If 20% sow drop, the weekly hog marketing’s will decline about 2.5 million hogs per week. The rest of the world will have great opportunity to help backfill the shortfall.
We Believe current U.S. lean hog futures are significantly discounted to what we expect will happen when China starts their needed imports.
We will not be surprised if the worlds hog prices reach record levels.
The Longer China’s sow herd liquidation continues, the higher the high and the longer it lasts.
Tough week for Lean Hog Futures
Last week was tough for Lean hog futures.
On Friday, February 15 April lean hog futures were at 60.27₵ lb. by Wednesday, February 20 they dropped to 52.25₵ lb. 8₵ lb. The 8₵ lb drop was dramatic and traumatic. Our Industry is losing money currently at a $20 U.S. plus clip. As producers we mostly have an Optimistic Gene but a drop of 8₵ shakes even the most optimistic soul.
U.S. Packer Gross Margins have fallen from their record high levels. If we use last Fridays close on U.S. Pork Cut-outs of 59.01₵ lb. and 53.13₵ lb. for a 53-54% lean hog. The spread of about 6₵ lb. probably means packers have next to no money left over after hog harvesting costs. If the Packer owns hogs the model of harvesting your own probably means negative margins just like most other hog producers.
More Packer Capacity is just around the corner with Prestage having an open house March 2 for their new Iowa Plant (1,000 head per hour capacity). More capacity probably means record Gross Packer Margins are a thing of the past.
U.S. Hog slaughter year to date is up 2.3% while the hog price is currently $30 per head less than a year ago. In our opinion Mexico’s 20% tariff and China’s 72% Tariff on U.S. pork is the blame for much of $30 per head difference.
U.S. Trade talks with China and Mexico are ongoing. It is in the U.S. pork industry best interest that somehow there is a resolution. Our sense is that the U.S. industry has stopped net expansion and we would not be surprised if the U.S. sow inventory March 1 is not lower then June last year.
Small pig traders report all pigs moving with barn space available but challenge is buyers’ confidence.
Last week we read where the National Pork Producers Council is pushing for the U.S.D.A. to take over from the U.S. Food and Drug Administration the regulation of GMO-Gene Editing of Swine.
We are not sure why as an industry if we believe GMO-Gene Editing is safe why we would not want it to be regulated and approved by the strictest protocols, which undoubtedly the U.S. Food and Drug Administration would provide.
If we want consumers to have the utmost confidence in the pork we sell then why would we not want to have it proven by the strictest protocols. A Move to U.S.D.A. would only make it easier for approval, that’s the reason for the push. Don’t we want to make sure it’s safe for our consumers, ourselves and our children?
Recently we were with a European producers. In Europe the courts have ruled Gene-Editing is to have all rules of GMO. It is GMO.
We asked the producers what they think about GMO-Gene Editing. Their answer; It will never happen in Europe.
This is about science and safety; but just as importantly it is about being able to sell our Pork. Before NPPC begins pushing for GMO- pork maybe surveys should be done to find out who will buy it? Never seen one?
We still expect a major Packer will come out with a NON-GMO label soon. Why wouldn’t they? Some packers are claiming no hormones on label already. All Pork NON-GMO currently. When one labels NON-GMO Pork we expect most will follow.