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Canada, Ontario - Oktoberfest and Better Days Ahead?

by 5m Editor
18 November 2011, at 10:03am

CANADA - Enjoyed a great pork schnitzel supper with one of my sons-in-law last night. Didn’t completely intend to, have pork that is. But upon arriving at a relatively high-end restaurant pub, discovered they had a great Oktoberfest menu in addition to their regular menu, writes Bob Fraser, Sales and Service at Genesus Ontario.

Bistro & Cafe is open for Lu.

OKTOBERFEST MENU (Held over until 22 October)
Crispy Pork Schnitzel $16
Served with mashed potatoes, home made sauerkraut & grainy mustard
Sausage Platter $15
Weisswurst & Bratwurst
Served with mashed potatoes,
home made sauerkraut & grainy mustard
Braised pork hock $15
Served with mashed potatoes,
home made sauerkraut & grainy mustard
Smoked Ham Hock & Split Pea Stew $11
With Potato & Root Vegetables

When we have a local restaurant getting any pork on the menu, let alone one this extensive, they have to be supported. So my son in law did justice to the pork hock and I took on the pork schnitzel. Fantastic! Such that I’m encouraged to hear from the waiter the schnitzel has become such a hit it is going to become a feature on the regular menu.

So I don’t intend my commentary to become a restaurant or food review but to highlight how our rising fortunes are a story of demand far more than one of supply. The most recent Hog & Pig Report just further highlighted what has become a theme of amazingly stable inventories over the last number of quarters. The tide that Jim Long has emphasized in numerous commentaries that is beginning to lift all boats is one of demand.

Take a look at the following graph supplied by John Bancroft, Market Strategies Program Lead, Stratford OMAFRA: john.bancroft@ontario.ca

The US pork industry is rapidly learning what the Canadian pork industry, as an export nation has understood for a long time. You live and die by your exports! The path ahead presently looks like we’re going to live, perhaps well? Now look at how booming exports have driven domestic demand!

Take a look at the following excellent analysis supplied by Bob Hunsberger, Wallenstein Feed & Supply as to how this kind of demand translates:

Assumptions for the Hog Economics Calculations - Producer Costs

Feed cost for an average ration:

  • 780 kgs of corn at elevator quote for #2 yellow
  • 190 kgs of soymeal at the cost delivered to the farm or mil.
  • 30 kgs of vitamin/mineral premix at $800 per tonne
  • $25 per tonne for manufacturing, delivery and overhead.

Feed use:

  • Whole herd feed efficiency of 3.3 for average production
  • Whole herd feed efficiency of 3.1 for excellent production

Capital Cost:

  • $4,500 per sow total investment for farrow to finish
  • 25 per cent debt at 7 per cent interest
  • Depreciation over 20 years

Labour Cost:

  • 17.6 hours per sow per year at $14 per hour.

Other Costs:

  • Vet, medication, electrcity, insurance, taxes, telephone
  • genetics, office, marketing and repairs
  • Total of $500 per sow per year.

Production:

  • Average production 19 pigs sold per sow per year at an index of 108
  • Excellent production 21 pigs sold per sow per year at an index of 110
  • Market weight is 115 kg live. Costing in table below is based on excellent production assumptions.

So are profits of $12.25 per hog for the next twelve months in fact the future? Well although Bob’s analysis is sound we’ve all learned with the extreme volatility as the "new normal" these numbers can change very rapidly, often with significant magnitude daily. However, two important points. One demand is offering up some profitable risk management opportunities for consideration. Two, note the doubling of profits moving from average production to excellent production. As always through good times and bad staying focused on your game pays the biggest dividends.

Genesus Global Market Report
Prices for week of 6 November 2011
Country Domestic price
(own currency)
US$
(per pound liveweight)
USA (Iowa-Minnesota) 83.55¢
US$/lb carcass
61.87¢
Canada (Ontario) 1.62
C$/kg carcass
57.38¢
Mexico (DF) 22.35
MXP/kg liveweight
74.22¢
Brazil (south region) 2.50
BRR/kg liveweight
63.08¢
Russia 88
RUB/kg liveweight
$1.29
China 17.05
RMB/kg liveweight
$1.21
Spain 1.19
€/kg liveweight
72.76¢