American Hog News USDA

[Mustang Sally Farm]

Thursday, April 26, 2012
Weekly Roberts Market Report
US - Lower soybean exports from South America and rumors that Brazil will halt exports this week were supportive, writes Michael T. Roberts.

Michael T. Roberts
Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University

LEAN HOGS on the CME finished up on Monday. MAY’12LH futures closed at $88.525/cwt; up $0.575/cwt but $0.025/cwt lower than this time last week. AUG’12LH futures finished $0.450/cwt higher at $88.950/cwt but $1.200/cwt lower than last report. Futures gained on an increase in wholesale prices and a somewhat supportive supply report. Slowing export growth in China is giving indications that pork prices will continue to languish. Spring grilling is expected to pick up soon. Last Friday, USDA’s Cold Storage report put freezer stocks down slightly but 7 per cent more than this time last year. USDA put the pork carcass cutout at $77.41/cwt, off $0.68/cwt and $0.43/cwt lower than a week ago. Monday, April 23 USDA placed hogs processing at 413,000 head vs. 413,000 last week and 273,000 a year ago. Cash hogs were steady-to-unchanged with some locations reporting weaker prices. Packer buying remains cautious due to poor packer margins. According to HedgersEdge.com, the average packer margin was raised $2.05/hd to a negative $11.25/head based on the average buy of $59.99/cwt vs. the breakeven of $55.91/cwt. The latest CME lean hog index was estimated at 79.01; down 0.56; and 3.63 under last report.

 

This table shows the maximum price a producer could pay for feeder cattle and still break even, assuming the costs and conversion/performance factors listed above. Producers should remain aware that calculations are based on averages. Courtesy DTN.
CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JULY’12 contract closed at $6.224/bu; up 10.0¢/bu and 9.25¢/bu higher than last Monday’s close. The DEC’12 contract closed at $5.454/bu; up 8.75¢/bu and 19.025¢/bu higher than last report. Exports, speculative buying new crop corn, and continued commercial buying of old crop contracts were supportive. Funds decreased net-bull positions to 210,431 lot down 28,838 contracts. Corn basis was steady-to-firm with end users raising bids trying to keep grain flowing. Farmer selling is slow due to early corn crop plantings. Exports were bullish with USDA putting corn-inspected-for-export at 29.386 mi bu vs. estimates for 28-34 mi bu. Weekly exports needed 3this week 3.8 mi bu to stay on pace with USDA export demand expectations. See chart.


SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The MAY’12 contract closed at $14.372/bu; down 9.5¢/bu but 17.25¢/bu higher than last report. NOV’12 futures closed at $13.414/bu; down 14.5¢/bu and 8.75¢/bu lower than a week ago. Lower exports from South America and rumors that Brazil will halt exports this week were supportive. US exports were weak with USDA announcing soybeans-inspected-for-export at 12.005 mi bu vs. estimates for 19-25 mi bu. Weekly inspections needed to be 11.5 mi bu to stay on pace with USDA’s 1.29 bi bu demand projection. See chart.


WHEAT futures in Chicago (CBOT) closed up on Monday. The MAY’12 contract closed at $6.250/bu; up 9.25¢/bu and 8.75¢/bu higher than this time last Monday. JULY’12 wheat futures finished at $6.324/bu; up 9.25¢/bu and 11.25¢/bu higher than a week ago. Exports, risk of frost damage to US crops and increasing Chinese demand for US wheat were supportive. Compared to this time last year US exports to China for the first quarter of 2012 exports increased more than fifty times over. USDA put wheat-inspected-for-export at 24.391 mi bu vs. estimates for 16-22 mi bu. The weekly export pace needed to stay on pace with USDA’s 1.0 bi bu demand projection is 18.5 mi bu.

[Mustang Sally Farm]

Friday, April 27, 2012
CME: Hogs, Pigs Inventory Up on Previous Year
Statistics Canada released yesterday the results of its quarterly survey of Canadian hog and pig operations. Below are some of the highlights from the survey and implications for North American pork production going forward, write Steve Meyer and Len Steiner.


The total inventory of hogs and pigs as of April 1, 2012 was reported at 12.040 million head, 210,000 head or 1.8% higher than the previous year but still some 21% smaller than then inventory peak in September 2005. The growth in Canadian inventories mirrored the increases in the US market, with the US inventory up 1.9% in the last quarter. Combined US and Canadian hog supplies were 76.912 million head, 1.9% higher than a year ago. At its peak, the Canadian hog industry contributed about 20.0% to North American supplies but that share has drifted to about 15.7% as of last count.

The Canadian sow inventory has been remarkably steady in recent quarters despite higher prices for North American pork. This is partly due to sharply higher feed costs last year that sapped the incentives to expand but also limited processing capacity. Even though Canadian producers receive some benefits from the exchange rate in purchasing feed from the US, the stronger Loonie becomes a liability when it comes to shipping feeder pigs to the US. The Canadian breeding stock as of April 1 was pegged at 1.310 million head, slightly lower than the previous quarter and within a few hundred head of last year’s levels. The Canadian breeding herd contracted by about 20% between 2005 and 2009 and it has held at those levels ever since (see chart). The North American sow inventory is currently estimated at 7.130 million head, just 32,000 head or 0.5% higher than what it was last March.

As in the US, much of the increase in pork supplies in Canada is not coming from herd expansion but from productivity gains. The survey pegged sow farrowings in Q1 of 2012 at 709,100 head, up 0.2% from the previous year. The pig crop for the quarter was reported at 7.265 million head, up 0.9% higher than the previous year. The size of the pig crop vs. farrowings implies 10.25 pigs per litter in the latest reported quarter, 0.7% higher than the previous year. The growth in pigs per litter in Canada has lagged behind the US, where pigs per litter are growing at near 2%. The far rowing size for the latest quarter was notably lower than what producer intentions indicated in the January survey. The survey also pared back intentions for Q2. In January, Canadian producers expected Apr - Jun farrowings to increase by 6.6% but this latest survey now expects farrowings to increase only 2.3% from a year ago and farrowings for Jul - Sep are expected to decline 1.2%. Even with steady growth in the number of pigs per litter, this implies that the pig crop in Canada in Q3, and likely in Q4, will be lower than in 2011.

[Mustang Sally Farm]

Monday, April 30, 2012
Hog Outlook: Canadian Swine Herd a Fifth of US Herd
US and CANADA - Statistics Canada announced the results of their April hog inventory survey this week. They said the Canadian swine breeding herd is unchanged from a year ago and their market hog inventory is up two per cent.
 
Ron Plain
The number of sows farrowed during the first quarter of 2012 was up 0.2 per cent. They predicted second quarter farrowings would be up 2.3 per cent and third quarter farrowings would be down 1.2 per cent. The Canadian swine herd is roughly a fifth the size of the US herd. It looks like US imports of hogs and pork from Canada this year will be close to 2011 levels.

The US Bureau of Economic Analysis said the US economy grew by 2.2 per cent during the first quarter of 2012. That is far better than zero, but not fast enough growth to put a big dent in the unemployment numbers.

USDA says 28 per cent of the corn acreage had been planted by April 22. That compares to an average of 15 per cent on that date and only 8 per cent planted on April 22, 2011.

The amount of pork in cold storage at the end of March, 612.7 million pounds, was down 1.6 per cent from the month before, but up 6.7 per cent from a year ago.

Hog prices ended this week mostly steady with the previous Friday. The national average negotiated carcase price for direct delivered hogs on the morning report today was $79.14/cwt, down 25 cents from last Friday. The eastern corn belt averaged $79.32/cwt this morning. The western corn belt averaged $78.42/cwt. Iowa-Minnesota had an average price of $78.37 on the morning report. Peoria had a top today of $54.50 and Zumbrota a top of $54/cwt. The top for interior Missouri live hogs Friday was $58.75/cwt, up 75 cents from the previous Friday.

The pork cutout value was lower this week. USDA's Thursday afternoon calculated cutout value was $76.75/cwt, down 71 cents from the previous Thursday. Hams and butts were higher this week. Bellies and loins were lower. Wholesale pork belly prices are now the lowest since January 12, 2010. Belly prices have been unusually high the last two years, boosting the pork cutout. That may be ending. Packer margins remain tight. The national average hog carcase price this morning is 3.1 per cent above the cutout value.

Hog slaughter totaled 2.092 million head this week, up 0.4 per cent from the week before and up 7.0 per cent compared to the same week last year. Barrow and gilt carcase weights for the week ending April 14 averaged 206 pounds, unchanged from the week before and up one pound from a year ago. The average barrow and gilt live weight in Iowa-Minnesota last week was 276.9 pounds, up 0.5 pounds from a week earlier, up 4.0 pounds from a year ago, and above a year earlier for the 22nd consecutive week.

Friday's close for the May lean hog futures contract was $85.50/cwt, down $2.00 from the previous Friday. The June lean hog futures contract settled at $86.60/cwt, down 80 cents for the week. July hogs ended the week at $87.52 and August settled at $88.00/cwt. May corn futures gained 41 cents this week to settle at $6.53/bushel.

[Mustang Sally Farm]

Thursday, May 03, 2012
Weekly Roberts Market Report
US - Corn and soybean futures closed up on Monday, writes Michael Roberts.

Michael T. Roberts
Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JULY’12 contract closed at $6.342/bu; up 8.75¢/bu and 12.25¢/bu higher than last Monday’s close. The DEC’12 contract closed at $5.432/bu; up 4.5¢/bu but 2.25¢/bu lower than last report. Fund buying off the strong rally last week and spillover from soybeans were supportive. Exports were bearish with USDA putting corn-inspected-for-export at 24.921 mi bu. This is below the 34 mi bu needed to stay on pace with USDA’s export projection of 1.7 bi bu.

The national average corn basis is at 4.0¢/bu over July futures indicating that the export pace has slowed due to the lack of corn available to end users. Concerns about strong demand draining supplies continue to support corn futures. Cash corn was steady-to-firm on slow farmer selling. USDA put corn crop progress at 53% vs. 28% last week and the 5-year average of 27% for this time of year.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The MAY’12 contract closed at $15.030/bu; up 6.25¢/bu and 68.75¢/bu higher than last report. NOV’12 futures closed at $13.810/bu; up 19.0¢/bu and 36.75¢/bu lower than a week ago. Late buying, strengthening inverse-to-new-crop spreading, and bullish soybean fundamentals were supportive. Given both May and July contracts closed above $15/bu increased technical buying is expected. Exports were bullish with China ordering another 220,000 tonnes (4.4 mi bu) for 2012-13 delivery. USDA put soybeans-inspected-for-export at 15.45 mi bu. vs. the 11.4 mi bu needed to stay on pace with USDA’s 1.29 bi bu projected demand for 2012.

As of Sunday, soybean seedings have exceeded the 5-year average by 7% with USDA putting plantings at 12%. Fundamentals are bullish amid concerns that 2013 stockpiles of soybeans won’t be large enough to keep up with strong demand, particularly with South American production reduced drastically by drought.

WHEAT futures in Chicago (CBOT) closed up modestly on Monday. The MAY’12 contract closed at $6.476/bu; up 5.5¢/bu and 22.75¢/bu higher than this time last Monday. JULY’12 wheat futures finished at $6.544/bu; up 4.5¢/bu and 22.0¢/bu higher than a week ago. Futures were behind nearly all session until near the end when funds jumped in to buy late in the session. Spillover buying from the surge in other grains; thin commercial buying; feed-wheat demand; and talk of freeze damage to a portion of the SRW crop were supportive. For the week ending April 29 USDA put the Winter wheat crop in good-to-excellent condition at 34% vs. 58% the previous week. USDA put wheat-inspected-for-export at 19.831 mi bu vs. the 18.4 mi bu needed to stay on pace with USDA’s 1.0 bi bu demand projections for 2012. Spring wheat planting continued at a quick pace with USDA putting wheat seedings at 74% vs. 57% last week and

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday with nearby’s up and deferreds down. APR’12DA futures closed at $15.73/cwt; even with Friday’s, as well as last week at this time close. The MAY’12DA contract closed at $14.94/cwt; up $0.06/cwt and $0.15/cwt higher than a week ago. JULY’12DA futures closed at $14.74/cwt; up $0.05/cwt but $0.03/cwt lower than last report. Class III May through August contracts closed higher while September and later contracts finished lower. Declining milk prices and high feed prices have tightened income quite a bit. This has moved many producers to negative cash flow. The preliminary April 2012 milk-feed price ratio is 1.45 according to USDA’s agricultural prices report released today. A milk-feed price ratio of 1.45 means that one pound of milk can buy 1.45 lbs of 16% protein dairy feed. This is the lowest since June 2009 when dairy farm profitability hit rock bottom. Factors in the milk-feed ratio include: the All Milk Price at $16.90/cwt; down $0.30/cwt from last month; prices received for corn at $6.14/bu, down 21.0¢/bu; soybeans at $13.80/bu, up 80.0¢/bu and alfalfa at $207/ton, $7/ton higher. The milk margin ending March 2012 was placed at $8.792/cwt. See chart.



According the USDA’s Production, Disposition, and Income report, the average milk production/cow totaled 21,345 lb/cow, 197 lb higher than 2010. Cash receipts from marketings were placed at $39.4 bi; 26% over 2012. Producer returns average $20.35/cwt, 23% higher than 2010. 2011 was a good year but do not reflect what is going on now. CME spot barrel cheese closed down $0.75 on four trades from $1.4250-$1.4275/lb. Blocks were unchanged with no trading. Spot butter was offered $0.05/lb lower and closed at $1.3550/lb. Fundamentally there is more milk volume right now than the pipeline can handle. Class III futures were: 3 months out = $14.96/cwt ($0.07/cwt over last report); 6 months out = $15.15/cwt ($0.02/cwt lower than a week ago level); 9 months out = $15.38/cwt ($0.09/cwt less than this time last week); and 12 months out = $15.43/cwt ($0.16/cwt under a week ago).

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished up on Monday. JUNE’12LC futures closed at $114.150/cwt; up $1.300/cwt but $0.425/cwt lower than last report. The AUG’12LC contract closed at $116.200/cwt; up $0.650/cwt but $2.400/cwt under a week ago. DEC’12LC futures closed at $124.050/cwt; up $0.600/cwt but $2.975/cwt lower than last week at this time. Easing fear over the U.S.’s 4th case of mad-cow disease and June futures’ discount to current cash prices were supportive. Technical buying was noted. The April contract expired during the session. Investors were relieved on the lack of new developments related to the BSE case disclosed last week. The animal appears to have been infected with a “naturally” forming strain of the brain-wasting disease and didn’t pose a threat to the U.S. meat supply. Indonesia was the only country to move to ban U.S. beef imports. Last year Indonesia bought 1.4% of U.S. beef exports. Late Monday USDA put the boxed beef cutout at $190.40; up $0.29/cwt. Cash cattle markets were quiet Monday with no bids reported through mid-day. Monday’s slaughter was placed at 115,000 head vs. 120,000 last week and 129,000 head a year ago. Year-to-date processing is down 5.1% from last year. Recent gains in wholesale beef prices off last week’s decline in cash cattle prices have improved processor margins. According to HedgersEdge.com, the average packer margin was raised $27.95/cwt from this time last week to a positive $8.75/head based on the average buy of $121.06/cwt vs. the breakeven of $121.75/cwt. Until last week the index had been negative since mid-September. Late Monday, April 30, USDA put the 5-area average price at $122.119.80/cwt; $2.68/cwt lower than this time last week. See graph.



FEEDER CATTLE at the CME closed up on Monday. MAY’12FC futures finished at $149.825/cwt; up $1.050/cwt. The AUG’12FC contract closed $1.650/cwt higher at $153.725/cwt; $1.650/cwt under last report. Monday’s estimated receipts at the closely watched Oklahoma City market were put at 9,800 head vs. last week’s 9,014 head and 7,805 head this time last year. Feeder steers and heifers were weaker at $2-$4/cwt lower. Stocker steers and calves were $4-$8/cwt lower. Stocker heifers and heifer calves were steady to $4/cwt lower. Demand was considered moderate for all classes. Cattle coming off pastures were in fleshy conditions. Quality was average. The CME feeder cattle livestock index was placed at 148.40; down 0.45 and 1.560 lower than this time last week. See chart.


LEAN HOGS on the CME finished mixed on Monday. May-August 2012 and May 2013 and later finished down while the December 2012 through April 2013 contracts finished up. MAY’12LH futures closed at $83.675/cwt; down $1.825/cwt and $4.850/cwt lower than this time last week. AUG’12LH futures finished $0.400/cwt lower at $87.600/cwt and $1.350/cwt lower than last report. Wholesale prices 16% lower than this time last, technical selling, and weak pork demand well off last year’s record-setting pace pressured prices. Non-commercials are now net-short in aggregate positions. Seasonal strength hasn’t materialized. Poor processing margins off weak wholesale prices will continue to weigh on prices. Light volume for cash hogs on Monday was noted with top hog prices expecting to range from $54-$58/cwt on a live basis later this week. USDA on Monday estimated the daily processing at 410,000 head vs. 413,000 head last Monday and 393,000 a year ago. USDA put the pork carcass cutout at $77.94/cwt, off $1.05/cwt but $0.53/cwt higher than a week ago. According to HedgersEdge.com, the average packer margin was lowered $0.35/hd to a negative $11.60/head based on the average buy of $59.21/cwt vs. the breakeven of $55.05/cwt. The latest CME lean hog index was estimated at 82.53; down 0.15; but 3.52 over last report.

[Mustang Sally Farm]

Monday, May 07, 2012
Hog Prices End Lower than a Week Ago
US - Iowa State University calculations estimate the average breakeven live price for barrows and gilts in the first quarter of 2012 at $64.46/cwt, down $1.66 from the fourth quarter of 2011, but up $3.76 compared to January-March 2011, writes Ron Plain.
 
Ron Plain
They estimate the average Iowa hog was sold at a profit of 55 cents in the first quarter.

USDA says 53 per cent of corn acreage had been planted by 29 April. That compares to an average of 27 per cent planted on that date, and 12 per cent planted on 29 April 2011. USDA has predicted that 2012 corn acreage will be the most since 1937. A big drop in cash corn prices is expected this fall. May corn futures ended the week at $6.62 per bushel. December corn futures ended the week $1.38 lower at $5.24 per bushel.

Hog prices ended this week lower than the previous Friday. The national average negotiated carcass price for direct delivered hogs on the morning report today was $75.37/cwt, down $3.77 from last Friday. The eastern corn belt averaged $74.81/cwt this morning. The western corn belt averaged $77.63/cwt. Iowa-Minnesota had an average price of $77.65 on the morning report. Peoria had a top today of $52.50 and Zumbrota a top of $52/cwt. The top for interior Missouri live hogs Friday was $56.50/cwt, down $2.25 from the previous Friday.

The pork cutout value was higher this week. USDA's Thursday afternoon calculated cutout value was $78.10/cwt, up $1.35 from the previous Thursday. Loins and hams were higher this week. Butts were lower. Wholesale pork belly prices moved up a bit after losing more than $19/cwt in the two previous weeks.

For most all of April, the national average hog carcass price was above the cutout value.

Hog slaughter totaled 2.069 million head this week, down 1.1 per cent from the week before, but up 4.0 per cent compared to the same week last year. Barrow and gilt carcass weights for the week ending 21 April averaged 206 pounds, unchanged from the week before and up one pound from a year ago. The average barrow and gilt live weight in Iowa-Minnesota last week was 276.1 pounds, down 0.8 pounds from a week earlier, up 2.8 pounds from a year ago, and above a year earlier for the 23rd consecutive week.

Since 1 March, the slaughter of US raised barrows and gilts is running nearly 1 per cent above the level predicted by the March inventory of market hogs. Year-to-date pork production is up 1.6 per cent.

It was a bad week for hog futures. Friday's close for the May lean hog futures contract was $79.80/cwt, down $5.70 from the previous Friday. The June lean hog futures contract settled at $83.72/cwt, down $2.88 for the week. July hogs ended the week at $85.35 and August settled at $86.10/cwt.

[Mustang Sally Farm]

Thursday, May 10, 2012
Pig Abuse at Tyson Supplier Documented
US - The Humane Society of the United States released an undercover video footage revealing cruel treatment of animals and inhumane conditions at a Wyoming pig breeding facility owned by a supplier for Tyson Foods. The HSUS has notified local authorities.


According to the HSUS, the video, shot in April 2012, was taken at Wyoming Premium Farms, a pig factory farm in Wheatland, Wyoming, owned by Itoham America, Inc., and shows workers kicking living piglets like soccer balls, swinging sick piglets in circles by their hind legs, striking mother pigs with their fists and repeatedly and forcefully kicking them as they resisted leaving their young.

The HSUS reports that in one case, a mother pig with a broken back leg endured a very heavy worker sitting and bouncing on top of her hindquarters as the pig screamed in pain. The investigator also found pigs with untreated abscesses and severe rectal and uterine prolapses, mummified piglet corpses, and baby piglets who had fallen through floor slats to either hang to death or drown in manure pits.

The HSUS met with the Platte County Sheriff's office to present investigation evidence and urged the office to pursue filing criminal charges if warranted.

"I am sickened and outraged by what I've seen, and any right-thinking person will have the same reaction," said Wayne Pacelle, president and CEO of The HSUS. "The shocking abuse at this facility shows why so many Americans are calling for reforms in the pork industry. It is also deeply disconcerting that Tyson and other companies are buying pork from this hellhole for pigs, and I hope those corporate relationships end tomorrow."

"It is also time for Tyson to join so many other major food industry companies and make a commitment to ending the confinement of sows in gestation crates," adds Pacelle. "These crates immobilize animals for their entire lives, and it’s no longer acceptable to the American public."

Many more examples of cruelty and unsanitary conditions are documented on video and detailed in an HSUS investigation report. The graphic video also documents prolonged suffering of pigs used for breeding who are confined in gestation crates, two-foot-wide metal cages so small the animals can't even turn around, rendering them virtually immobilized for almost their entire lives.

Tyson Foods' Response
According to Tyson Foods, contrary to the impression left by HSUS, there is no connection between the Wyoming farm and the pork that the company processes. Tyson Foods claims that it does not buy any of the hogs raised on this farm for its pork processing plants.

The company, in a press release, stated: "We do have a small, but separate hog buying business that buys aged sows; however, these animals are subsequently sold to other companies and are not used in Tyson’s pork processing business.

"We’ve seen the video and we are appalled by the apparent mistreatment of the animals. We do not condone for any reason this kind of mistreatment of animals shown in the video."

According to Tyson, virtually all of the hogs it buys for its processing plants come from thousands of independent farm families who use both individual and group housing. The company says that it requires all hog supplying farmers need to be certified in the pork industry’s Pork Quality Assurance Plus program, which incorporates rigid animal well-being standards and is part of the industry’s ‘We Care’ responsible pork initiative.

NPPC Condemns Actions of Wyoming Farm
The National Pork Producers Council condemns such actions, which are not in accord with the US pork industry’s best practices that are exemplified in its Pork Quality Assurance Plus program.

Providing humane and compassionate care for their pigs at every stage of life is one of the ethical principles to which US pork producers adhere. US pork producers are committed to caring for animals in a way that protects their well-being. Just as it is to others, mistreatment of animals is appalling to pork producers. According to NPPC, "We do not defend and will not accept mistreatment of animals."

NPPC understands that the farm in question is taking immediate steps to address the situation, including an unannounced inspection of the facility by the farm’s consulting veterinarian. Individuals responsible for willful abuse of animals must be held accountable.

[Mustang Sally Farm]

Friday, May 11, 2012
Pork Exports Post Strong First Quarter Growth
US - US pork exports finished the first quarter 8 per cent higher in volume (598,058 metric tons) and 20 per cent higher in value ($1.66 billion) than last year’s record pace, according to statistics released by the USDA and compiled by the US Meat Export Federation (USMEF).
 

March pork export volume of 198,972 metric tons was 8 per cent lower than a year ago, but up 6 per cent from February 2012. Export value of $570.5 million was 3 per cent higher than last year and up 8 per cent from the previous month. These results were led by excellent growth in the China/Hong Kong region and by strong performance in Mexico, Japan and Canada.

“A 20 per cent increase in pork export value for the first quarter is extraordinary, especially considering the record performance of last year,” said USMEF President and CEO Philip Seng. “On the beef side, market access issues and price sensitivity are making volume growth difficult in some markets, but we are pleased to see export value remaining above last year’s record pace, even on smaller volumes.”

Pork export value per head sets new monthly record
March pork export value was particularly strong on a per-head-slaughtered basis, reaching $59.92. This was nearly $4 higher than a year ago and set a new monthly record, surpassing the previous high of $59.53 set in November 2011. Exports equated to 27.8 per cent of total US production of muscle cuts plus variety meat, and 24 per cent when including muscle cuts only.

Mexico remains the leading market for US pork on a volume basis, with first quarter exports up 17 per cent in both volume (162,721 metric tons) and value ($299.7 million). Exports to Japan, which nearly reached the $2 billion mark in 2011, were up just 1 per cent in volume (122,899 metric tons) but also achieved a 17 per cent increase in value to $530.6 million. Exports to the China Hong/Kong region, which came on very strong in the second half of 2011, were 30 per cent higher in volume in the first quarter (115,642 metric tons) and surged 82 per cent in value to $234.9 million.

Other first quarter market highlights included:

Exports to Canada were up 26 per cent in volume (55,916 metric tons) and were one-third higher in value at just under $200 million.


In Russia, where US pork now has better potential for expansion under a global tariff rate quota, exports were up 20 per cent in volume (15,510 metric tons) and 36 per cent in value ($47.9 million).


Led by a strong performance in Colombia, exports to the Central and South America region expanded 9 per cent in volume (20,603 metric tons) and 16 per cent in value ($53.5 million).
In South Korea, pork exports surged in the early months of 2011 because of culling of the domestic swine herd (due to foot-and-mouth disease) and a temporary duty-free tariff rate quota for some cuts of imported pork. Consequently, year-over-year exports to Korea were lower in the first quarter of 2012 – down 27 per cent in volume (53,590 metric tons) and 12 per cent in value ($154 million). It is important to note, however, that these totals were still more than double the volume and triple the value recorded in the first quarter of 2010.

“While domestic supplies are recovering in Korea, we are still creating new opportunities for US pork.” Mr Seng said. “The lower tariffs made possible by the Korea-US FTA will enhance the competitiveness of US pork in terms of price, and help us further expand the presence of chilled pork and value-added pork products in the retail and foodservice sectors. These marketing strategies have proven very effective in Japan, and I believe we can have similar success across north Asia.”

[Mustang Sally Farm]

USDA Livestock, Dairy, Poultry and Aquaculture Outlook

Reports» USDA Livestock, Dairy, Poultry and Aquaculture Outlook» USDA Livestock, Dairy, Poultry and Aquaculture Outlook - May 2012

17 May 2012
USDA Livestock, Dairy, Poultry and Aquaculture Outlook - May 2012
In 2013 small increases in farrowings and continued strong sow productivity gains, together with higher average dressed weights due to lower feed costs are expected to translate into a moderate increase in pork production. U.S. commercial pork production is forecast at 23.8 billion pounds, an increase of 2.3 percent over 2012. U.S. pork exports are also expected to grow moderately next year. 2013 pork exports are forecast at 5.4 billion pounds, an increase of close to 1.8 percent over this year’s level. Production and export forecasts point to 22.7 percent of production to be exported next year, compared with 22.8 percent in 2012.


 

Pork/Hogs

First-Quarter Wholesale-to-Retail Spread Record-Wide

The full set of data that is now available for the first quarter of 2012, is useful in explaining important hog and pork market dynamics of the quarter, as well as in indicating potential market direction as the markets move into summer. As a whole, the data suggest that of all the players in the pork market chain—hog producers, packer/processors, wholesalers, retailers, and consumers—the only ones left smiling by the price and demand/supply metrics of first quarter may be pork retailers. First-quarter retail pork prices finished at $3.49 per pound, 6 percent higher than a year ago and the highest first-quarter retail price on record. Record retail prices reflected, in part, robust first-quarter U.S. exports, which were 15.8 percent higher than a year ago. Strong exports—23 percent of first-quarter commercial pork production—left U.S. per capita disappearance almost 1 percent below the first quarter of 2011. Tighter first-quarter domestic supplies and higher prices for competing animal proteins likely supported record retail prices. At the wholesale level, the situation remains quite different. Wholesale pork prices have lagged year-earlier prices from late January to the present. First-quarter USDA wholesale primal cutout values were 5 percent below first-quarter 2011.
 
Strong retail prices combined with weak wholesale values to yield the widest firstquarter wholesale-retail spread ever: $2.03 per pound. While it is possible that soft wholesale prices reflect slower forward bookings for export, it is more likely that retailers are defending their spread by favoring strong returns over sales volumes. Higher first-quarter retail prices for beef (+9 percent) and for chicken (+5 percent) would accommodate a retail strategy that places less emphasis on maximizing pork sales volume. Such a strategy could lower wholesale pork demand.
 
Second-quarter 2012 commercial pork production is expected to be 5.5 billion pounds, 2.8 percent higher than a year ago. Increased April-June pork production derives from year-over-year larger fall and winter pig crops and heavier estimated dressed weights. Second-quarter prices for live equivalent 51-52 percent lean hogs are expected to average $62-$64 per cwt, 8.4 percent lower than a year ago. Prices for 2012 are expected to be about 6 percent lower than a year ago.

Commercial Pork Production and U.S. Pork Exports To Increase Moderately in 2013

In 2013, moderate increases in farrowings and continued strong productivity gains are expected to yield an annual pork production level that is about 2.3 percent above 2012. Commercial pork production is expected to be 23.8 billion pounds. Higher estimates for average dressed weights as a result of lower feed costs contribute to the higher production forecast. Hog prices next year are expected to be $57-$61 per cwt, about 2.7 percent below 2012.

Foreign demand for U.S. pork products will continue to be an important market focus in 2013. Lower U.S. pork prices next year, together with continued global economic growth will, in all likelihood, support continued strong exports. Next year USDA anticipates that 22.7 percent of commercial pork production will be exported, versus almost 23 percent this year. Total U.S. pork exports for 2013 are forecast at 5.4 billion pounds, about unchanged from this year. As is almost always the case, over two-thirds of U.S. exports in 2013 are expected to go to U.S. North American Free Trade Agreement (NAFTA) partners, Canada and Mexico, and to Japan. Japan is expected to remain—solidly—the no. 1foreign destination for U.S. pork exports in 2013.

U.S. pork imports next year are expected to be in line with 2012 estimates, or about 810 million pounds. In the past, the United States has imported about 4.3 percent of its annual pork disappearance; next year should be no different. U.S. imports of live swine next year are likely to be somewhat higher than forecasts for 2012: 5.87 million head in 2013, versus 5.78 million head expected this year, due mostly to expectations of higher Canadian production as indicated by stronger breeding inventories in Manitoba.

In 2013, per capita pork disappearance is expected to be year-over-year higher in each quarter. For the year, per capita pork disappearance is expected to be 47.2 pounds, 2.1 percent above 2012. For a demand inelastic commodity such as pork, small increases in per capita disappearance are often accompanied by disproportionately lower prices up and down the supply chain. Retail pork prices will likely average about $3.40 per pound, or about 3 percent below forecast retail prices for 2012.

First-Quarter Exports Up Sharply

First quarter U.S. pork exports were 1.4 billion pounds, 15.8 percent ahead of last year. The five strongest markets for U.S. pork are shown in the table below. Firstquarter exports to China likely represent the tail end of deliveries of large purchases made in 2011. The USDA’s Foreign Agricultural Service expects 2012 China’s pork imports from all sources to decline by 14 percent. See http://www.fas.usda.gov/dlp/circular/2012/livestock_0412.pdf. USDA also forecasts a 14-percent reduction in South Korea’s imports in 2012, from all sources, as the pork sector recovers steadily from 2010-11 outbreaks of foot and mouth disease. The Government of South Korea recently announced that it would limit the initial 70,000 metric tons (MT) duty free tariff rate quota (TRQ) for fresh/frozen pork bellies announced for the period April-June to 20,000 MT.

Special Article
 
U.S. Pork Industry Moving Toward Open Sow Housing as an Alternative to Gestation Crates

Introduction

In recent years, a growing number of major U.S. companies that demand and supply pork products have adopted strategies that explicitly move away from direct or indirect use of gestation crates in pork production. McDonald’s Corp.—a major buyer of pork products—and thus an indirect user of gestation crates—recently announced that it would require its pork suppliers to submit plans by May 2012 that transition suppliers’ production facilities from use of gestation crates, to group sow housing. McDonald’s thus joins other major U.S. buyers of pork products along with major U.S and Canadian pork-producing companies, in adopting business models that incorporate group sow housing in pork production. Pork users and pork producers appear to be making this move in response to a developing public perception that crating sows during gestation is detrimental to the welfare of the animal.

The Current U.S. Hog Production System: Gestation Crates

For the last 30 years, typical U.S. hog production has employed individual crates to house pregnant females during gestation. The typical gestation crate measures 7 feet by 2 feet, or 14 square feet, and was adopted by the industry to overcome innate hierarchical swine behavior. Female swine, in particular, tend toward aggressive behavior to establish dominance when they are housed in groups. This means that freely moving pregnant swine tend to fight until dominance is established. Such aggression can cause serious injury to less-dominant females and to unborn piglets. When the females are crated, aggression and threat of injury are minimized. Gestation crates also facilitate individualized animal care, feeding, and monitoring.

The downside of gestation crates is the severe constraint on movement that the 14- square-foot crate imposes. While the crate affords the pregnant female some limited side-to-side and back-and-forth movement, it totally prevents the animal from turning itself around. The animal welfare questions that are raised by the movement limitations of gestation crates have motivated the industry to adopt a different means of pork production that allows the pregnant animal freedom of movement.

Group Sow Housing as an Alternative to Gestation Crates

A production model based on group sow housing places pregnant swine in open pens that allow them free movement. An accurate description of a “typical” group sow housing barn is elusive because no single type has yet evolved in the United States. Consequently, there is wide variation in design characteristics of existing grouped housing units. For example, the number of animals grouped in one pen can vary anywhere from 5 animals to more than 100, depending on per-animal space allocations. The groups themselves can be “static,” meaning that all the animals in a pen enter it together when the group is formed, or “dynamic,” meaning that animals enter and exit the group. The size of the groups and the per-animal space allocations often determine the method employed to feed the animals.
 
Feeding the animals in a group setting presents serious challenges given the tendency of swine toward aggression, particularly at feeding time. There are various methods available to feed the animals in a group setting. Three of the most common are electronic sow feeders, where the animals are trained to line up to enter feeding stations from which individualized rations are dispensed, based on information read from chips implanted in the animal’s ear; trickle feeding, where feed is delivered over a period of 15 to 30 minutes to troughs or on the floor of the pen; and free-stall feeding, where the animal enters a stall, often with a door closing upon entry, allowing her protection from aggressive pen mates during feeding. Each feeding method has a different set of cost, space, and management requirements, which together interact with group size, per animal space allocations, and numerous other physical characteristics of the unit’s design to affect the animals’ wellbeing.
 
Gestation Crates and Group Sow Housing: What Do Comparative Studies Show?

There are now many comparative studies in the animal science literature that document differences in production performance, behavior, and welfare indications between animals housed in gestation crates and those housed in pens. One of the most often-cited studies was carried out by McGlone et al. (2004). This study aggregated research findings from 35 previous comparative studies to determine whether sow behavior, performance, or physiology differed between the two housing types. The study tested for statistical differences between farrowing rates; pigs born per litter; oral, nasal, and facial behaviors; and cortisol blood levels in gestating animals. The research results, which are summarized in the table below, indicate that the differences between the means of measured variables were not statistically significant. That is, none of measures were significantly (P < 0.05) influenced by sow housing type. The study concludes that “gestation stalls or wellmanaged pens generally … produced similar states of welfare for pregnant [females] in terms of physiology, behavior performance, and health.”
 
This study also addresses two issues important in comparing the different systems. The study indicates that sow productivity—as measured by farrowing rates and pigs per litter—is not affected by housing type. This is good news to for U.S. pork producers, some of whom equate group housing with lower female productivity and lower asset returns. More important perhaps, the study identifies the producer’s animal handling/management skills as the key to maintaining productivity of sows housed in pens.

With respect to concerns about the effects of gestation crate housing on animal welfare, neither McGlone et al., nor current animal science research generally provide clear, empirical evidence that switching to group housing improves the welfare of pregnant female swine. The literature is supportive of the contention that sow/gilt welfare is not determined by housing type. “In other words proper design of stalls and pens can result in equivalent animal performance and welfare outcomes, although the design features for achieving that objective will differ. Therefore, it’s not clear that simply switching to group housing will inherently improve or reduce sow performance or welfare.”

The Group Sow Housing Model Often Employs Gestation Crates To Assure Swine Safety

 As the sector continues to evaluate sow housing options, it will be important not to overlook two crucial safety features of the group sow housing model: First, the group sow housing model often does not exclude the usage of sow crates. In current practice in both the European Union and the United States, newly bred sows are crated for around 30 days to insure proper embryo implantation. Moreover, the pregnant females are typically crated for a 5-day period just prior to farrowing. Pregnant females are thus removed from group pens at periods in gestation when they are most vulnerable to aggression and injury. Second, both production models—gestation crate-based and group sow housing—move pregnant females into farrowing crates just prior to the birth of the litter.
 
The farrowing crate— different in dimension and design from the gestation crate—is designed to allow the female to position herself to nurse the litter. The sow’s movement is restricted to prevent injury to the litter, such as crushing or smothering . Crate use in the group sow housing model implies that the female spends about 35 percent of the year—4 months—in individual housing and the balance of the year in a group setting. Under a gestation crate system of production, the animal is crated 100 percent of the time.
 

[Mustang Sally Farm]

US Hog Margins, 1 June 2012
07 June 2012

 

US - Margins improved significantly in the second half of May, particularly in spot Q2 and nearby Q3 periods, with deferred marketing quarters showing stronger margins as well, writes Doug Lenhart, General Manager of Genesus USA.

With the exception of the spot period, all forward margins are now at or above the 70th percentile on a long-term historical basis, providing producers with another opportunity to capture profitable margins following the fallout experienced in late winter/early spring.
 



Genesus Global Market Report
Prices for the week of May 28, 2012
 


Country

Domestic price
(own currency)

US dollars
(Liveweight a lb)
 


USA (Iowa-Minnesota)

83.14¢ USD/lb carcass

61.52¢
 


Canada (Ontario)

1.57¢ CAD/kg carcass

55.18¢
 


Mexico (DF)

19.00 MXN/kg liveweight

60.66¢
 


Brazil (South Region)

1.97 BRL/kg liveweight

44.01¢
 


Russia

95 RUB/kg liveweight

$1.30
 


China

13.20 RMB/kg liveweight

94.41¢
 


Spain

1.33 EUR/kg liveweight

75.40¢
 

Lower feed costs and higher hog prices have both contributed to the recent recovery in hog finishing margins. Following the release of the May WASDE report that indicated corn ending stocks above market expectations, corn has generally been under pressure although the market has stabilized recently.
 
A larger than expected drop in crop condition ratings this week coupled with the fact that soil moisture across the Corn Belt is the fourth driest on record going back to 1895 has raised concerns.
 
April USDA Cold Storage data revealed total pork inventories at 659.532 million pounds, up 8.1 per cent from March and 20.1 per cent higher than last year. It was also the second highest monthly pork inventory figure on record next to April 2008. While that might seem bearish, there are expectations that the high storage figure is in anticipation of a big export campaign over the summer.
 
With forward margins improving back above the 70th percentile, many producers have triggered alerts to either initiate and/or scale into additional coverage in order to capture the improved profitability.
 
2nd Qtr ’12 Most Recent Offering of $8.59, the low was ($1.96), the high has been $19.39 and the 5 year percentile of 67.7 per cent.
 
3rd Qtr ’12 Most Recent Offering of $7.76, the low was $1.20, the high has been $14.07 and the 5 year percentile of 74.3 per cent.
 
4th Qtr ’12 Most Recent Offering of $2.24, the low was ($1.76), the high has been $7.19 and the 5 year percentile of 74.0 per cent.
 
1st Qtr ’13 Most Recent Offering of $4.00, the low was $0.18, the high has been $6.04 and the 5 year percentile of 78.2 per cent.
 

[Mustang Sally Farm]

Finding Ways to Feed Pigs for Less
08 June 2012


US - Results of a preliminary experiment conducted at the University of Illinois indicate that it may be possible to select pigs that can make efficient use of energy in less expensive feed ingredients, thus reducing diet costs.

Less expensive feed is usually higher in fiber than the corn-soy diets typically used in US swine production, explained Hans H. Stein, professor of animal sciences at the University of Illinois at Urbana-Champaign. However, the white breeds that are used in commercial pork production use only about 40 per cent of the insoluble fiber. "If you can increase that number to 50 or 60 or 70 per cent, then of course, you would get a much better use of the energy in those ingredients," Dr Stein explained.
 
"The white breeds have been selected for high efficiency and rapid gain for many, many generations," Dr Stein continued. "But that's all based on corn-soy diets. However, there are also indigenous breeds of pigs that have not been selected for commercial production, and these breeds have, therefore, not been fed the corn-soybean meal diets for as many generations as the white breeds."
 
Among those indigenous breeds are Meishan pigs, which have been raised in China for many centuries. Dr Stein's hypothesis was that these pigs, which have not been selected for efficiency and rapid weight gain, would use fiber more efficiently than the white breeds.
 
Stein and his team compared the fiber digestion of Meishan pigs with that of two groups of Yorkshire pigs. They tested four diets that used high-fiber ingredients: distillers dried grains with solubles (DDGS), soybean hulls, sugar beet pulp, and pectin. When fed DDGS, the values for apparent total tract energy digestibility were higher for the Meishan pigs (83.5 per cent) than for either weight-matched (77.3 per cent) or age-matched (78.8 per cent) Yorkshire pigs. Researchers observed no significant difference in energy digestibility for the other ingredients.
 
"What we observed was that, particularly for the DDGS diets, the Meishans were quite a bit more effective at using that fiber," Dr Stein said. "That diet is high in insoluble dietary fiber. When we looked at more soluble fibers, there was no difference."
 
Although Meishan pigs would never be used for commercial pork production in the United States, the results indicate that differences exist among breeds of pigs. Thus, it is possible that differences also exist among the white breeds and that some may use fibers more efficiently than others.
 
Dr Stein stressed that this study was preliminary and said that determining if white breeds can be bred to use insoluble fiber more efficiently will be quite costly because it requires selecting pigs for multiple generations. Dr Stein said that he and colleagues at the University of Illinois' Institute for Genomic Biology are pursuing funding for further research.
 
"I think it is exciting that there are some pigs that can use fiber better than we have thought in the past, and I think this will open up opportunities to think in different ways about how we can feed pigs economically," he said.
 
The study was published in a recent issue of the Journal of Animal Science and was co-authored with former graduate student Pedro Urriola.
 

[Mustang Sally Farm]

WPX 2012: US Pork Exports in 2012 Not as Strong as 2011
08 June 2012



US – The US had record pork exports in 2011 and very strong exports in the first quarter of 2012. However, currency exchange issues and fewer exports to China will make this a more challenging year, writes Chris Wright for ThePigSite from the World Pork Expo in Des Moines.

RC Hunt, President of the National Pork Producers Council (NPPC), said that the future of the US pork industry depends on free and fair trade and the continued expansion of exports. He pointed out that in 2011 the US exported a record of US$6.1 billion in pork, accounting for 27 per cent of all pork produced in the country.
 
Hunt said that particularly since last June, there has been great success for US pork exports to major markets. One of those markets was China, which was especially important in the latter half of 2011. However it does not appear that China will import as much in 2012 as it did last year.
 
Fewer exports to China and complications due to currency exchange issues in other countries this year lead Hunt to believe that they won't reach the 27 per cent mark like they did last year. Still, the expectations for 2012 are optimistic, he said.

Free Trade Agreements

Among the highlights that Hunt pointed out was the passage last year of Free Trade Agreements (FTAs) with Colombia, Panama and South Korea. The agreements with South Korea and Colombia have gone into effect and the Panama FTA should be implemented later this year.
 
Once fully implemented, these three FTAs will generate over US$ 770 million in additional pork exports annually.
 
Hunt pointed out the agreement with Colombia, in which Colombia agreed to remove a requirement that the US freeze or test pork against trichinae. Since the US has a negligible risk for trichinae, the Colombian requirement was a non-scientific barrier that prevented access of US chilled pork exports to Colombia. The NPPC worked closely with US and Colombian officials to remove the trichinae mitigation requirement. The removal of this barrier will allow US pork exports to reach 100,000 metric tons.

Trans-Pacific Partnership

Among the export challenges that lay ahead, Hunt said that the US is currently participating in the Trans-Pacific Partnership (TPP) negotiations with eight countries. With a total population of 195 million, TPP countries represent a substantial market for US pork exports.
 
Of those TPP countries, Hunt said that Viet Nam has the biggest potential for expanded US pork exports. Vietnam currently has limited US imports via non-tariff barriers. But if those barriers were removed, US pork exports could reach nearly US$ 600 million.
 
Hunt also mentioned trade with Canada, which is one of the US top export markets, while the US represents Canada's top export market. Canada has expressed interest in joining the TPP, but the NPPC objects to Canada's long history of subsidizing hog producers. Without those subsidies US pork exports to Canada would increase significantly. Therefore the NPPC urges that those subsidies be eliminated as a condition of Canada's entry into the TPP.
 
Japan also wants to join the TPP, but its agricultural sector is against it. Year after year, Japan has been the number one value market and the number two volume market for US pork exports.

China and Russia
 
At a second conference, also on pork exports and potential markets, held during the World Pork Expo, Laurie Hueneke, Director of International Trade Policy, Sanitary and Technical Issues for NPPC, addressed trade with China and Russia.
 
China is by far the world's largest pork consumer, consuming 50 million metric tons and could easily be the US's largest export market. China (including Hong Kong) imports only one per cent of its total pork consumption. Also, Chinese pork producers don't have easy or cheap access to feed grains, therefore their production costs are much higher than in the US. So imports from the US seem logical.
 
However, there are a number of issues restricting US pork to China. Hueneke said that those issues include a ban on the use of ractopamine, very high value added tax on pork imports and large subsidies to domestic producers, among other issues. Also, it was mentioned at this session that Chinese pork production has increased four per cent in 2011/2012.
 
If US exports to China increased as little as one quarter of one per cent, it would increase the value of US pork per head by US$ 3.72. If that went up one per cent it would increase the value of US pork per head by US$14.88 said Hueneke. Therefore, any positive movement in exports to China will be significant.
 
Russia is the talk of town in Washington, said Hueneke, because it will soon become a member of the World Trade Organization (WTO). Once it joins the WTO, the US Congress must grant normal trade relations to Russia, in order to take advantage of the negotiated benefits.
 
Hueneke said that since 2008, US pork exports to Russia have decreased. There are a number of sanitary and phytosanitary (SPS) issues that need to be addressed with Russia so that US pork can grow in that market.
 
Those SPS include the trichinae issue, which calls for freezing pork, even though the US does not have problems with trichinae. Russia has zero tolerance for pathogens and tetracyclines and is threatening a ban on the use of ractopamine. It was also mentioned at this session that Russian pork production has increased five per cent in 2011/2012.
 
Hueneke concluded by saying that Russia has the fifth largest economy in the world and therefore represents a US$400 million a year potential for the US pork export market.

[Mustang Sally Farm]

Weekly Roberts Market Report
20 June 2012



 Michael T. Roberts
 Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University


US - Corn prices continue to show price strength, writes Michael Roberts.

LEAN HOGS on the CME finished up on Monday. JULY’12LH futures closed at $95.450/cwt; up $2.425/cwt. AUG’12LH futures finished $2.025/cwt lower at $93.225/cwt. The DEC’12LH contract closed at $78.425/cwt; up $0.575/cwt. A rise in grain prices, an indicator of higher feed costs, underpinned Monday’s rally. Pit sources said that higher feed costs can deter livestock producers from expanding production. Hog slaughter may again be below the year-ago figure for a second consecutive week following a six-weeks period from late April through the end of May when it averaged 4.5 per cent above a year-ago. USDA’s quarterly hogs and pigs report in March projected supplies to average nearly 2 per cent above a year ago for the second quarter. Hog futures staged a sharp rally on fresh signs of tightening supplies and increasing summer demand for the grilling season. Still, there are signs the industry is struggling from supplies of meat that continue to outweigh demand. The rally recovered steep losses from Friday, when traders took profits from long positions ahead of the weekend. Monday, June 18 USDA put the pork cutout value at 94.33; up 0.21. According to HedgersEdge.com, the average packer margin was placed at a negative $7.95/head based on the average buy of $72.89/cwt vs. the breakeven of $69.99/cwt. The latest CME lean hog index was estimated at 95.25; up 0.96. USDA on Monday estimated the daily processing at 391,000 head vs. 386,000 head last Monday and 394,000 a year ago. USDA put the pork carcass cutout at $77.94/cwt, off $1.05/cwt but $0.53/cwt higher than a week ago.
 

This table shows the maximum price a producer could pay for feeder cattle and still break even, assuming the costs and conversion/performance factors listed above. Producers should remain aware that calculations are based on averages. Courtesy DTN.
 
CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JULY’12 contract closed at $5.994/bu; up 20.0¢/bu. The DEC’12 contract closed at $5.340/bu; up 28.0¢/bu. Weather premium and strong buying interest from both commercial and noncommercial traders were supportive. Persistent economic concerns regarding Europe’s crisis slowed bull enthusiasm. Hot weather drying up soil moisture in key corn producing areas fueled speculation prices could strengthen on shorter production projections. Exports were neutral-to-optimistic with USDA putting corn inspected for export at 24,729 mi bu vs. estimates for 15-21 mi bu. This was well below the 34.3 mi bu needed to stay on pace with USDA’s 1.65 bi bu demand projection. (See chart) Exports compared to this time last year were over 43 mi bu.
 


Strong cash markets reinforced gains in corn, as basis, or the difference between cash and futures prices, remained firm in spite of the rally in futures. Usually basis weakens when futures prices rally. However, that wasn’t the case on Monday reflecting low availability of supply. Corn prices continue to show price strength.
 
SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JULY’12 contract closed at $13.842/bu; up 8.25¢/bu. NOV’12 futures closed at $13.392/bu; up 25.25¢/bu. New crop soybean contracts outpaced old-crop market supplies on weather concerns. Pit sources said they don’t think USDA’s 2012 yield forecast of 43.9 bu/ac will hold. Exports were not supportive with USDA putting soybeans-inspected-for-export at 7,897 mi bu vs. estimates for 10-16 mi bu. Inspections are running 13 per cent ahead of the total needed to stay on pace with USDA’s 1.335 bi bu.
 


Funds expanded net-bull positions as analysts continue to warn that supplies will tighten if hot weather persists. Funds were net-long 212,956 contracts for the week ended Tuesday, June 13, 2012. Short positions were placed at 5,984 lots. The net-long position is the difference between the number of long contracts (or bets that prices will rise) and short contracts (bets prices will fall). Funds’ net-long positions in soybeans has been large for a lot of the year on expectations that supplies will tighten after drought reduced South American soy production. Soybean prices should continue to strengthen for the next 10-14 days with some profit taking.
 
WHEAT futures in Chicago (CBOT) closed up on Monday. JULY’12 wheat futures finished at $6.302/bu; up 20.75¢/bu. The JULY’13 contract closed at $7.036/bu; up 15.75¢/bu. Futures were behind nearly all session until near the end when funds jumped in to buy late in the session. Lack of commercial interest held prices back amid speculative short-covering. Spillover from corn and soybeans weather concerns for wheat-crop making in China, Russia and the Ukraine were supportive. Fund managers expanded net-short positions in CBOT wheat futures to 6,367 contracts, more than double their net short of last week at 2,549 lots. USDA put wheat-inspected-for-export at 20,620 mi bu vs. estimates for 20-27 mi bu. This was 1.5 mi bu below the 22.1 mi bu needed to stay on pace with USDA’s 1.15 bi bu demand projection.
 

[Mustang Sally Farm]

Weekly Roberts Market Report
27 June 2012



 Michael T. Roberts
 Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University




LEAN HOGS on the CME finished down with the exception of the nearby July 2012 contract. JULY’12LH futures closed at $93.500/cwt; up $0.150/cwt but $1.950/cwt lower than last report. AUG’12LH futures finished $0.40/cwt lower at $88.750/cwt and $4.475/cwt lower than last Monday’s close. The DEC’12LH contract closed at $77.375/cwt; off $0.100/cwt and $1.050/cwt lower than last report. Fears over expanding supplies and higher grain prices had traders backing away from the latest six-week rally. Pit sources said early Tuesday that hog futures will now begin to steadily decline after the nearby contract gained 21 per cent from early May through last week. Supplies of pork in cold storage are the highest on record at the end of May, according to a USDA report issued last Friday. Meanwhile, the seasonal production trend is that live-hog supplies typically reach their lowest point of the year in June or July before expanding through mid-winter. Slaughter rates are at the tightest point of the year supporting prices. Cash-hog prices ranged from flat to $2/cwt lower on limited buying interest. Late Monday, June 25, USDA put the pork cutout value at $101.29/cwt; up $0.48 and 6.960/cwt over last report. Tight supplies and lighter live-weights due to the spring heat wave have forced processors to bid up prices for hogs. In some cases plants have decided to limit production rather than pay through the nose for hogs that don’t cover sales. Poor processing margins and uncertainty about demand for fresh pork ahead of July 4th may result in some additional cutbacks in processing schedules. According to HedgersEdge.com, the average packer margin was lowered $0.65/hd placed at a negative $8.60/head based on the average buy of $75.89/cwt vs. the breakeven of $72.72/cwt. The latest CME lean hog index was estimated at 102.01; up 0.59 and 6.76 higher than last Monday. USDA on Monday estimated the daily processing at 384,000 head vs. 391,000 head last Monday and 388,000 a year ago.
 


This table shows the maximum price a producer could pay for feeder cattle and still break even, assuming the costs and conversion/performance factors listed above. Producers should remain aware that calculations are based on averages. Courtesy DTN.
 
CORN futures on the Chicago Board of Trade (CBOT) closed up the limit on Monday. Daily trading limits on Tuesday expand to 60.0¢/bu. The JULY’12 contract closed at $6.310/bu; up 40.0¢/bu and 31.75¢/bu over last report. The DEC’12 contract closed at $5.940/bu; up 40.0¢/bu and 60.0¢/bu over last Monday’s close. Corn prices skyrocketed up the limit as summer heat baked Midwestern crops. Traveling through Eastern Kentucky, Southern Illinois, and Missouri recently corn crops looked very thirsty and were penciling as early as 10:00 a.m. Little-to-no-rain is in the forecast however the hurricane will help Southern Georgia crops. This hot weather is hitting during the key pollination phase. The market will remain extremely sensitive to weather over the next couple of weeks. Late Monday USDA downgraded the corn crop in good-to-excellent condition to 56 per cent from 63 per cent. Corn basis weakened. Lingering concerns over Europe’s debt crisis also were supportive. Exports were helpful as USDA put corn-inspected-for-export through June 21 at 27.012 mb vs. estimates for 20-25 mb. Thirty-five mb were needed this week to stay on pace with USDA’s demand projections of 1.65 bb. See chart:
 


The national average basis for corn was down 4.0 ¢/bu to 47.0¢/bu over December 2012 futures. Subscribers to certain DTN services are able to map basis and prices for crop commodities. Below is a screen shot of that technology. While not promoting the website I find it very useful in locating pricing information by locality and distance from any given location using the mapping and circumference tools. As of last night using my location in North Carolina cash corn prices were $6.81/bu in Statesville, NC (basis 87.0¢/bu); $6.31/bu in Goldsboro, NC (basis 37.0¢/bu); and $6.51 in Petersburg, VA (basis 57.0¢/bu). This would be good information for producers, merchandisers, and corn users alike.
 


SOYBEAN futures on the Chicago Board of Trade (CBOT) closed sharply higher on Monday. The JULY’12 contract closed at $14.824/bu; up 40.0¢/bu and $1.00/bu over last Monday. NOV’12 futures closed at $14.254/bu; up 50.0¢/bu and 86.25¢/bu over last report. The same weather premium and global economic forces are supporting soybeans that are supporting corn. Weather forecasts indicate little relief in sight. The key to soybeans, much like corn, remains concern over damage being done to the crop at a time when crop production has little margin for error. Soybean crops are in a critical stage of blooming. USDA put the US soybean crop blooming stage at 12 per cent vs. 5 per cent last week and the 4 per cent five year average. Additionally, the soybean crop in good-to-excellent condition was lowered 3 per cent from last week to 53 per cent. Unlike corn, though, there is little USDA is going to be able to do in regards to number "adjustments" to keep domestic supplies from tightening to alarming levels if the weather doesn't change. Dry weather conditions in South America have the market concerned that the South American soybean crop will be reduced increasing prospects for US exports. Exports were bearish with USDA putting soybeans-inspected-for-export at 9.182 mb vs. estimates of 10-15 mb. This is below the 13.1 mb needed to stay on track with USDA export demand projections. See chart:
 


While the national average basis for soybeans was down 1¢/bu at 42¢/bu under November 2012 futures basis in the Southeast was stronger. See DTN source screenshot below.
 


Should producers sell on the rally or wait for prices to rise further? What happens if the weather changes and the US crop comes in? The soybean market could go south in a hurry. The challenge for pricing soybeans at this time are similar for the producer and the user but in a mirror image sort of way. The producer wants to hold onto the crop as long as possible in order to get the best price. The user wants to price at the lowest point possible. At the same time neither wants to give up gains in profit margins. If the market does decline quickly don’t be the guy that waited too long to price soybeans.
 
The best thing for a producer (user) to do might be to sell (buy) on a scale-up (scale-down) basis when the market is rallying (declining). That is, pick a price point and time period that yields a profit you can live with and sell (buy) a portion of the crop (input) at that point. Then pick another point and let go (buy) a little more and so on. Realizing you probably won’t hit the high (low) of the year your trades have a greater change of being profitable. This goes for a declining market. Don’t be the one who waits for the rebound that may never come. Pick a point that leaves you a profit and sell (buy) a portion, then another, and then another. The strategy of making a profit at each price point will … guess what? … result in an ultimate profit all around. No you may not hit a “home-run” but you will make a profit. In volatile markets paying attention to selling (buying) at profit-margin points will always keep you in business even though you may be disappointed in not achieving the highest (lowest) selling (buying) price. One thing to remember is that the producer (user) should know the cost of production at all times.
 
Most merchandisers have various programs to help producers and users in this effort. Be sure you understand what you’re getting into though. A good rule of thumb is, “If you don’t fully understand it, don’t do it until you do.” Ask questions, it is your money.
 
WHEAT futures in Chicago (CBOT) closed up on Monday. JULY’12 wheat futures finished at $7.242/bu; up 51.0¢/bu and 94.0¢/bu over last report. The JULY’13 contract closed at $7.764/bu; up 46.75¢/bu and 72.75¢/bu over this time last week. The potential for a smaller corn harvest is supportive on expectations that demand will pick for wheat used for livestock feed. Exports were neutral with USDA putting wheat-inspected-for-export at 19.484 mb vs. estimates for 18-24 mb. Wheat prices were also supported on falling expectations for wheat production in important areas like the Black Sea region and Australia. USDA put the US winter wheat crop harvest at 59 per cent this past week vs. 48 per cent the week before and the five-year average of 27 per cent. The national average basis for HRW wheat was unchanged at 37¢/bu under the July futures contract.
 

[Mustang Sally Farm]

USDA Quarterly Pigs and Hogs Report: June 2012
 
United States Hog Inventory Up 1 Percent
 
United States inventory of all hogs and pigs on June 1, 2012 was 65.8 million head. This was up 1 percent from June 1, 2011, and up 1 percent from March 1, 2012.

Breeding inventory, at 5.86 million head, was up 1 percent from last year, and up 1 percent from the previous quarter.
 
Market hog inventory, at 60.0 million head, was up 1 percent from last year, and up 1 percent from last quarter.
 
The March-May 2012 pig crop, at 29.4 million head, was up 1 percent from 2011. Sows farrowing during this period totaled 2.92 million head, up slightly from 2011. The sows farrowed during this quarter represented 50 percent of the breeding herd. The average pigs saved per litter was a record high 10.09 for the March-May period, compared to 10.03 last year. Pigs saved per litter by size of operation ranged from 7.50 for operations with 1-99 hogs and pigs to 10.20 for operations with more than 5,000 hogs and pigs.
 

Quarterly Hogs and Pigs Inventory –
United States: June 1
 
United States hog producers intend to have 2.90 million sows farrow during the June-August 2012 quarter, down 1 percent from the actual farrowings during the same period in 2011, and down 1 percent from 2010. Intended farrowings for September-November 2012, at 2.89 million sows, are down 1 percent from 2011, but up slightly from 2010.
 
The total number of hogs under contract owned by operations with over 5,000 head, but raised by contractees, accounted for 47 percent of the total United States hog inventory, up from 45 percent last year.
 

[Mustang Sally Farm]

US Hog Margins, 4 July 2012
05 July 2012

 

US - Margins deteriorated sharply over the past two weeks primarily due to soaring feed costs. Margins would actually have been even worse if not for a late month recovery in hog prices, particularly in nearby contracts, writes Doug Lenhart, General Manager of Genesus USA.

Projected hog finishing margins are now well below average as well as negative in both Q4 and Q1 following readings near or above the 90th percentile earlier this year.
 



Genesus Global Market Report
Prices for the week of June 24, 2012
 


Country

Domestic price
(own currency)

US dollars
(Liveweight a lb)
 


USA (Iowa-Minnesota)

97.91¢ USD/lb carcass

72.45¢
 


Canada (Ontario)

1.90¢ CAD/kg carcass

67.89¢
 


Mexico (DF)

21.23 MXN/kg liveweight

71.68¢
 


Brazil (South Region)

1.86 BRL/kg liveweight

42.37¢
 


Russia

95 RUB/kg liveweight

$1.32
 


China

13.49 RMB/kg liveweight

96.32¢
 


Spain

1.38 EUR/kg liveweight

78.72¢
 

A searing heat wave accompanied by drought has dimmed what earlier were bright hopes for this season’s corn and soybean crops especially in the Eastern Corn Belt. Crop conditions have declined steadily over the past few weeks and are now record low for this point in the growing season.
 
USDA released their June acreage and quarterly stocks reports this week, which pegged 1 June corn stocks at 3.15 billion bushels and final acreage at 96.405 million, up 541,000 from the March Planting Intentions. Soybean acreage was revised up 2.178 million from March to 76.08 million acres, with 1 June soybean stocks at 667 million bushels. All eyes are on weather though, and rainfall over the next two weeks will be critically important to stem a further decline in corn yield prospects.
 
USDA’s June All Hogs and Pigs report showed 1 June hog inventories up 1 per cent from last year and in line with expectations. June-Nov farrowing intentions were 1 per cent below last year, and the recent advance in feed costs may further discourage expansion.
 
The quick deterioration in forward profit margins has highlighted the importance of setting targets to scale into protection as the opportunities to do so can be short-lived.
 
3rd Qtr ’12 Most Recent Offering of $2.87, the low was $(0.30), the high has been $14.07 and the 5 year percentile of 50.5 per cent.
 
4th Qtr ’12 Most Recent Offering of ($5.34), the low was ($7.37), the high has been $7.19 and the 5 year percentile of 32.9 per cent.
 
1st Qtr ’13 Most Recent Offering of ($2.18), the low was ($3.78), the high has been $6.04 and the 5 year percentile of 36.0 per cent.
 
2nd Qtr ’13 Most Recent Offering of $3.84, the low was $2.83, the high has been $9.83 and the 5 year percentile of 34.1 per cent.
 
The Hog Margin calculation assumes that 73 lbs of soybean meal and 4.87 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $40 per cwt for other feed and non-feed expenses. Thank you to Commodity & Ingredient Hedging, LLC (CIH) for the margin data. Please visit www.cihmarginwatch.com to subscribe to the CIH Margin Watch report.