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Global Observation: 2018 will be a good year for pig producers all over the world

Time
2019/03/01 16:50
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Editor's Note: Today I recommend an analysis article from "Jiayu Pig Breeding" with the original title "2018 - Profit?" * * *, in the recent price of pig prices are not optimistic, look at the global pig industry situation, this analysis "expected Chinese pig prices will remain strong in 2018", do you agree, welcome to leave a message to discuss together, as follows:

2017 is a good year for pig producers. What about 2018?

 
 

Our observations.

1. The United States

If lean pork futures and pork prices are an indication of supply and demand, it seems to us that U.S. producers will make profits in the range of $20 per pig in 2018. A promising prospect. At present, the sow population has expanded by about 1%, but compared with the increase of slaughter capacity by at least 7% in the United States, this will lead to a real chase for live pigs in the market to meet the hanging chain space in 2018 and maintain retail shelf space, food services and export markets.

We believe that lean pork futures do not take into account lower slaughter margins; we anticipate that in the coming months, there will be a large number of market competition for pig procurement. We believe that the current lean pig futures price in 2018 is 10 dollars lower than what will happen. By then, the profit of slaughtermen will gradually decrease with the decline of weekly pig market sales.

The real indicator of current supply and demand is 40 pounds of live pigs in the US dollar spot; a year ago, their average price was US$43, and now it is US$68. That's an increase of $25 compared with the same period last year. This is a big difference. No one pays more than they should.

We hope that the US Department of Agriculture's proposal to focus on the new spontaneous grading system of marble pattern and flesh color will be put in place. We expect some slaughtermen to resist, because most people don't like to change or be dominated by the government. Some genetic companies will be dissatisfied with the proposed changes because their products will not meet the quality category and will be discounted. Ultimately, pork buyers will make a decision. If they require the best and the best, we expect suppliers (slaughtermen) to work hard to meet their needs. In business, customers are always right if they don't buy it from someone else.

For some butchers, dealing with this change is difficult because they have a very profitable era.

"When your company is a huge success, you don't want to see the world changing" - Frank Vermeulen.

We anticipate that the game of "change" is under way and that it is no longer "other white meat" brands competing with cheaper chicken. Now it's red meat and marble. Beef is our goal. Compare higher-priced products. The concepts of lean meat, lean meat and lean meat are out of date. Tastes and flavors have always been important in demand. Now it's targeted in an organized way.

"Humble people will inherit the earth, but they will never increase their market share" - William G. Mc. Gowan (1929 - 93)

2. Canada

Canada will follow the American market closely. If there is no expansion, it is very rare. Exports of 70% of pork and pork production, strong global economic growth will continue to drive strong export growth. Canada's competitive advantage over the United States comes from the lower dollar, and Canadian producers will benefit from the improved slaughter capacity of the United States, as it will push up pork prices, which we expect will lead to more pig exports to the United States.

3. Mexico

Mexican producers benefit from higher US slaughter margins. Because pork is imported to Mexico, not live pigs. Last week, the price of pork in Mexico was 29 pesos per kilogram (68 cents per pound), and each pig was 50 dollars higher than the US market. This is a good year for Mexican producers.

If the profit margins of American slaughtermen fall, so will the price gap between Mexico and the United States.

A terrible threat, the Canadian-American-Mexican pork trade is currently being renegotiated by the North American Free Trade Agreement. Who knows how it will end? Mexico is a huge market for American pork, mainly ham.

4. Europe

We expect the gross European product to remain stable. Compared with the dollar, the strong euro has made Europe less competitive in the global market. We expect Spain to continue to lead if production increases.

African swine fever is spreading across Eastern Europe. If it can reach Germany or Denmark, it will be a major factor in the global pork export market.

Europe has a range of good producers; the question is whether they can sustain their global competitiveness by continuing to impose their own regulations and rules. In the past decade, millions of sows have dropped out of production. Fortunately, *per capita pork consumption in Europe is high, and domestic demand is an anchor in this industry.

We are seeing a phenomenon, such as in North America, where better taste and flavor of pork are becoming more and more important.* The pursuit of Asian markets and domestic demand is leading the evolution of lean meat-dominated countries.

5. China

China is a contradiction. Many new sow farms are being built, but many are being closed. The Chinese government reported in October that the number of sows in China was 3487 million, down 5.3% from a year ago (about 2 million less sows). The price of live pigs in China is 15.05 yuan/kg, or $1.02 live weight/pound, which is quite profitable in the industry; besides slaughtermen, more than 13 million sows have withdrawn from production. With huge extra slaughter capacity, they have little to do.

Why is pig production still shrinking despite three years of huge profits (more than $75 per head)? The main reason is the closure of farms under the new strict environmental law. It is estimated that 5 million sows have been and will be forced to withdraw from production for environmental reasons.

We expect that the price of live pigs in China will be insured in 2018.