Road Trip Montana and Alberta
Last week we went to the state of Montana and the Canadian province of Alberta. The purpose of the visit was to have group meetings with Genesus customers and prospects. Of course, we got to hear about markets and other industry issues.Montana
We had our meeting in Great Falls Montana. Montana is an important area for Genesus as we have over 30% market share. Montana is a tough area to raise hogs. Crop land is not the highest yielding and many producers are taking hogs 1,000 miles to market. These circumstances put extreme pressure on producers to push the envelope to increase productivity and keep costs in check. If you’re not good you can’t survive, consequently as a region we expect Montana has the highest productivity of any U.S. state. A barometer of this is Genesus customers in Montana have by our calculation on average weaned an average of 27.3 pigs per sow per year, with some over 30. The reality of Montana’s distance to markets leads producers to work together as a group. At our meeting there was extensive discussion and questions about pork quality and consumer desires. The Montana producers know one of the major keys to success for the pork industry is producing pork that creates demand. Marbling, meat color, ph, and tenderness were all points of dialogue. With this backdrop Montana produces almost exclusively Duroc boars (Genesus has the largest registered Duroc herd in the world) in their goal to produce pork with high standards.Alberta
Our meeting in Lethbridge Alberta directly followed the annual producer meeting held by Maple Leaf Foods (Canada’s largest food company) for its Lethbridge plant. Producers were quite positive after the meeting as Maple Leaf appears committed to keep the export focused Lethbridge plant rolling. This sentiment was further augmented by Maple Leaf’s announcement two weeks ago to invest $560 million in infrastructure and technologies over three years in establishing world class prepared meats network. Not only will this investment keep Maple Leaf globally competitive but it should be seen as a huge positive for all Canadian producers. With 50% of Canada’s pork production exports any and all efforts to keep the Canadian pork chain more competitive is price enhancing. One of the great positives for Alberta Pork Exports is that currently Alberta feed prices are the lowest in North America but this is being done with little use of DDG’s, this in turn is keeping meat quality higher as the soft fat associated with DDG use is not prevalent. Several packers across North America have told us over the last few months about the issues of soft fat and soft bellies that lead to demand challenges. It’s the reason Iodine tests to measure fat firmness are now being done at several plants, soft fat is bad. An extra cost from the insanity of corn ethanol. Alberta producers that attended our meeting were optimistic and as a group excellent producers. We don’t sense any significant expansion will be undertaken; it is more of how to get more productive and lower costs.Other Observations
*U.S. cash early weans are averaging $32.86 and cash 40 pound feeder pigs $47.58. Each price is up almost $15.00 per head since September. We expect prices to continue to move higher. *The latest U.S. weekly sow slaughter indicates 62,125. It appears we are running 2 – 4,000 head a week higher than a year ago. We believe such numbers mean there is little change happening in the U.S. breeding herd. *Last week U.S. 450 – 500 pounds sows averaged 61.56 cents per pound; a year ago they averaged 49.70 cents per pound. That is about $60 more per head this year compared to last. That certainly helps profits and cash flow. *Last week 53 – 54% U.S. lean hogs averaged 94 cents per pound the same week a year ago the price was 66 cents per pound. With a 200 pound carcass that would be $56.00 a head higher year over year. Last week U.S. hog marketing’s were 2.306 million the same week a year ago they were 2.311 million. PORK DEMAND – same number of hogs and $56.00 more per head! The industry has some tremendous demand momentum. Thank goodness for exports!Global Wealth
The 2011 Credit Suisse Global Wealth Report was released last week. ‘Since last year’s report global wealth has increased to U.S.D. 231 trillion from U.S.D. 195 trillion. Looking ahead, we expect to see total world wealth increase by 50 % to U.S.D. 345 trillion by end – 2016.” The high wealth growth countries in 2010 – 2011 (over 10%) included Australia, Brazil, Chile, China, Colombia, India, Indonesia, Malaysia, and South Africa. The U.S.A. was under 5% 2010 – 2011; Canada was (5 – 10%). Two interesting points wealth creation with recession ongoing? What is a recession? The second point as wealth increases in countries like China already a huge consumer of pork, we expect this will continue to increase pork demand. It is proven higher wealth leads to higher meat consumption. Global wealth increasing is good for the pork industry.Summary
Despite what the Chicken Little Economists have been saying for months about prices and pork demand the market place is ignoring their projections. Global demand for U.S. and Canadian pork is pushing prices higher. We expect a continuation over the next several months.Genesus Announcement
Genesus is pleased to announce that Paul Flint and Susan Wulf of Ames, Iowa will be moving near Krasnodar, Russia to manage Genesus’ New Registered Purebred Nucleus and Multiplication system (6,200 sows) with other responsibilities including sales and marketing. Paul Flint – Recently Swine Business Development Manager – Allflex USA. Previously Production and Marketing Manager Waldo Farms breeding company. Susan Wulf – Recently Sales Manager PigChamp Swine record keeping company. Previously Real State and Contract Administrator with Christensen Farms Sleepy Eye Minnesota and Swine Farm owner. Genesus is the world’s largest register of swine breeding stock. Purebred genetics are of paramount importance in the Russian market. Paul and Susan’s Russian responsibilities are very important for the development and education of Russian swine production personnel and the insurance of rapid genetic progress.
Categorised in: Pork Commentary
This post was written by Genesus