Pork Commentary, August 28th 2017
Jim Long President-CEO Genesus Inc.
Last week went with two of my boys on a tour of the U.S Midwest. A few weeks ago we were in England and Europe, now my sons go to travel and see a different place, the countryside farmed by the families who emigrated from England and Europe several generations ago.
U.S Midwest Road Trip
Spencer the 20-year-old had been to the U.S Midwest before. Aidan the 15-year-old had never been. After travelling through Michigan, Indiana, Illinois, Wisconsin and Iowa some 2,400 miles (4,000 kilometres) of driving. I asked Aidan what he thought about that part of the U.S. He replied “nice people” and “lots and lots of corn.”
As Aidan said “lots and lots of corn” From our windshield tour of the Northern Mid U.S and talking to several producers along the way, crop looks good. One producer in Minnesota told he could buy corn that day $2.80 a bushel ($110 U.S per tonne). Feed costs should be staying relatively low in our opinion.
Lots of talk as we went from producer to producer about new packing plants coming into production. Seaboard – Triumph Sioux City, Iowa Clemons – Cold Water, Michigan, Prime Pork, Prestage, Moonridge and discussion about Pipestone’s potential leadership into a new plant. All producers are concerned about shackle space this fall.
On our trip we got the opportunity to visit the new Prime Pork Plant in Windom, Minnesota. We always appreciate the opportunity to visit packing plants in North America and around the world. It was great to see the Prime Pork plant up and running. It is a very impressive state of the art facility. The plant is focused on producing high quality pork products. The day we were there it hit another plant record of harvesting 4,000pigs/day. To date the plant has reached all of its targets and is on track for when it will be operating at full capacity of 6,000/hogs/day in the fall.
We toured the plant with Spanish Packer Friselva, Miquel Ramio – Owner and CEO of Friselva; Miquel Ramio Jr – Production Manager, and Jordi Micalo – Sales Manager
Last September we had toured the Friselva plant in Spain. They were quite impressed by the Prime Plant. They commented that they never knew there was so much corn until their own drive in the Midwest.
As any regular readers of this commentary is aware. We repeatedly talk about the need to deliver quality pork to consumers that has taste and flavour. That’s what drives real demand and consumption. It was great from our perspective to see the Prime Pork Plant dedicated to that quality target.
On our trip we got asked several times where the hog market is going. To us there are three key parts: pork cut outs, U.S dollar and how fast new plants come on stream.
Last Friday U.S pork cut outs were still strong at 87¢ lb. (with large marketing’s at 2,338 million head for week) while Lean Hogs hovered in mid-70¢. Cut outs reflect the demand for Pork if it stays relatively strong and the big new plants Seaboard – Triumph and Clemons Food Group ramp up over the next few weeks this will be quite supportive for hog prices. With excellent packer margins the incentive for the new plants to ramp up as fast as they can is certainly there.
Last week there were 70,000 more hogs then same week a year ago but market hogs were bringing $20 more per head this year compared to last. A U.S dollar 10% lower then it was compared to most other currencies is also supporting U.S pork export demand and helping hold prices.
We believe we will be on a wild ride in the market this fall. We heard reports of packers having lined up hogs for two weeks ahead. We expect most producers trying to shove in as many hogs as they can as hog prices continue to fall.
The wild ride? This fall could have hogs from 45¢ to 65¢ lb. lean. Depends on how fast new plants ramp up, U.S dollar and continued export demand. Next 120 days will be a wild time
This post was written by Genesus