30 January 2023

3 minute read

By: Banff Pork Seminar

North America

It's a good indication of the kind of guest you are when you get invited back. Well-known U.S.-based protein industry analyst and market commentator, Brett Stuart warmed up his audience at the 2023 Banff Pork Seminar (BPS) with a little anecdote about spending a couple of years living in Western Canada and when he left, bringing back to the United States the woman who would be his wife.

The fact is he didn't need that story to convince the audience he speaks their language. They know that. He is a popular analyst and solid speaker who has been in Banff before. He gets invited back because he is clear, informed and comfortable providing useful market analysis based on his solid network.

Here are six key predictions from his presentation.

Cycle peaked. The commodity cycle has peaked; but we will not return to pre-pandemic price levels in commodities or inputs. The recession risk remains globally but Stuart sees a soft landing for the United States and Canada.

Tightening global hog supplies. Stuart predicts a smaller U.S. hog herd and a steady Canadian herd while the EU herd will continue its decline. North America now produces the most affordable pork.

The China factor. COVID waves will pass allowing economic recovery. The hog cycle has been disrupted temporarily. China can live without U.S. pork but can the United States live without China? The answer is yes as long as Mexico continues to be a strong customer, he says. Mexico is growing in all phases of pork from production, export, import and consumption. It's the only country to do that and it is a major opportunity for the United States.

Back to China. Stuart gave two indications of Chinese central policy impact. One is the massive hog hotels that have been China's response to modern disease management and have garnered worldwide attention as a curiosity and business model. Stuart says based on his feedback he believes they have proven to be a massive failure at managing disease and may well be pushed to the waste bin of history. A second was the government's decision to ban swill feeding. It immediately meant they were in the market for 30 million tonnes of feed grain. A huge impact.

The big wildcard ahead: Feed grain prices. While he was quick to point out he is not a meteorologist, Stuart says he has he access to good ones and he says they are forecasting a weather shift from dry years seen recently to wetter years ahead.

Decent year ahead. Stuart says 2023 should be a decent year for hog farmers based on supply/demand, but it may be a tougher year for processors.

The activist challenge. One big unknown is California's Prop 12 court case. The Supreme Court heard oral arguments in October and is expected to offer a ruling in the next 60 days, Stuart says. California has moved the implementation date to mid-2023.

This case has big implications far beyond pork, he says. It has mass-following far beyond agriculture and it could trigger a cascade of similar regulations in other states. No one knows which way this will go. An estimated three percent of U.S. hogs are compliant. California consumes an estimated 12 percent of U.S. pork.

The other challenge is activist versus data driven climate policies, says Stuart. It is moving quickly globally. Dutch farmers are protesting plans to halve the nation's livestock. New Zealand plans to tax farmers for emissions, beginning in 2025. Ireland plans to cut emissions by 25 percent by 2030; Denmark to cut livestock emissions by 65 percent.

Canada's Prime Minster Trudeau is suggesting a 30 percent cut in fertilizer emissions costing around 160 mmt of grain, and proposing tripling the carbon tax (to $150,000 for a 5,000 ac. farm).

It's all about methane from livestock, fossil fuels, landfills and biomass burning and it will have a big impact on the pork industry.