Pork Commentary

Jim Long President – CEO Genesus Inc. info@genesus.com

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Thanksgiving – A Good Week for Family

Not So Good for Hog Markets

November 30, 2015

 

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This past week was Thanksgiving and a time for family and reflection of the past and future. My 13-year-old son Aidan and I went to the Thanksgiving football game of the Detroit Lions and Philadelphia Eagles. It was nice family time. An American tradition. It also was next to a miracle with the Detroit Lions winning 45 – 14. About 70,000 Detroit attendees were a very happy bunch! We doubt the Pilgrims would have envisioned the spectacle of football when the first Thanksgiving was held on Plymouth Rock.

Hog Markets

Thanksgiving week also brought us the lowest lean hog prices for in the last six years with lean hogs just over 51¢ per pound. Thanksgiving week is always hard for swine producers as the short marketing week and seasonal supply takes pressure off packers to keep shackles full. Thanksgiving for hog producers generally means a lot of work for little or no profit. USDA Carcass Cut – out was 72¢ last week with hogs in low 50’s, packers are doing well with our farmer arithmetic coming up with $40 gross margin. Not sure, it can get any better for packers. The benefit for producers is the profitability and optimism for the future of the hog industry is leading to the construction of two new packing plants one in Coldwater Michigan by the Clemens Food Group (10,000+ per day) and Triumph Foods in Sioux City Iowa (16,000+ per day). Recently Dan Groff spoke in Ontario – he is the Director of Business Development for Country View Farms, the Hog Production and Procurement Company for the Clemens Food Group. He is responsible for the Clemens Food Group Hog Procurement as well as Hog supply growth, logistics, feed and nutrition for the company’s 57,000 sows. Clemens currently has a 1.2 million square foot processing facility in Hatfield Pennsylvania and 100,000 square feet further processing facility in Emmaus. Clemens is currently producing 2 million pounds of pork daily. It was very interesting for Ontario – Canadian hog producers as the new Clemens plant in Coldwater Michigan would be the closest US facility to Canada. Mr. Groff spoke of the Clemens reasons for the plant:

• Several years of record profits
• Pork continues to be the favoured protein around the world
• Growth of value added sales over the last 18 months have exceeded the previous 18 years
• Additional hog supply is needed for continued future growth – limited potential to greatly expand hog supply in the US North-East.

Ontario producers are keen on how this will fit into their options for marketing. Currently Ontario producers are challenged to get their hogs marketed. They all are but at a negative price basis since the Quality Meat Plant closed over a year ago in Toronto. It is expected that US Country of Origin Labelling will disappear sometime in the near future which will make many, if not all of US plants keener to acquire Canadian Market Hogs. The reality is the 50,000 plus hogs a week Clemens will add to capacity in 2017, has the other packers in the region wondering how they will keep existing plants full. We do not believe anyone really expects the Eastern Corn Belt to add 130-150,000 sows new production. Clemens in the meantime has several US producers committed to send hogs when the plant opens. The other plants will lose this supply. We expect when COOL gets sorted all US Eastern Corn Belt packers will look to Ontario to lock in some supply. They will want to do it as soon as they can. Most of the packers know who is leaving them to go to Clemens Group. They know what supply has to be replaced.

Summary

• New plant is good for producers.
• New plant not good for other packers as they will be chasing supply.
• Good for Ontario producers as they will have all Eastern Corn Belt packers chasing their hogs as soon as COOL is done.
• Plant not open before fall 2017.

Categorised in: Pork Commentary

This post was written by Genesus