Lower or no profit margins are pushing US total red meat and poultry production lower. The USDA projects over a billion less pounds in 2012 will be produced compared to 2011.

An increase in US population and a small increase in exports have USDA projecting in 2012, 201 pounds of red meat and poultry per capita disappearance down seven pounds per capita in two years.

Less protein available will be price enhancing for pork producers. Lean hog futures reaching over $1.00 a pound is a strong reflection of the market place expecting ever stronger prices.

CME April Live Cattle closed last Friday at $128.15 a pound up from $1.06 almost a year ago. That is an increase of about $250 per head. Higher cattle prices will absolutely pull lean hogs higher, as the USDA projects the 2012 beef supply 5 per cent lower year over year.

We remain quite optimistic of strong lean hog prices through the summer of 2012. The wild card is feed costs as they go up and down in huge price swings. This past week corn jumped 40 cents a bushel while soybeans climbed $1.00 per bushel. The insanity of corn ethanol continues to wreak havoc on swine production cost structure.

Spain

This past week we had visitors from Spain.

• Spanish producers are receiving about 75 cents US per pound (1.20 Euros per kilogram).
  
  
• Producers in Spain are feeling strong economic pressures as only the best can make any money at current prices.
  
  
• The cost of feed in Spain is such that about $140 is needed to produce a market hog.
  
  
• Spanish producers are looking for productivity improvements as a way for them to survive. Genesus is glad to report that we are establishing a production facility in Spain to have Genesus Genetics available for the domestic market.
  
  
• The European Swine Industry is under intense pressure. The industry is contracting. A report from The Netherlands last week indicated that Dutch based Topigs Genetic Company lost in the first six months of 2011 138 customers (33,000 sows). Topigs explained that they expect their gilt sales in The Netherlands will decline 27,000 gilts per year. This is a tough time for Topig.
  
  
• Kicking Topigs when they were down was the President of Netherlands based Hypor (Hendrix Genetics) Antoon Van den Berg who said in a Dutch interview "The farmers are not happy with Topigs at all, the slaughter hogs cannot keep up with the hogs from the competition breeding companies." It seems to us the Dutch Swine Genetic Industry must be a blood sport. In the same interview, Hypor President Mr. Van den Berg was asked "Why is it not possible for Hypor to get more market share in the Netherlands?" He replied: "Hypor didn’t have market share in the gilt sales in the past, the image from Hypor not good at all, this is still hurting us."

As a competitor we have to admit we find it amusing when another competitor falls on their own sword while confronting their own brutal facts.

Bottom line: Intense competition in the Swine Genetic Industry pushes genetics forward which helps producers to lower the cost of production, increase productivity, and profit potential. I have to say the scenario is stimulation and challenging – but never boring!