Jim Long, President-CEO, Genesus Inc.
Go figure, less hogs leads to higher prices! For months we suggested lean hog prices would surpass 2021, seems we are on track.
Observations
U.S. Pork Cut-outs closed $1.0996 on Friday.
Year to date U.S. hog slaughter 10% less.
2022 =14,846,000 vs
2021=16,494,000.
We believe the USDA estimate of 4% less is overestimated. We won’t be surprised to see 8% less ongoing.
Iowa – S. Minnesota weight
February 6, 2021 = 288.3 lbs
January 29, 2022 = 290.3 lbs
February 5, 2022 = 289.1 lbs
Current weight at levels that don’t denote back up of hogs.
June lean hog futures closed Friday at 112.20, end of October they were 88¢ – a gain of $50 per hog.
A real reflection of lack of supply to demand. USDA cash early weans averaged last week $83.47 while 40 lb. feeder pigs $112.10. Kind of what happens when there were four months of under $20 for 40 lb. feeder pigs in 2020. Surest cure to low prices is low prices.
Iowa – S Minnesota lean hog price averaged Friday at $90.38. If pork cut-outs can stay near $110.00, as they were Friday, $1.00 lean hogs will be soon.
Less hogs, strong demand, all small pigs and market prices racing higher. No sign of expansion. The latest weekly sow slaughter is 62,000 which doesn’t indicate expansion. Cattle and Poultry prices strong. Pork is good value. 2022 is shaping up for a very good year. An industry damaged by Covid issues and abandoned by the USDA and NPPC on CFAP-1 top-up deserves a good run. It is here.
The list of Chinese Public Companies with about 4.2 million sows appears to have had losses in 2021 of $7.613 billion U.S. dollars. Our Farmer Arithmetic equates this to an average loss of $1,812 per sow. Let’s assume this is about 10% of China’s sow herd (inventory reported to be 42 million). Could country-wide this equate to $70 billion? You think there isn’t liquidation of the sow inventory?
Of note, China hog prices still are low and losses continue at this pace. Our premise, financial losses in hog production leads to less hogs. Big financial losses in hog production leads to even fewer hogs. We believe China has been liquidating sows since last July. We expect in quarter 2 to see China hog slaughter numbers begin to drop year over year and prices rise.
Tough Markets Not Only in China
Genus PLC is the owner of PIC. PIC is a major part of Genus plc. PIC is currently the world’s largest Swine Genetic Company. Since September, or over about the last 6 months Genus PLC, which is a listed public company (GNS) on the London Stock Exchange, has seen its shares decline from 6070 GBP ($8230) to 3490 GBP ($4730) last week wiping out 100’s of millions of dollars in market value. It appears the institutional shareholders who have owned a large percentage of shares have decided to cash out.
We won’t surmise why investors are leaving. There is little public news other than some reports of a weak China market and insiders selling shares. Must be tough times for management to explain collapse in value of 100’s of millions of dollars in market cap. Genus Chief Executive compensation 2,075,000 GBP ($2.7 million), shareholders, we expect, want their share value to stop bleeding.
Evgeny Shatokhin, official representative of Genesus in Ukraine and Kazakhstan:
+380 (50) 444 2633
shatokhinyevgen@gmail.com
