North American sow herd is shrinking
Depressed market conditions are forcing the American pig breeders to reduce their production capacities and the first signs of change are seen in the sow herd, informs the latest report from Genesus. "In our opinion, the US sow herd is currently contracting about 15-20,000 a week. Last quarter the USDA data shows the sow herd contracted 7400 a week, estimating the current situation, doubling or tripling this number is not extraordinary thinking. At 20,000 a week, the US sow herd would be down on June 1st, 340,000 from December 1st. We believe the Canadian sow herd is also shrinking," said Jim Long, President and CEO of Canadian Genesus Inc.
He also expects a significant drop in hog supply in the market for the months to come. At this point, the North American swine sector seems to follow a similar scenario like the one reported in 1998, when too many pigs added in the market made it collapse. "The last great debacle the North American Industry had was in late 1998. Market Hogs got to 8? lb., too many Hogs for Packer Capacity, the price collapsed.
When the dust settled many of the largest producers i.e. Murphy Farms, Carrolls, Heartland, Premium Standard Farms, Purina, etc. had new ownership structure or even bankruptcy. Scale can be a plus but also a curse. Losing $30-40 per head times lots of hogs means lots of money lost," added Mr. Long.
But it is not only the prices that are creating severe problems for meat processors in the Nort American markets. Several disruptions in the food supply chain have been reported in the last two weeks, affecting companies such as JBS, Smithfield and Hormel Foods, which were forced to shut down operations in some of their plants.
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