World Market Update
World Markets
- Our Premise – The three major hog-producing areas in the world USA, China, and Europe are all cutting production at the same time. This has never happened before.
Feed Prices
- Feed prices have pushed the cost of production to record levels all over the world. Some relief in sight.
Contract Highs | Now | ||
Corn | December | $7.66 | $6.07 |
Wheat | July | $12.84 | $8.31 |
Soybeans | September | $16.06 | $14.16 |
- Spain 370 Euros/ton or over $10.40 a bushel, was $11.60 a bushel
- China 3128 RMB = $12.50 a bushel, was $13.70 a bushel
Europe
December 1 | ||||
2020 | 2021 | # down | Percentage | |
Breeding Pigs | 11,415 | 11,004 | – 411 | – 3% |
Total Pigs | 145,877 | 141,516 | – 4,321 | – 3% |
Europe Pork decline 5% Q1 – was 7% lower in March
Germany
- 1.48 million sows May 2022
- Germany has declined 6.2% since December 1 (-100,000) down to 1.48 million. Down over 200,000 in the last 18 months.
- High feed prices
- Loss of exports due to ASF
- New animal welfare regulations
- 12% less pork in Q1 vs. a year ago
Spain
- The largest producer in Europe
- Business model – contracting unlike rest of Europe it has been the only country in Europe to expand in the past two years
- Last ten weeks slaughter has declined year over year
- Has the highest price on record – just over cost of production
Netherlands
- Livestock industry under huge pressure for nitrogen pollution
- $27 billion USD budgeted to radically reduce livestock production through farmer buyouts – voluntary to start with
Sow herd (1,000 head) | ||
2014 | 2019 | 2021 |
1,106 | 1,047 | 910 |
- Huge protests underway – some estimates sow herd will be cut by 30% -300,000 sows. Less hogs coming
China
- Sow liquidation began last July – 10 months later is March-April.
China Average Hog Prices | ||
Price per lb. | 35 lb. Feeder Pigs | |
Low was March 18 | 85¢ lb. | $59.60 |
Week of July 7 | $1.38 lb. | $103.29 |
- The only reason the price increased is because of fewer pigs. China just had its 1998.
USA
June 1 USDA Hogs and Pigs Report | |||
| (1,000 head) | ||
| 2020 | 2021 | 2022 |
Kept for Breeding | 6,236 | 6,220 | 6,168 |
Market | 71,038 | 66,933 | 66,356 |
Pigs per Litter Dec.-May | 11.00 | 10.95 | 10.97 |
Sows Farrowing Actual Dec-May | 6,329 | 5,964 | 5,904 |
June-November | 6,425 | 6,098 | 6,025 |
Why less Hogs?
- Financial losses during Covid crisis
- High feed costs
- Difficulty to get labor
- High building costs – $4,000 sow farrow to wean
- Breakeven?
- Generational change
USA – Demand
- Chicken production lower year over year with prices now $1.60 lb. a year ago $1.05 lb.
- Beef cow liquidation and lack of Heifer retention at record combined levels. USDA projecting almost 2 billion lbs. less Beef in 2023 then 2022 (-7%). Equal to about 4 weeks of hog production.
- Inflation – we don’t think it will cut U.S. Pork demand – consumers will cut out other items. Beef $2.60 cut-outs – Pork $1.08 cut-outs.
Fake Meat
Beyond Meat stock (Nasdaq: BYND)
- 234.90 High in 2019
- 27.17 Last week
Market capitalization – down -$15 billion from peak
Down -$1.74 billion since January 1, 2022
Taste does matter
Gene-Edited Foods
- Survey by Iowa State of 2,000 U.S. residents
- Quote “Around 60% of the women in the survey said they would be unwilling to eat and purposely avoid gene-edited food.
Pork Exports
- Challenge of Euro to U.S. dollar
- A year ago, 1.18 Euros to $1 USD – Now 1.03 Euros to $1
- This makes U.S. pork less competitive in World Markets at an almost 15% change
- Year to date exports down -24%
- Thank god for Mexico as it’s up 11% and is the leading export country
- China starts up most U.S. plants approved unlike Spain and Canada
Summary
- Our premise is China, Europe, and the USA are the major hog-producing areas with 75% of the world’s production all down at the same time, probably the first time in history.
- U.S. hog prices in our opinion are at minimum the same as this past 12 months with significant upside as global pork supply craters.