The size of the U.S. swine herd continues to grow. Joe Kerns of Kerns and Associates is featured in this edition of Pork Pod. In his review of the quarterly Hogs and Pigs Report, Kerns says the numbers were in line with trade expectations.
Joe Kerns, Ames, IA, Kerns and Associates
Don Wick: 00:04 From The Pork Checkoff in Des Moines it’s Pork Pod! Pork Pod! A look at the hot topics in today’s pork industry. The Pork Checkoff is working for you through various forms of research, promotion, and consumer information projects. This is Don Wick speaking on behalf of the Pork Checkoff. Today our guest is Joe Kerns of Kerns and Associates. The latest quarterly Hogs and Pigs report has USDA estimating the US inventory of all hogs and pigs at 71.7 million head. That’s up 3% from last year. The breading heard inventory is just over 6 million heard, up 2%. The market hog inventory at 65.6 million head, up 4% from a year ago. Again our guest Joe Kerns of Kerns and Associates out of Ames Iowa. Joe, give me your take on these numbers.
Joe Kerns: 00:48 Well a couple of things so so number one is that the USDA numbers were almost exactly on top of the pre report estimates and so we didn’t get like a boogeyman coming out of the closet on this report. If anything it was a little bit of relief and that’s what the market is indicating today we’re green across the board the front end is kind of leading the charge. That’s been the case. I’ll circle back around to that in a moment. But everything is kind of giving a coming out from oh no this can be really bad. And we’re trying to trade values a little bit higher. I didn’t see anything that was completely noteworthy on the report that perhaps even worthy of significant discussion. You had a couple of small aberrations. The march made pig crop number came out a little bit larger than that what the annalist were anticipating. But when you work through the numbers the pigs per litter numbers also revised down just a little bit lower so we almost had mitigating errors, so something to sink your teeth into on this report, I think that you are going to find a tough time piecing that out of the report, however it does provide almost a kind of a you know you go to the doctor and he says you are healthy and you have that kind of dread going into the office, I would make this report kind of a kin to the same thing, we got a clean bill of health for the industry to move forward and express some more profits.
Don Wick: 02:02 In some of the state by state numbers though say those pigs say litter continue to be pretty impressive though don’t they.
Joe Kerns: 02:12 Oh very much so and we are starting to get a haves and have nots that’s really expressing itself on these reports and it’s not really any surprise that the larger operations have a tendency to perhaps have the better genetics that are more prolific. And we see this time over time, that the big systems continue to get better and better and perhaps put a little distance between them and their smaller brother that might be fostering some niche market, where productivity is not quite as important but we as an industry I think you got to impressed by taking a great big step backwards and saying where are we vs where we come from. It’s a huge success story for US agriculture, yes.
Don Wick: 02:47 So expansion continues to grow we’ve got some slaughter capacity coming on board as well as we look onward here. How do you see us moving as we go further into this year?
Joe Kerns: 02:57 The interesting part to me is I think when you’re in year number two of a three year experiment we need to add someplace in the neighborhood of 90 to 100 thousand sows per year in order to accommodate the new plants that are coming on line. We almost hit that number exactly on the head last year. 89000 and change certainly appears to me that we’re on Q In order to do the same thing this year. If you look at the state by state breakdowns you might squint just a little bit and take a peek at those Iowa up 30000 sows that seems to make sense we’ve got a new plant going in Sioux City. The one that I thought was odd to me was both in the eastern belt where you’ve got the new cold water Michigan facility a couple of the states that are tertiary to that particular region namely Illinois and Indiana both showed a reduction in sows and that just that just doesn’t make sense to me.
Joe Kerns: 03:45 So maybe we’ll start to see them kind of find their way back. We’ll probably feel at first with a pig crop and then have it evidence later perhaps from the USDA. But I think as an industry we’re rolling forward with this increased capacity in fulfilling the need with shackle spaces in the countryside.
Don Wick: 04:06 We’re in this weather market as far as the grain side. What’s this mean for locking in feed?
Joe Kerns: 04:13 You know that if you take a look at a profitability model going forward in your trading cash corn in the northern regions let’s just pick kind of this I-90 corridor and say that you’re paying three dollars and 10 cents for cash corn right now. As a pork producer I don’t know if what good waiting for 295 does to you versus the threat that could be in the event that we start to get some adverse weather and move prices higher. So I think it’s perhaps advisable that as we as we as producers are taking advantage of some of the higher revenue items and also to cover back what our inputs look like also. Most folks that we work with have a production base associated land base associated with their pork production operations and so therefore you do have somewhat of a natural hedge.
Joe Kerns: 05:02 But reaching out and getting corn especially if it’s clean if we get some good clean bomb attacks and free corn that you can acquire and then have the storage space the market is telling you take it now I think there is. We had a colleague on this morning Don, that was talking about this is really the land of opportunity speaking metaphorically about kind of the timeframe that we’re in the relationship between the commodity prices and I do believe that I think this is there’s huge opportunities for producers to take advantage of the current economics.
Don Wick: 05:34 Joe Kerns from Kerns and Associates. We thank you for listening to this edition of Pork Pod. For more information on this topic or the Pork Checkoff itself, visit pork.org.