info@genesus.com
Last week U.S. hog marketing’s were 2,503,000, up 9,000 head from a year ago. Essentially no change. The market was positive in a sense considering 2.5 million hogs marketed with market hogs 88¢ lb. and Pork cut-outs 99¢ lb. (Iowa State University cost of production calculation 86.73¢ lb.).
Small pig prices continue to be higher than a year ago. Cash early weans averaged $29.57 last week, a year ago $12.04. Iowa State University projects early wean cost of production $41. Cash 40 lb. feeder pigs a year ago were average $33.50, last week $50.87. Note both early weans and feeder pigs are $17 higher year over year. In our opinion reflecting the decrease in year over year feed prices and subsequent lowering of finishing costs. We understand good demand for small pigs, and we expect there prices will rise from this point through the fall.
Last week there was some life in lean hog futures with October getting just over 80¢ lb., December 71¢, February 74¢, April 78¢. The challenge is if cost of production is 87¢ lb. it doesn’t take an ag economist to calculate real significant losses for the next several months. Farmer Arithmetic $25 per head average loss until April. We would expect this scenario will just continue to grind down the sow herd.
We are not hearing many new sow barns being built. We expect this is a reflection of recent and current economics in our industry. Building and equipment costs have risen to new highs and when coupled with interest rates much higher than recent times are major contributors to the lack of construction. Some numbers we heard recently were over $4,000 USD per sow for Prop 12 compliant farrow to wean. Farmer Arithmetic 7% interest on $4,000 per sow is $280 per sow per year, 28 pigs weaned per year, that’s $10 per pig interest cost. We suspect cost of production reaching $50 or maybe more per pig. Cash early weans were $29.57. The challenge is a pig is a pig for all intents and purposes and there is little value placed on a pig whether it comes from a new barn or old one.
China
China’s hog price continues very strong at 20.77 RMB/kg or $1.35 USD lb. liveweight. Current profits are in the $100 per head range. A long way from losses of months upon months of $50 per head losses. Liquidation of 4 million sows has obviously led to less hogs. In a couple weeks Spencer and I will be heading to China. We will both be speaking at the Global Pig Genetics Summit and visiting producers. We will report our observations.
Gene Editing – GMO
Demand Crusher?
The drumbeat of the push for Gene Edited – GMO pigs continues. Give credit to PIC they stay on message about the merits of what they hope will be a game changer for their financial position. We see all the reasons Gene Edited – GMO pigs are to benefit to PIC. They will be in position if it gets approved to work to recapture 10’s of millions they have invested in Gene Editing – GMO technology.
Major shareholders of Genus plc which owns PIC include huge investment funds Baillie Gifford, BlackRock, Vanguard Group, we expect pressure to launch GMO – Gene Editing is strong, PIC expected to have regulatory approval in 2023. It seems the potential approval if ever date is still not established. Genus plc shares have decreased 24.54% in last year.
We expect PIC has a good chance to eventually get approval for Gene Edited – GMO somewhere in the world. We don’t question the technology. What we question is what it could do to pork demand. The only study we have seen was done by Iowa State University. In our opinion a pro ag and technology institution. That study of 2,000 American respondents found that around 60% of the women in the survey said they would be unwilling to eat and purposely avoid gene-edited foods. If someone has another extensive study, we would like to see.
What we don’t understand is why the Pork Board – NPPC seem to be cheerleading this technology but have never used their resources to do polling on consumer attitudes and acceptance.
The challenge to producers’ is technology gets accepted, they start to use Gene Edited – GMO pigs. What happens if market stops. For example, Major Packer? Retailer? Restaurant chain? Importer? Importer announces no Gene Edited pork. When Paylean got stopped, we just stopped using. What do you do with Gene Edited pigs in a system. Is PIC guaranteeing a market for the technology they will be selling you at we expect a huge premium.
Right now, Mexico will not accept GMO corn for human consumption. Mexico is now U.S. largest importer of pork it’s mostly hams, so it’s part of millions of hogs. Do you think Mexican Pork Producers won’t fight to keep Gene Edited – GMO pork out of their country when precedent already set on corn.
We have huge demand issue in the Pork Industry. We have a huge lack of profitability issue. In our opinion we can’t afford Russian Roulette with potential demand crushing technology. If PIC is confident in this technology acceptance, it would not be unreasonable for producers and industry to be furnished monetarily market access guarantees from the seller of such technology.
