At Genesus, we pay attention to China as it is a big market for us. Last year, Genesus exported 42 per cent of all Breeding stock into China from the whole world.

Market Hog Prices are the indicator of supply and demand. Last week, China hog prices averaged 18.33 RMB per kilogram. That is $1.21 US lb Liveweight, or for a 270 lb market hog, $326 USD. The same market hog in the US is $132. Almost a $200 US per head difference. We all know packers only pay what they have to! The $1.21 US lb ($326) is a true reflection of supply and demand.

Following are excerpts of a Report recently by Hu Song of CSEA China:

“The Chinese hog industry had a happy 2016 with profitable hog price about 668 Yuan ($98US) per animal according to Wens Group the largest hog producer in China. The industry is also cautiously optimistic about the year of rooster 2017. The comparison of national pig data between 2015 and 2016 indicates that domestic pork consumption per capita declined by 1.4 per cent. The total number of pigs sold to market in 2016 was about 671 million, reduced by 5.1 per cent against 2015. The total pork yield is also reduced by 2.7 per cent. Given the profitability in 2016, pig farms slowed down the culling of sows, less sows were culled in 2016. Meanwhile, hog producers are motivated to expand the sow herds, high health purebred and F1 gilts are highly demanded, many reputable pig breeding farms have pre-sold out the products for the entire year 2017. The national sow inventory was increased by 1.5 per cent in 2016, more likely in 2017. The import of pork continuously rise in 2016, increased by 112.1 per cent comparing with 2015. Detail breakdown data is included in Table 1 below.”

Of note, China in 2016 consumed 55,120,000 tons of pork. In 2016, China imported 1,650,000 tons of pork. The total pork imported is only 3 per cent of total pork consumption. Next to nothing, but a big price booster for all exporting pork countries. Our farmer arithmetic tells us the total imports were equal to 45 million market hogs, average China market weight.

Productivity is a challenge, marketed per sow per year is 15.66. There are big disease challenges and mortality is high. Also, swine genetics utilisation lags behind. With high profitability in the industry, it seems many market hogs qualify for breeding stock. This caps productivity potential. Meat produced per sow per year at 1.242 kg has lots of room for improvement. In the end, the biggest factor is 1.38 billion people averaging 39.9 kg pork consumption per capita (88 lbs), and you got the huge demand now and for our lifetime.

Other Observations

Current Market

• Weaner pigs 37.82 RMB/kg – 20kg pig $110 US
• Corn 1.54 RMB/kg = $5.70 US/bushel
• Soybean meal 3.33 RMB/kg = $440 US/ton
• Total Hog Cost – Farrow to Finish = $263 US per head
• Current margin Farrow to Finish 668 RMB = 98$ US per head
• Wens Group produced and marketed 17,500,000 head in 2016. At 98 US per head (668 RMB), could be around $1.7 billion in profit. It’s good to own lots of pigs at the right time!

Summary

When we look at hog prices in China and the minimum increase (60,000) in the current sow inventory, we expect continued large exports to China for the foreseeable future.

Gene Editing-Altering

Last week, we wrote about US FDA’s proposal to have Gene Editing-Altering treated with an approval procedure similar to a new drug. We wrote that we are concerned on how the whole process could jeopardize pork demand and consumer acceptance. PIC’s efforts re: PRRS is doable. We agree with that. That’s not our point. A case in point in the Enviropigs, developed at the University of Guelph in 1999. The Gene Altered pig was kept in production until 2012, 10 generations. Never approved for food chain. There was no market. In our opinion, the change in consumer wants has made such a product harder to move forward with. Below is an article from the New York Times re: Enviropigs.

Move to Market Gene-Altered Pigs in Canada Is Halted: By Andrew Pollack

A Canadian project aimed at creating a genetically engineered pig whose manure would be less harmful to the environment is being halted after failure to find a company willing to bring the animal to market, according to the lead researcher.

The less polluting pig, called the “enviropig,” has a gene that allows it to better digest phosphorous in its food, therefore reducing the amount of phosphorous in the manure. Phosphorous can contribute to algal blooms and other environmental problems. Ontario Pork, an organization of hog farmers that had been financially supporting the project at the University of Guelph in Ontario, has decided to stop spending money on it.

Cecil Forsberg, an emeritus professor of molecular and cellular biology at the university who was a co-inventor of the pig, said he agreed with the decision.

When the first such pig was created in 1999, “I had the feeling in seven or eight or nine years that transgenic animals probably would be acceptable. But I was wrong,” Dr Forsberg said.

“It’s time to stop the program until the rest of the world catches up,” he said. “And it is going to catch up.”

No genetically engineered animals have been approved for use in the food supply. But many consumers say in opinion polls that they would be wary of eating them.

The genetically altered pig was created using genetic material from a mouse and an E. coli bacterium to reduce phosphorus in the pig’s feces. The University of Guelph began the research in 1995 and sought food safety approval from regulatory authorities in Canada and the United States a few years ago. While Canada approved reproduction of the pig in February 2010, no government has approved it for human consumption and none of the pigs have been sold commercially.

The 16 pigs in the herd, some of them representing the 10th generation of transgenic animals, will be killed, Dr Forsberg said. But frozen semen is being saved so that the herd could be recreated if a company was found that would be willing to market the pigs.

“We’ve done enough research that we feel that if industry is interested they should be able to pick it up,” Dr Forsberg said.

Dr Forsberg said the university has had some discussions with parties in China but no deal was reached.

Groups opposed to genetically modified food, hailed the halting of the research, as did Canadian environmental groups. Some environmentalists said the pig would contribute to industrialized farming in ways that would be harmful to the environment, even if its manure was less polluting. Farmers now can give pigs a supplement in their feed to help them digest phosphorus. Dr Forsberg said that supplement had become less expensive, meaning there was less financial incentive for farmers to accept the transgenic animals.