Genesus: An overview of the situation in the global pork market

In the United States, there were 525,000 pounds of pork (~238 tons) in cold storage at the end of May 2023, down 4% from last year. For the first time in several consecutive months, we are seeing a lower level of pork stocks compared to the previous year. About 500,000 pounds (~226.8 tons) of pork are produced weekly in the United States. That is, the storage contains approximately a week's production volume.

The slaughter of sows for the last week amounted to 66,861 heads. From our point of view, this number of culled sows is a direct sign of ongoing liquidation. According to our estimates, the slaughter of more than 60,000 sows per week clearly indicates a reduction in the breeding stock.

In last year's report of June 1, the breeding stock of pigsamounted to 6.168 million heads. We believe there will be around 100,000 fewer sows in this June report.

In the states of Iowa-South Minnesota, the sales weight of slaughter pigs continues to decline. A week ago he was 278.5 lbs/126.33 kg, a week earlier he was 279.9 lbs/126.96 kg (down 1.4 lbs/635 grams). A year ago, the weight was 283.6 lbs / 128.64 kg (down 5.1 lbs / 2.31 kg in an annual comparison). The lower weight indicates that manufacturers are willing to sell. And MEAT processors are ready to buy. On April 24, the average selling price in Iowa-South Minnesota was 67.44¢ cents/lb ($1.49 US/kg). On June 21, it was already 96.97¢ cents/lb ($2.14 US/kg). An increase of almost $60 US/head. In our view, the lower selling weight we are seeing is a positive sign that the price of hogs may continue to rise as meat processors actively buy up hogs.

The price of corn has been unstable lately. The weather is an extremely important factor. As soon as the first signs of an impending drought appear, corn prices immediately rise. Then it rains and the price drops - a real roller coaster. But there are two more realities. Firstly, US corn exports decreased by 33% compared to last year, and secondly, in some regions of Brazil, corn costs no more than $4.32 US/bushel, which is also a limiting factor for rising corn prices in the United States.

In Germany, the elimination of the breeding stock of pigs continues. Westfalia, one of the largest pig producing regions in the country, reports that their sow herd decreased by 3.4% to 321,400 in May. Regarding the future level of supply of pigs in the European market - despite record prices, Europe continues to reduce production. There is too much pressure on the industry due to swine diseases amid restrictions on the use of antibiotics , problems with labor resources and more and more new rules for protecting the environment, keeping animals and so on.

ASFis still an important factor in CHINA. This week we learned about an outbreak of ASF in a huge multi-storey pig farm. Due to ASF, producers continue to intensively dispose of pigs, putting them on the market regardless of weight and age, which keeps prices down. The financial losses of Chinese mega-producers are incredibly high, and the value of their shares is close to historical lows. According to our estimates, pig producers in China are losing about $50 US/head. Multiply this by 12 million pigs (weekly production in the country) and you get minus $600,000,000 US per week. Such losses encourage liquidation.

Summary

This week, the United States Department of Agriculture (USDA) will publish a report on the state of affairs in the pig industry for June 1. We expect to see lower numbers of sows and pigs. Let's hope that the number of livestock will be low enough to instill some optimism in the market. Prices are set by supply-demand-optimism or lack thereof.