Interview

10th Annual Kalmbach Feeds Agribusiness Conference — Jim Long

Wednesday, 22 March 2023

Jim Long Pork Commentary, March 6th 2023

This past week we attended and spoke at the Kalmbach Feeds Agribusiness Conference held in Columbus, Ohio. The conference is one of if not the best-organized ag events we have attended. Multiple speakers and food were excellent. The host’s Paul Kalmbach Sr, Paul Kalmbach Jr, and the entire Kalmbach team were omnipresent which made the event enjoyable and knowledge-enhancing.

This year is Kalmbach Feeds 60th year in business. We first met Paul Sr. about 40 years ago when Kalmbach Feeds was much much smaller. Since then the company has grown in multiples becoming an agribusiness powerhouse and a true example of entrepreneurial success and American opportunity.

Other Observations

The U.S. National Average Corn Price has gone from $6.88 bushel in late February to $6.25 last Friday. December corn futures last week $5.65 bushel down from highs that touched $7.00. It appears the low volume of U.S. corn exports is weighing on markets. Cheaper corn is obviously good for pork producers.

Spain is the third-largest pork-producing country in the world. It is the largest in Europe. Last week set another record hog price at 1.967 Euros/kg (95¢ lb. U.S. liveweight). The Spanish price has gone up for nine weeks in a row (most of European countries are also at record levels). At the end of January last year, the Spanish price was 1.02 Euros/kg (49¢ lb. U.S. liveweight). A 285 lb. pig is now bringing $131 per head more than a year ago. The price spread currently between Spain and the U.S. is over $95 per head. It’s not if but when the U.S. and Spanish price narrows, we don’t believe it will be from the Spanish price declining. The current spread will obviously pull pork exports from Spain to the U.S. Arbitrage.

Last week the Genesus team attended VIV Asia held in Bangkok, Thailand. It was the first VIV Asia held in three years due to Covid issues. Genesus people from the Philippines, Vietnam, Thailand, China, South Korea, the UK, and Canada participated in the Genesus Exhibit. Genesus has genetic production in China, Vietnam, and the Philippines.

VIV Asia was well attended with many visitors from throughout Asia. Many global projections indicate the major growth for pork consumption will be in Asia in the coming years.

Last week we wrote it appears ASF is spiking again in China. At VIV last week several Chinese visitors had the same sentiment. One Chinese company just lost 30,000 sows. We continue to believe the low China hog price is due to many pigs going to slaughter at any weight due to ASF breaks. At some point, the dog will hit the end of the chain. China’s prices will take off again exuberated by the liquidation last year due to the billions of dollars lost due to really low prices and are now further hampered by ASF liquidation.

Last week we showed a China map indicating current major ASF breaks. We were told by Chinese producers that the map underestimates the current situation.

We received a report last week from industry insiders, the recent rising epidemic (ASF) has led to 70% of sows lost in Shandong and Hebei provinces (latest inventory we have pigs Shandong 31.5 million, Hebei 18.1 million). Some areas in Henan lost 30-35% (Henan 44 million pig inventory) and some pig farms in Northeast China lost 15-18%. The incidence rate of disease in Shanxi is also high, with one large enterprise losing 70% (Shanxi 9 million pig inventory). Some parts of Guandong lost 15% (20.7 million pig inventory). The five provinces listed above had 121 million in pig inventory reported prior to current ASF breaks.

Last year we wrote about the major liquidation ongoing in the United Kingdom. This was due to the massive losses’ producers were suffering from. Last June sow inventory was down 18% year over year. Through the fall until the end of the year, year-over-year slaughter numbers stayed the same, but with ever lighter carcasses. Since the first half of this year, year-over-year slaughter numbers have collapsed running over 15% lower, with carcass weights over 5 kgs lighter (11 lbs.). The hog price is now at record levels of 2.09 up 70% from a year ago. The old saying the surest cure for low prices is low prices comes to mind.

Europe is down 1 million sows and 12 million pigs in inventory from two years ago. The elimination of copper sulfate, and antibiotic limitations are driving up mortality. The decrease in pigs and high prices will cut Europe’s pork exports. This will pull U.S. – Canada – Brazil prices higher as Export markets are backfilled.