Pork Commentary, Aug. 14th, 2017
Jim Long – President and CEO, Genesus Inc.
US Hog Prices Continue Strong
Last week, the USDA 53-54% National Hog carcass averaged 84¢ lb; same time a year ago, 53-54% lean hog was 67¢ lb. That’s about $35.00 per head year over year to the better. That $35 is really helping producers bottom lines.
A reflection of stronger lean hog prices can be seen in US feeder pig prices. A year ago they were averaging at $30.00 per head (30-40 lb composite); this year we see an average of $42.00.
Packers margins remain strong last week. US pork cut-outs were 95¢ lb, with lean hog in the low 80¢ lb. The gross margins for packers are being reported at around $30.00 per head. We are at a time, packers and producers are both making money. A reflection of healthy supply and demand.
US daily packing capacity is approximately 443,000 head per day. In the five weekdays last week the US averaged 428,000. This is close to 97% of its capacity. A very efficient economic utilization. The two new big plants in Michigan and Iowa are to start this fall with increased total capacity of 25,000 to 50,000 daily, depending on the number of shifts.
Big question is, on when these plants actually get going and at what are daily harvest numbers. We could be challenged this fall to handle all US hogs, but in our opinion, they will get harvested. On top of weekdays, there are Saturdays. With high packer margins and good pork demand the extra effort to extend plant harvest, hours will be justified and profitable.
The US exports are over 27% of its pork production, one of the factors supporting the US. Pork prices are the declining value of the US dollars which makes the US pork more competitive globally. The US dollar index is an indicator of the US dollar trading relative to a bundle of world currencies. Last December, when US hogs were below 50¢ lean the US dollar index, was 103.09; and last Friday it closed at 93.10; about a 10% decline. A lower US dollar makes all pork products more price competitive, increases sales into export markets and pushes US hog prices higher. Going into the fall, the lower US dollar will be supportive to hog prices.
US June pork exports were up six percent year-over-year, and the largest June volume on record. Valued at $527.10 million, up four percent. This increased the first half total to 1.25 million mt. valued at 3.32 billion, up 13 percent of 16 percent respectively. The increased pork export is a big part of the reason US market hogs are $35.00 per head higher than a year ago despite increased hog are pork products.
December corn closed on the CME last Thursday, at the lowest price in ten months. On Friday the USDA came out with a projection that US corn crop this year will be third largest ever, at 14.153 billion bushels. Also, last week the USDA estimated the soybean crop to be 4.381 bushels, a new record.
The USDA also predicts the world inventory of wheat will be at record levels at the end of this crop year. Seems to us, there will be no feed shortage.
Global Mega Producers – Betagro
Last week we had the opportunity to a visit with Betagro. Betagro is based in Thailand, they are one of the Global Mega Producers, and though listed at 110,000 sows on the Global Mega Producer list, they currently have 120,000 sows.
Founded in 1967 the Betagro Group is an integrated agricultural company based in Lop Buri Province, Thailand. The company is a complete production model which includes: swine production, chickens, eggs, feed manufacturing, and distribution of animal health products.The 120,000 fully integrated swine production system, includes packing and processing. The swine production base is focused on loose sow housing and large pens for farrowing.
Betagro has a long term production supply relationship with Hoham of Japan
Betagro has used Genesus genetics for the last six years with a further usage of Genesus underway.
This post was written by Genesus