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Pork Commentary: Pork Powerhouse

by 5m Editor
10 September 2008, at 11:42am

CANADA - This week's North American Pork Commentary from Jim Long.

When we look at the U.S. Top 20 pork powerhouses, we see that at 2,947,000 sows, they are approximately 50% of U.S. Pork production. Smithfield continues its huge dominance in production. There is little change in total pork powerhouse sow numbers from 2007 to 2008. We can only imagine this group’s collective financial losses in the last year. It’s been hard for them just like everyone else. There is no magic. The hog price is the hog price. The feed price is the feed price. They got big by being resourceful. It’s part of the laws of business. Now it appears any growth is from taking over other existing operations. There is no gold rush to build new sow barns.

Canada Pork Powerhouses

Canada’s five pork powerhouses decreased by 30% in 2008. It’s a reflection of the economic pressures caused by high feed prices, currency exchange rate, and obviously net profit losses. Big sky farms has the stability of being owned by the Saskatchewan government which has poured millions into this rat hole while independent tax paying producers have been driven out of business. It’s ludicrous that governments should and do own hog farms. The Saskatchewan government has announced they are planning on selling big sky. We are still waiting. Maybe they should just close them and admit this foolishness.


Source: AgricultureOnline®

Source: AgricultureOnline®

Pork Demand

The ag economists from Missouri reported last week that U.S. Domestic pork demand was negative 3.9% in the first 6 months of 2008. Thank goodness for pork export demand saving our bacon.

Makes it wonder how chicken and turkey domestic demand is up this year but pork down. We have invested as an industry one billion dollars in check off since it’s inception a generation ago. U.s. Per capita pork consumption has not changed in this time period, hovering around 50 lbs. In the same time period chicken is up, turkey is up, and beef is up (especially when you consider revenue spent per capita).

In most businesses an investment of one billion dollars for marketing that did not lead to increased market share (even worse pork market share of U.S. Per capita meat and poultry has declined each year of check off). Heads would roll. The lame other white meat program has failed. One billion dollars wasted. World pork consumption has increased with a market share being 46% of all the world’s meat and poultry consumption, but not in the USA where pork consumption is less than 25% of all poultry and meat consumed.

Let us be clear, we are in favour of check off, but we are not in favour of spending our money stupidly. The other white meat program has proven it doesn’t work. Get new marketing. Fire the advertising agency. Lets get value as we can all see pork demand in the form of exports have enhanced our prices. Unfortunately, domestic demand is falling. This is not good for our business.

An interesting part of this equation is the spin master ag-economists that give inflated convoluted values to the check off. Their opinions bought and paid for with our own check off dollars, these purveyors of spin justify repeatedly the success of the other white meat program. This in the face of all the facts. They have lost if they ever had their credibility.

We have, like you, invested our life’s resources in this industry. It’s a tough business. Everything we do must bring value. We plead for better utilization of the check off dollars. We need to increase domestic demand. Coca-cola keeps marketing through thick and thin. Marketing increases demand. We have packers that know the business. They too prosper from greater demand. Co-op marketing with packers could be an option. Pork billboards in Iowa is about preaching to the choir. Iowa has 1% of the U.S. Population. It’s about check off politics; it’s not about value. As we said, we support check off, but it’s not working. It needs to change for all our destinies. A billion dollars is gone and we have lost market share. In 2008 we need “change“.

Maple Leaf Foods

The listeria outbreak that has been linked to maple leaf foods is bad for everyone in our industry, in and outside of Canada. Now the leader of the official opposition in Canada wants an inquiry into the tragedy. Nothing like politicians wanting to close the barn door after the cows get out. (accidents do happen.) Maple leaf and CEO Michael McCain appear to have as good of job as possible dealing with the problem. They have been forthright and proactive. The faster maple leaf gets back its mojo, the better for all Canadian producers.

Markets

The average Iowa-Minnesota lean hog price last Friday was 74.23, up from Friday the previous week 6.00 (+$12.00 per head). It’s the right direction, but with USDA carcass cut-outs at the end of the week down for the 12th consecutive day to 77.20 (had been 93.89), its hard to see much further upside to lean hog prices when we all know slaughter is seasonally increasing.

Fortunately, future lean hog prices continue to show confidence in the marketplace. October 69.42. December 68.17 (Friday close). We are still concerned that week upon week of over 2.4 million head marketings which we expect this fall (200,000 more head a week then now) could put extreme pressure on slaughter prices.