USDA Back To Work

After many days of no U.S.D.A. reporting due to Government shut down on Friday last week U.S.D.A. employees are back to work. Our Observations:             *In the three weeks during shut down 53 – 54% lean hogs have gone from 95.84 to 88.28 (last year 82.88).             *Cash early weans and feeder pigs in the last 3 weeks have moved up $8.00 – $9.00 per head higher.  Last Friday U.S.D.A. reported Ave. cash early weans were $52.15 – 40 pound feeder pigs ave. $69.70.             *Last week’s U.S. hog marketings 2.297 million- a year ago 2.382 million, down 3.5%.             We expect it will take a few more days before the market stabilizes.  The push and pull of price discovery has been difficult for producers and packers.

Canadian Pork To Gain Access To E.U.

            Last week the Government of Canada and the European Union (E.U.) finalized a tentative agreement for freer trade.  Part of the agreement has Canada acquiring a quota volume equivalent of about 80 thousand tonnes of pork cuts.  At the current time, virtually no Canadian pork is exported to the E.U.  E.U. pork is currently allowed into Canada.             When and if the deal is ratified, Canada will have access to a market of 500 million people that currently consumes 20 million tonnes of pork per annum.             The Canadian 80 thousand tonne pork quota would be less than ½ of 1% of total E.U. consumption.  Not exactly an EU market mover but it should support Canadian prices somewhat.  The E.U. with significantly higher hog prices than Canada has with the 80,000 tonne limit continued to protect their hog producers.

Cost of Production

            To state the obvious the swine industry is now benefiting from lower feed costs.  Cost of production per market hog could be up to $40 per head less than a year ago.  The difference you can see in feeder pig prices a year ago of right now $25 is now $70 or about $45 per head difference – most of that gain due to feed price declines.  Going forward we see little change in year over year hog supply for the next ten months.  We continue to believe $25 – $30 per head profits should be realized.

Swine Genetic Industry Shake Up Continues

            A couple of weeks ago PIC bought Genetipork.  This past week Danbred North America announced they would become DNA genetics becoming independent of Denmark’s genetic program.  DNA makes big brave move leaving one of the world’s major genetic groups in Danbred to go off on their own.  After many years of association it must be startling for Danbred to no longer be in the lucrative North American market.  The press release from DNA says “The separation from the Danish genetic system is an amicable one.  It comes down to the fact that our business approach and how we deliver economic value for our customers no longer matched.”

Our Observations

            *DNA no longer has to pay genetic royalties to Denmark.    DNA now has to pay for its own genetic program.             *DNA no longer has the easy access to the huge genetic Danish base of Danbred.             *DNA now has to build a new brand and no longer has the internationally acclaimed Danbred name to piggy back.             *The DNA economic model should take a while, swine genetics don’t change quickly.  Obviously the genetics that were being sold by Danbred North America if you extend the new DNA genetics reasoning were not designed for the economic model of North America.  Not sure we would want to explain that to customers who have been paying good money for what it appears was a genetics needing significant economic improvement.             *The DNA genetic model will be interesting.  Already they claim on their website “DNA genetics lines are designed to excel in North America commercial production setting market place.”  Amazing – change genetics from Danish to North American by just saying so?  Observation:  Genetics take a lot longer and a lot more work than just issuing a press release. “Abracadabra Genetics!”

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This post was written by Genesus