pork. In 2014, it is estimated the US will produce 22,759 billion pounds as heavier slaughter weights have closed the gap between the number marketed and total tonnage. It is very positive that pork demand has been so strong that a 3% decrease in pork supply increased hog prices at least $30 per head. This really indicates that red meat demand is alive and very well.
Beef2015 projected US beef production is 23,790 million pounds. Down 600 million pounds from 2014 and down 2.5 billion pounds from 2010. The beef supply projected for 2015 is the lowest in decades with per capita consumption of boneless equivalent beef at 50.1 pounds. This is the lowest since the 1940s. In the 1970s, the average American consumed 80.9 pounds of beef per capita. The collapse of Beef supply is extraordinary. Choice steers are projected to average 155.20/pound in 2015, the highest ever. In 2010, choice steers averaged 95.38/pound. The huge price increase are making choice beef cuts the staple for only the rich and special occasions. The high beef prices will support pork prices and demand. If the pork industry can get focused on meat quality, tenderness, flavour, and juices, we can capture some beef demand. It is our observation that some retailers and packers are recognizing the opportunity to put a product with a better eating experience forward. It always makes us mental when we hear we need to sort as an industry the better hogs with red meat, marbling, and proper fat colour for the Japanese market. It is like saying as a Genetic Company we will sort all our best genetics for Minnesota customers. What about quality? If we know it is better, for taste, better flavour, and marbling should it not be for all. A better consistent product for all drives total consumer satisfaction and demand. Just last week Smithfield Foods announced a Duroc sired program for a premium market. Good idea and it shows a move towards Black Angus Beef type program in the pork industry. We believe as an industry, a push to all Duroc everywhere would push all quality higher and increase demand. All consumers at every level would appreciate and crave this better pork. If through a better quality product, we could have every family in America eat pork one more meal a month it would do wonders for pork price support. Demand based on quality is a proven winner in any industry. We as an industry have talked quality and then use some Genetics devoid of marbling, colour, and water holding capacity. It is time to stop talking quality but delivering a product that will drive demand. US pork consumption per capita has flat lined in the 40s per pound since the 1970s. Flat per capita consumption is not a sign of success. A better eating experience by the consumer could be the trick to unlock demand growth in the face of beef supply collapse.
China UpdateThe China Ministry of Agriculture reports a decrease of 550,000 (-1.3%) plus sows in the month of October. In the last 12 months, the Chinese sow herd has decreased 11.3% or more than 5 million sows. It is not if, but when Chinese hog prices will explode. When that happens, expect an appreciable increase in pork exports to China supporting the US–Canada hog price.
Categorised in: Pork Commentary
This post was written by Genesus