17 July 2024

3 minute read

By: Jim Long

North America

Last week the USDA reported their projections for pork production in the quarterly animal production report.

The USDA is projecting an increase of 837 million lbs. in 2024 above 2023 (+3%). It is projecting another 411 million lbs. 2025 vs. 2024 (+1.4%). From 2023 to 2025 +4.4%.

We must live in a resilience industry. According to Iowa State University, farrow to finish (available online) losses in 2023 averaged just over $30 per head. In 2024 January to July losses have been $8.50 per head. Current breakeven price is 87.06 carcass per lb. according to Iowa State. With current October lean hog futures 70.15, December 62.375, February 67.50. The fall and early winter profit outlook doesn’t look good.

Year to date U.S. pork production is up 1.2%. To reach 3% as USDA projects for 2024 we need to have 4.8% increase over the balance of this year. That’s not going to happen.

We still expect that the losses for 20 of the last 24 months has led to liquidation. USDA in our opinion is over estimating pork supply and this is leading to pushing future prices lower.

Corn

U.S. last week came out with projections that the U.S. would produce 15.1 billion bushels of corn in 2024. Such a huge crop will keep corn prices low. U.S. national average cash corn price a bushel last Friday $3.93 a bushel (Corn ND, MN $3.46). In context a year ago, U.S. national average cash corn price $5.90 a bushel. Since then, it's been mostly downhill. 15-billion-bushel crop for each $1.00 a bushel change is $15 billion dollars change for corn farmers. John Deere announced layoffs last week.

KFC

Last week KFC (Kentucky Fried Chicken) announced it's Ontario, Canada restaurants were going to only serve Halal certified chicken. KFC would also stop serving pork products (bacon) at all Canadian locations.

This is an absolute catering to what Islam wants, Halal entails the slitting of animal’s throat while still alive and conscious (no stunning is allowed).

As pork producers the attack on our market access is sad. There has been a #BoycottKFC started on social media.

Our challenge in our industry is on pork demand. Losing outlets for Pork further damages our opportunities. We have pointed out continually the price difference between Pork and Beef. We need to address our taste issue created by the race to lean which has damaged taste. Last Friday U.S. pork cut-outs 98.73¢ lb. U.S. Beef Choice cut-outs $3.22 lb. Consumers obviously have money for Beef.

Maple Leaf Foods

Last week Maple Leaf Foods announced a plan to split the company with Maple Leaf Foods being in future prepared meats, including brands such as Schneiders, the poultry business and its plant protein business. Maple Leaf will keep 19.9% of a yet unnamed spinoff pork company.

The new pork company will have ownership of pig production (approximately 85,000 sows). Two slaughter plants the largest in Brandon, Manitoba, smaller one in Lethbridge, Alberta. The new pork company will have a supply agreement with Maple Leaf to supply pork. The breakdown of newco’s sales will be about 1/3 to Maple Leaf, 1/3 to current export markets, 1/3 to retail fresh pork in Canada and some in the U.S.

In the last year Maple Leaf processed 4 million hogs but has capacity for 5 million. The goal was stated to expand 1 million.

In our opinion this change was inevitable as Maple Leaf will focus on consumer markets. The newco pork company focused on production costs, quality and export.

For producers who always asked to own a packing plant the new public company is an opportunity. Producers joined together and invested in Conestoga in Ontario (45,000 head a week) and it's been successful for them. The newco Maple Leaf entity could be opportunity for current hog suppliers to buy shares in their future. We estimate the total net worth of current independent hog suppliers to Maple Leaf would be $2 billion plus dollars. The ability and opportunity to own a significant part of the extended value chain is real.