"Go with the Spanish way", analyst says to the US pork industry
There is something wrong with the US pork industry, believes Jim Long, President and CEO of Genesus Inc, who also suspects that curent losses faced by hog producers are the result of speculative movements in the lean hog future market. "The US hog industry is in a dark time. Prices and the losses associated with that are huge. Some estimates put potential annual US producer losses at $5 billion total. Coronavirus tore up the Packing Plants. Now they appear to be back to near normal production. Can they keep going? Gross Packer Margins are excellent working as huge incentive to kill hogs.
Lean Hog Futures, seem to us, an indicator of speculation more than the reality of the pork industry supply-demand too many times. Observation - almost all if not all world hog markets are higher priced then the U.S. None of the other markets have a lean hog future market. Spain which has the third-largest hog production in the world has a unique way to set their national hog price. Every Thursday 1:00 pm representatives from the Producers, Packers, Processors and Retailers meet to set the price of market hogs for the week. We have attended the meeting in the past. Seems to us these negotiations have led to a continual balancing of each segment of the industry's interests where each sector’s margins are respected. It takes away one sector losing $40-60 per head which another is making $60," commented Mr Long in his Genesus report of the market. For now, exports have kept the American pig sector alive, especially to China, but barriers in trade may appear at some point as long as politics is involved, added Jim Long. "Appears US to China exports were record high in May. With China hog prices above $2.00 U.S. a lb. they should buy lots more. The little problem is the US-China political relationship. Agricultural products seem to get targeted in trade wars," he said. A new bill initiated by 5 Senators from North-Carolina, Iowa and Oklahoma may offer some support for the swine industry as long as the initial proposal are kept in place:
1. Compensate hog producers who are forced to euthanize or donate animals that can’t be processed into the food supply due to Covid-19 related packing plant capacity reductions;
2. Increase funding for animal health surveillance and laboratories, which have been tapped to perform Covid-19 testing during this human health emergency.
3. Revise the Commodity Credit Corp. charter so a pandemic driven natural emergency qualifies for funding.
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