Last week lean hog futures reached $1.10 lb. Friday, June – July months closed over $1.09 lb. It’s been inevitable that the lean hog price would go higher up 20¢ lb. from the end of October ($42 per head). Reason is fewer hogs than even a year ago.
Our Observations:
Since the 1st of January year to date, U.S. hog slaughter is 11.1% lower. Just over 1.5 million head less.
Iowa – S. Minnesota hog weights
Year over year hog weights 0.6 lb. heavier. Next to no change. In our opinion, indicates lower hog numbers, not due to hogs being backed up.
Last week the “who’s calling whom” scenario came more into play. Packers were looking for hogs. As hog numbers continue to decline the calling will become more frequent.
Reflection of supply-demand: USDA cash 40 lb. feeder pigs last week $105.00 a year ago $68. No one pays more than they have to. Lots of empty barns chasing pigs to fill them. What do you expect re supply when there are at least 300,000 less sows than peak sow herd? A decrease of 7.5 million pigs of weaned production.
PRRS – PED is rearing its ugly head knocking down supply and increasing demand to fill finishers.
After the Iowa Pork Congress, we traveled through the Midwest. What we observed is not only labor shortages in slaughter plants but the ongoing struggle for labor in swine farms and the implication of this reality. Not enough labor in many sow units is cutting productivity. Too many farms are short labor and this leads to normal productivity functions not getting completed. In nurseries – finishers we observe the same. We expect lack of labor could be cutting production by 2-3% coming from higher mortality in all phases of production and lower farrowing rates. We have knowledge of 5,000 sow units with only 7 employees working. A production disaster.
This lack of labor is also contributing to the lack of new sow units getting built or older ones getting started again.
Let’s compare 3rd quarter PigCHAMP Data from 2010-2019 (prior to Covid) and 2021
PigCHAMP Mean on 280 Farms
Our data doesn’t necessarily confirm our belief of lower productivity due to labor. It certainly shows a lack of productivity increase that had been a hallmark of 2010 to 2019. We believe the lack of productivity increase from 2019 to 2021 is the lack of overall labor. Born Alive litter size increased from 2019 to 2021 in line with Genetic progress. Lower farrowing rate and higher pre-weaning mortality are a function of husbandry (labor). Higher sow mortality leads to fewer sows farrowing, cutting farrowing rate. A consequence of Prolapses Is Coming.
Europe
Prices continue to be terrible for producers. Losses have ranged from $30 – $50 per head the last four months. Cull sow prices have been at record lows for 18 consecutive weeks. Sow liquidation is ongoing. Some Euro regions project a 10% decline of the sow herd. When the dust settles, less pork and price increases like the U.S. is experiencing.
China
We believe one of the consequences of large sow herd liquidation in China will be less corn imports. Last week China canceled 380,000 metric tonnes of corn (14.96 million bushels). China has bought 490 million bushels (this crop year), 137 million has been shipped. The U.S. Corn market expects China to buy the corn, this is propping up current corn prices. Seems China, if they need the corn, not in a hurry to take it, and obvious from last week’s actions, they can cancel. One thing for sure, don’t need corn to feed hogs that don’t exist.
Summary
U.S. hog price continues to move higher with less hogs coming to market. European and China sow liquidation means at some point in 2022 over 75% of the world’s hog production will be down at the same time – the first time in history for all three major world production zones.
Less hogs always lead to higher prices.
Evgeny Shatokhin, official representative of Genesus in Ukraine and Kazakhstan:
+380 (50) 444 2633
shatokhinyevgen@gmail.com
