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Pork Commentary: Markets Continue to Languish

by 5m Editor
6 October 2009, at 10:04am

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

You need to go no further than the breathless daily reports of pandemic fantasies. Someday the reporting of a flu which is something that is a daily occurrence will become irrelevant. Until then, it will be real hard for our market to get any positive traction. The dismal part is losses of $30 per head are commonplace. Two years of real pain is taking a heavy toll with US sow slaughter continuing to run around 70,000 a week a sure sign of real breeding herd liquidation.

  • This coming week it appears the Canadian Government will announce the rules and criteria for its loan guarantee and herd retirement programs. It will in the end, result in fewer sows in Canada, cutting production. The Canadian sow herd has already decreased over 12 per cent from its peak inventory.

  • We have talked to some hog equipment suppliers and the only business they are getting is replacement equipment for existing infrastructures. We had the huge building phase from 1995 – 1998. Many of those barns now need major renovations. There is little capital to get this accomplished. Lots of wire holding pens in place. We better get some positive cash flow soon or many barns will be beyond the point of no return.

  • Corn and Soybean crops continue to get larger according to some reporting services. Wheat has dropped $2.00 a bushel in the last couple months hitting contract lows. Huge Soybean crops being predicted out of South America. It appears there will be enough feed stuffs over the next few months to prevent another feed price shock. The wildcard is ethanol and export demand. A weak US dollar could enhance exports by increasing foreign purchasing power.

  • Early weans continue to rise. Now up last week with cash prices hitting $36 as a high and with a $25 average. The USDA September inventory reported 4 per cent less pigs less than 60 pounds. Assuming this is correct we expect to see continual early wean price enhancement.

  • We had some visitors at Genesus this week from China. They report China hog prices are $1.80 US a kilogram or 82 cents US live weight per pound. We were told good Chinese producers are making $20.00 US per head. Breakeven is over 70 cents US per pound. In China, there has been government support to keep sows in production but it only is $15 US per sow. Below average producers are losing money. China has expanded hog production an average of 20 million head a year over the last seven years. Greater disposal income, the love of pork and 1.3 billion consumers are great demand drivers.

  • This past week we toured Conestoga Meats in Ontario with our Chinese group. Conestoga is owned by independent producers and harvest about 14,000 head a week. Conestoga has developed its own brands and markets. Unlike the Meadowbrook co – operative in Illinois the Conestoga producers have kept control of its destiny with an active producer board. Currently, Conestoga has new construction underway to expand its processing capacity. It’s good to see the positive results of 150 producers working together. I am particularly proud to see Conestoga’s success knowing my deceased father was the founding chairman and one of the principal advocates of this producers group. He always believed that when producers get together their combined capital wherewithal could rival any major corporation. There is no magic in business, you have a plan and then you execute.

This coming week we will go to Moscow to attend the Golden Autumn Agriculture Exhibition. We will update the Russian swine market in next week’s commentary.