Pork Commentary

Jim Long President – CEO Genesus Inc.

info@genesus.com September 22, 2014

Lean Hog Prices

Cash lean hog prices gained strength all last week. Friday Iowa – Southern Minnesota averaged $105.82 up over $10 per head on the week. US pork cut – outs were over $113/pound. We expect further upside to cash if cut – outs stay over $113. Last week the US marketed 2,050,000 hogs down 128,000 from the same week a year ago. Feed cattle marketed were down 60,000 head from the same week a year ago. Absolutely a huge drop in marketings per head of red meat, the only thing keeping prices from a huge explosion is the heavier year over year carcass weights of cattle and hogs. December corn and November soybeans closed at life of contract lows. Feed prices continue to move downward. If PED hits even close to what happened last winter, hog prices relative to fed prices will allow profit margins per head well over $60 per head this next twelve months. National Pork Board Chris Novak, CEO is leaving the National Pork Board to become the head of the National Corn Growers Association. We have met and talked to Chris Novak several times. In our opinion he did an excellent job at the National Pork Board. When he joined it was our belief it was being run for the benefit of the internal bureaucracy. He changed the culture, refocused, and re-energized the organization. The Corn Growers got a good man. Whoever takes Chris’s place at Pork Board has big shoes to fill. We wish Chris all the best and thanks for a job well done. Seems to be a belief among many swine vets PED – PRRS will be back this winter at levels similar to last year. This would be what you call educated guessing. Swine Equipment companies are real busy – lots of upgrading needed and some new construction. Interesting how some companies got hit harder than others with PED. Also risk management programs or lack thereof had a big effect on profitability. We suspect big variation in profitability YTD from company to company. This will lead to different levels of facility upgrading and possible expansion. Hedging We see the Expert Ag–Economist that predicted August $1.40 lean hogs (in July), a big miss, is now suggesting to lock in feed prices. Wonder how much of his own money he’s throwing in? Reminds us of the Warren Buffet quote and we paraphrase ‘Wall street where people who ride in Rolls Royce’s get advice from people who take the subway to work.’ Country of Origin Labelling It is rumoured that the World Trade Organization has ruled against the US in the country of origin labelling. Canada and Mexico had taken the US to court. If true, when the final report comes out the US has 60 days to appeal. Probably that would be a useless effort other than a delay tactic as the US has lost at every international judicial level. Point is, it was a dumb law. More government involvement unnecessary. It didn’t make food safer, it was just government overreach. Summary Cash prices are stronger. Feed prices are lower. Margins are better. Good time to be a Pig Farmer!

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