Pork Commentary: Canada Doing Its Part

To have profitable hog prices we need fewer hogs. From what we can see Canada is doing its share.

To the end of March year to date there was 20 per cent less total Canada pig activity. In the first three months of 2009 there were 1.3 million fewer year over year. That’s 100,000 less a week in the continental production system. Canada has done its share to lower hog numbers. It has happened because of the huge financial losses suffered by producers across Canada in the last two years. As someone said to us last week “The women and children are dead. The only ones left are the warriors.” Tragic but probably true. This is a tough business.

Other Observations

• The USA National Lean Hog Price in the last week of March was 55.10, a year ago the same week was 49.38. 2009’s lean hog national lean hog price was 11 per cent better than 2008. The national lean cost average May 2008 was 79 cents. We expect the same trend in 2009.
  
  
• Demand in January Canada’s pork exports were up 3.4 per cent from January 2008.

We keep hearing that pork exports are being hurt by the global economy. The facts are that exports are up.

• The spot price for hogs last week in the United Kingdom was €1.55 a kilogram which is $1.05 US liveweight per pound. A price increase of 50 per cent from the UK’s price lows in 2008. Why is the price higher? It’s what happens with liquidation. The UK like the rest of the world has been hammered by high feed prices which lead to large financial losses. The herd was cut significantly. The UK 60 pound feeder pigs are currently touching $87.00 US cash. High hog prices in the UK and lower supply is leading to greater pork imports. Consumers are and will be paying more for pork despite a Global Financial crisis. People eat!
  
  
• Last week Canada’s Maple Leaf Foods announced that for the foreseeable future it does not plan to continue a formal sale process for its Burlington Ontario processing plant (capacity approx 42,000 a week).

We suspect USA country of origin labeling (COOL) has helped make Maple Leaf’s plant more profitable as the cool regulations are keeping more market hogs in Canada. Plants need hogs to be profitable. In the coming months as USA packing plants look at empty shackles due to COOL. Maple Leaf and other Canadian packers will be running near capacity. Coupled with a lower Canadian dollar and solid pork supply, expect Canada’s packer’s to increase pork exports. We’re not sure COOL advocates thought this would be an implication of the rules?

• Last week the Ontario Pork Producers Marketing Board (OPPMB) had its annual meeting. There was much wringing of hands by some of the Jurassic directors who wish to continue with the draconian monopoly powers for selling hogs. Fortunately, the writing is on the wall. The last vestiges of the central committee planning are almost over as the Ontario Government is poised to unshackle producers from totalitarian product control. There will be soon a meeting of the OPPMB directors to elect a new Chairman. The current chairman continues to leave little doubt that as Hugo Chavez rules so should he. Why would any organization not want to keep a chairman that has supervised a system that has consistently delivered the lowest hog prices in the world (we have never been challenged on this claim). As the real Hugo Chavez said last week “Capitalism is dead.” Capitalism has been dead for Ontario Pork Producers for a decade. Only the resiliency and productivity of the producers has kept the industry viable despite the world’s lowest hog prices.
  
  
• Last week, the USDA released crop planting expectations. For all intents and purposes 85 million acres of corn and 76 million acres of soybeans are the same as a year ago. There will be lots planted. Crop farmers have made money and fertilizer costs are down with the decline of crude oils. We will not run out of feed. We expect little price enhancement in corn and soybeans as global and domestic poultry livestock inventories will continue to be low. Only a weather scare can push feed prices up significantly.
  
  
• The Chicken Little Economists from the University of Missouri are now projecting $48 – $52 in quarter two and $51 - $55 in quarter three (10 per cent lower than last year). We quote Glen Grimes and Ron Plain April 04 weekly review “The bottom line is that the breeding herd needs to be reduced more, possibly five to seven per cent (300,000 – 420,000)”. In our opinion hoping the industry cuts the breeding herd by such a significant amount is obscene and defeatist. No wonder our domestic per capita pork consumption is half of Europe’s. The Chicken Little’s are being paid by producers’ dollars and given a platform to continually put forward ideas that are outdated. Our industry was not built by ‘University Professors’. It was built by entrepreneurs who have built, borrowed, and risked. “Can do” people rather than “can’t do” people. If we have to do as they say liquidate 300 – 420,000 more sows before we get profitable it would take, in our opinion, another year of $25.00 per head losses or almost $3 billion in industry losses.

The whole industry will be crippled for a generation. The losses that will be needed to knock out that many sows will be catastrophic for the whole industry. There is no place better in the world than USA to produce hogs. Losses have been worldwide. It is not USA unique – the USA has feed, land, capital, expertise, packers, and educated labor. It has been hard but we believe what we are seeing in the Global Hog Prices and the huge decrease of all meat and poultry. Supply will soon lead to sustainable hog profitability. We still believe 90 cent lean in June.

GENESUS 25 plus Award Winners

Genesus is pleased to congratulate the 66 Genesus customer herds that achieved over 25 pigs weaned per year in 2008. It takes extraordinary effort and management to reach such lofty production accomplishments.

At Genesus we are proud these award winning producers have made the decision to choose Genesus as their genetic source.

Genesus continues to invest intensively in genetic improvement and testing. Genesus has the world’s largest registered Purebred Swine Herd and is the largest producer of Yorkshire-Landrace F1’s derived from registered purebreds.

The combination of purebred genetic enhancement which maximizes heterosis and the Genesus customer’s superior management leads to production results that are creating new industry benchmarks.