American Hog News USDA

[mikey]

Saturday, February 14, 2009Print This Page
Market Preview: Pork Export Value Up 49.5 Per Cent in 2008
US - Weekly US Market Preview provided by Steve R. Meyer, Ph.D., Paragon Economics, Inc.



December pork exports were surprisingly strong, given all of the doom and gloom we’ve heard, plus the sharp strengthening of the US dollar last fall. Figures 1 and 2 show exports from two slightly different views.

 


Figure 1 is carcass weight equivalent from USDA’s Economic Research Service (ERS). ERS converts Commerce Department/Foreign Agricultural Service data to carcass weight so it can be easily compared to production numbers here in the United States. On this basis, December 2008 shipments were 3.2 per cent higher than in December 2007 – an improvement from November’s 0.5 per cent year-on-year increase. December’s 312.3 million pounds of carcass weight exports brings the yearly total to 4.668 billion pounds, 48.6 per cent higher than in 2007. That amounts to 19.96 per cent of total US commercial pork production – definitely close enough to 20 per cent to use the rounded up number. Wow! The pork from one in every five pigs slaughtered last year went overseas. Unimaginable in 1995, when the United States was the world’s-largest pork “importing” country.

Figure 2 shows annual exports on a product weight basis. These data come from the Commerce Department and the Foreign Agricultural Service. They are published in metric tons, the quantity units of international meat trade, but I have converted them to million pounds here. On this measure, exports grew by 49.4 per cent in 2008, with China/Hong Kong vaulting to the No. 2 ranking among US export markets. Shipments to Japan grew by 20.9 per cent last year – the largest annual growth rate since 2001 for our largest export market. Shipments to Mexico rebounded nicely (+51.6 per cent) after a difficult 2007. Finally, exports to Russia grew by 78 per cent last year, while exports to Canada continued their steady growth at +15.2 per cent.

Figure 3 is more important to the US pork business than either of the other two charts, since it is value that actually enhances the ability of packers to pay more for US hogs. The value of exports grew last year by 49.5 per cent -- slightly higher than the increase in export quantity, which means that export prices increased even while export quantities were exploding. That implies strong demand indeed.


Figure 3 also shows the true importance of a customer like Japan. They buy more and they buy higher-valued products. Canada remains the second largest US customer on a value basis, but both Mexico and China/Hong Kong closed the gap on Canada significantly in 2008.

In addition to the $4.116 billion of pork exports, the industry sold a record $559 million of pork variety meats abroad last year. That number was 102 per cent higher than in 2007, and was accomplished by selling 956.65 million pounds of variety meats, 94.8 per cent more than in 2007. The total value of pork and pork variety meat exports – $4.675 billion – equals $40.14/ head for each of the 116.458 million hogs slaughtered in the United States in 2008.

The string of record export years now stands at 17. Reaching 18 in 2009 will be very difficult, but the December export performance is encouraging since it occurred after the US dollar strengthened.

Hog Supplies on the Mark
A quick thought on hog supplies: They have been almost precisely what I expected coming out of the December Hogs and Pigs Report. Figure 4 shows the actual data for 2008 and 2009, and my forecasts for weekly slaughter for December 2008 through 2009. Note that the actual numbers have been very close to the forecasts, deviating only 0.5 per cent since 1 December. That’s good enough for me!


Does that mean that the rest of the December report – including the September-November pig crop that was pegged at 6 per cent lower than last year – is accurate? Not really. But it also doesn’t call that report into question. The more I hear about empty finishing barns in Iowa and Minnesota, the more I think my projected slaughter levels of just over 1.9 million per week in May and June are pretty solid.

Just how aggressive packers will be in chasing those pigs remains to be seen. They have had miserable margins over the past three months and have run inverted meat margins (i.e. the hog price has been higher than the cutout value) for six out of seven weeks this year. So, things need to improve on the product side to get hog prices significantly higher. Will the spring bring a normal surge of demand? I think so. But I’ve never had to make that call with an economy like this and I don’t think anyone yet knows how to factor it in to meat demand.



As published in National Hog Farmer's Weekly North American Preview.

[mikey]

Tuesday, February 17, 2009Print This Page
New Guidelines for 'Fatigued' Pigs
US - USDA's Food Safety Inspection Service (FSIS) has set new guidelines for the handling of pigs that are reluctant to move at the packing plant.



USDA's Food Safety Inspection Service has issued guidance to its inspectors on handling 'fatigued' or 'slow' hogs at packing plants, reports Pork Magazine.

Among the guidance suggestions, plants may elect to have a written protocol on handling fatigued or slow hogs. The protocol should explain measures that ensure all pigs are handled humanely and include procedures for tracing fatigued pigs through the process. The protocol should ensure that the requirements are met so that all pigs receive ante-mortem inspection.

It also should address whether slow pigs will be moved as a group to the stunning area after inspection, or if they will be stunned in a pen specified to hold slow or fatigued pigs. The pigs should then moved immediately to the sticking area for post-mortem inspection.

According to National Pork Producers Council and its Packer-Processor Industry Council developed materials to help FSIS understand the science of fatigued pigs and how such pigs currently are handled in plants.

[mikey]

Wednesday, February 18, 2009Print This Page
US and Canadian Hog Inventory Down Four Per Cent
US - This publication is a result of a joint effort by Statistics Canada and NASS to release the total hogs, breeding, market hogs, sows farrowed, and pig crop for both countries within one publication.

 

This information was requested by the US hog industry to provide producers additional information about potential hog supplies. US inventory numbers were previously released on 30 December 2008.

US and Canadian inventory of all hogs and pigs for December 2008 was 79.1 million head. This was down four per cent from December 2007 but up two per cent from December 2006. The breeding inventory, at 7.49 million head, was down three per cent from a year ago but virtually unchanged from last quarter. Market hog inventory, at 71.6 million head, was down four per cent from last year and down three per cent from last quarter. The pig crop, at 36.3 million head, was down four per cent from 2007 but up three per cent from 2006. Sows farrowed during this period totaled 3.79 million head, down five per cent from last year.

US inventory of all hogs and pigs on 1 December 2008 was 66.7 million head. This was down two per cent from both 1 December 2007 and 1 September 2008. The breeding inventory, at 6.08 million head, was down two per cent from last year but up slightly from the previous quarter. Market hog inventory, at 60.6 million head, was down two per cent from both last year and last quarter. The pig crop, at 28.4 million head, was down four per cent from 2007 but up 6 per cent from 2006. Sows farrowed during this period totaled 2.99 million head, down six per cent from last year.

Canadian inventory of all hogs and pigs on 1 January 2009 was 12.4 million head. This was down 10 per cent from 1 January 2008 and down 17 per cent from 1 January 2007. The breeding inventory, at 1.40 million head, was down seven per cent from last year and down one per cent from last quarter. Market hog inventory, at 11.0 million head, was down 11 per cent from last year and down four per cent from last quarter. The pig crop, at 7.86 million head, was down three per cent from 2008 and down four per cent from 2007. Sows farrowed during this period totaled 799,200 head, down four per cent from last year.

[mikey]

Saturday, February 21, 2009Print This Page
Market Preview: Packers Feeling the Pain
US - Weekly US Market Preview provided by Steve R. Meyer, Ph.D., Paragon Economics, Inc.



Smithfield Foods’ announcement this week stating plans to close six processing plants, eliminate 1,800 jobs and reduce the number of operating business units from seven to three is definitely a sign of the times. While efficiency has always been important, it is now indispensable. Even the juggernaut that was (and still may be) Smithfield, is not immune to that requirement.

Some industry observers have long marveled at Smithfield’s standard operating procedure of buying another company, making sure it had good management and systems in place, and then more-or-less leaving it alone. The practice worked pretty well for years and Smithfield’s stock soared from $1.30/share in early 1990 to a peak of over $35 in mid-2004. It’s hard to argue with success.

But difficult times have hurt Smithfield and many other companies in and out of the food and agricultural sectors. Obviously, Smithfield management decided it was time to streamline. The operating units will be centered on the company’s three largest packing entities – Smithfield Packing, John Morrell and Farmland Foods. The closures have no impact on Smithfield’s packing capacity since all of the companies’ slaughter plants were spared.

That is an important message, I think. The John Morrell plants at Sioux Falls, South Dakota, and Sioux City, Iowa, have long been on the short list of US slaughter plants that are long in years and perhaps short on efficiency. The Sioux Falls plant was once considered a definite dinosaur, since it dates to the day of four-species (beef, pork, lamb and veal) operations under one roof. But the addition of major processing capabilities in the ’90s has made it a very important plant for Morrell’s value-added products.
,br> Sioux City, on the other hand, is strictly a kill-and-cut operation located near a revitalized downtown area. It doesn’t even have the stockyards next door anymore. How much longer will it last in this kind of environment? I hope it is needed for a long time, but the same change in philosophy that led Smithfield to make this week’s changes could impact this plant and industry capacity as well.

With that said, I do not think we are at great risk of losing a slaughter plant this year. US market hog production will be lower in 2009, especially in the second quarter. Imports of Canadian market hogs will be much smaller, too. I expect no more than 500,000 or so this year (compared to 2.3 million in ’08) and, depending on how the mandatory country-of-origin-labeling (COOL) soap opera turns out, perhaps far fewer. Feeder/weaner pig imports will decline as well in 2008. I expect them to fall from last year’s seven million to 5.0 to 5.5 million this year.

These reductions will not leave large chunks of unused slaughter capacity for long periods of time. Utilization rates will indeed be lower than in 2007 and 2008, but closing a plant is pretty much a forever decision, and I don’t think 2008 supplies will dictate that it be made – especially after Smithfield has passed on an opportunity to close a plant that many industry observers believe to be vulnerable.

The exception may, sadly, be the Meadowbrook Farms plant in Rantoul, IL. The plant is closed at present due to a cash flow crunch caused by a contract dispute with a major customer. There are no plans to permanently close the plant, but the situation is serious. USDA’s Grain Inspection Packers and Stockyards Administration met with Meadowbrook suppliers last week and they usually only get involved when serious livestock payment issues arise. I hope the plant survives because I have friends involved as owners and as staff. Undeniably, the prospects don’t look good in the current economic environment.

With all of that said, it is important to realize that the current situation for pork packer margins is abysmal (see Figure 1). In a period of six months, US packers have gone from the highest per-head margins in the past nine years to the lowest per-head margins in the past 12 years. What is even more unusual is that the margins fell apart in September and October – the very time of year when pork packer margins usually strengthen.


Why the dismal performance? In a nutshell, packers are paying too much for hogs relative to cutout and by-product values. Meat margins (the spread between the cutout value and the hog price) have been negative in eight of the past nine weeks. By-product values have actually recovered some since Christmas, but last week’s $15.25/head (7 February) is over $8/head lower than last summer’s record high.

I think packers are trying to maintain both customer and supplier relationships as they wait for warmer weather and, hopefully, a seasonal increase in pork demand. It is a logical approach but one that, at least for now, is getting a bit expensive.

[mikey]

Saturday, February 21, 2009Print This Page
Weekly Review: Japan Still Reigning as US Customer
US - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

 
Ron Plain
Pork exports for 2008 were up 48.6 per cent from 12 months earlier. Pork imports were down 14.1 per cent last year from a year earlier.

Net pork exports as a percent of production in 2008 was up to 16.4 per cent. This compares with 9.9 per cent in 2007. This was the major reason why live hog demand was up 6 per cent while consumer demand for pork was down 3.5 per cent from 12 months earlier.

Japan continues to be our number one customer of pork in 2008 and exports were up 23.4 per cent, China and Hong Kong, was up 139.8 percent, Mexico was up 49.3 per cent, Canada was up 14.9 per cent, South Korea was up 12.1 per cent, Russia was up 76 per cent, Taiwan was up 70.7 per cent, Australia was up 40.3 per cent and other countries were up 83.8 per cent from 2007.

December pork exports were up 3.2 per cent from 2007. China and Hong Kong were down 27.1 per cent in December from a year earlier. USDA is estimating pork exports in 2009 will be down about 15 per cent from 2008.

Pork cutout this Thursday afternoon at $57.22 per cwt was down $1.32 per cwt. With the weak consumer demand, pork cutout is not likely to increase much until we reduce slaughter more than we have to date. Loins at $72.06 per cwt was down $4.64 per cwt, Boston butts at $63.75 per cwt down $1.33 per cwt, hams at $40.03 per cwt down $1.42 per cwt and bellies at $72.26 per cwt down $0.10 per cwt from a week earlier.

Live hog weights for barrows and gilts in Iowa-Minnesota trended lower seasonally with the weight at 268.2 pounds down 0.8 pound from a week earlier but still up 1.2 pounds from a year earlier; continuing to support the belief that marketings are not as current as they were last fall.

Good news from north of the border. Canada's hog herd was down 10.2 per cent on 1 January from a year earlier. The breeding herd was down 7.1 per cent, sows and bred gilts were down 6.9 per cent from 12 months earlier.

Even with nearly a seven percent reduction in the sow herd, the farrowing intentions for January-March are only down 3.4 per cent and the April-June intentions are only down 2.6 per cent. With some growth likely in litter size, pig production in the first half of the year may be down only between two and three per cent from last year. With the weak consumer demand we need more reduction in the North American sow herd than we have had to date. The most recent sow and gilt slaughter data continues to support the belief that producers are not currently reducing the breeding herd. Sow slaughter in January was down 4.1 per cent after adjusting for the smaller herd which means the number of sows slaughtered was down between six and seven percent from a year earlier. The bottom line is that additional reductions in the hog herd in North America is needed to stop the bleeding.

Live hog prices this Friday were $1.00 – 2.00 higher per cwt compared to last week. Weighted average negotiated carcass prices were $0.10-4.91 per cwt lower Friday morning compared to seven days earlier.

The top live prices Friday morning for select markets were: Peoria $36.50 per cwt, Zumbrota, Minnesota, $39.00 per cwt and interior Missouri $43.00 per cwt. The weighted average negotiated carcass prices Friday morning by areas were: western Cornbelt $57.92 per cwt, eastern Cornbelt $55.73 per cwt, Iowa-Minnesota $57.00 per cwt and nation $56.47 per cwt.

Slaughter this week under Federal Inspection was estimated at 2214 thousand head up 0.4 per cent from a year earlier.

[mikey]

Monday, February 23, 2009Print This Page
Judge Rules Recumbent Pigs May be Processed
CALIFORNIA, US - Contrary to a state law, a federal judge has ruled that pigs unable to stand may still be slaughtered and processed for food. Four welfare groups will appeal against the ruling.



A federal judge in Fresno has ruled that pigs too weak or stressed to stand up can still be butchered despite a state law to the contrary, reports Los Angeles Daily News.

US District Judge, Lawrence J. O'Neill, ruled that a 102-year-old federal food safety law that allows swine too sick to stand to be slaughtered under certain conditions supersedes the California law.

Four groups that work for the humane treatment of animals criticized the ruling on 20 February, saying it endangers the nation's food supply. They vowed to appeal.

"This challenge to California law is a stunning example of the meat industry's utter disregard for animal suffering and public safety," said Bradley Miller, national director of the Humane Farming Association, in a written statement.

Representatives of Miller's group, along with The Humane Society of the United States, Farm Sanctuary and the Animal Legal Defense Fund, said the ruling creates a loophole that could lead to the butchering of sick and injured animals.

The state law banning the slaughter of so-called downer animals was written last year in response to an animal rights group's taping of abuse at a Southern California slaughterhouse. Two meat industry groups sued, arguing that the statute would cause good pork to go to waste, concludes the report in Los Angeles Daily News.


 

[mikey]

Tuesday, February 24, 2009Print This Page
GAO Report Warns of Shortage of Veterinarians
US - The Government Accountability Office (GAO) has put out a statement highlighting the growing national shortage of veterinarians.



Veterinarians are essential for controlling zoonotic diseases - which spread between animals and humans - such as avian influenza. Most federal veterinarians work in the Departments of Agriculture (USDA), Defense (DOD), and Health and Human Services (HHS). However, there is a growing national shortage of veterinarians.

GAO determined the extent to which:

the federal government has assessed the sufficiency of its veterinarian work force for routine activities
the federal government has identified the veterinarian work force needed during a catastrophic event, and
federal and state agencies encountered veterinarian work force challenges during four recent zoonotic outbreaks.
GAO surveyed 24 federal entities about their veterinarian work force; analyzed agency work force, pandemic, and other plans; and interviewed federal and state officials that responded to four recent zoonotic outbreaks.

The federal government lacks a comprehensive understanding of the sufficiency of its veterinarian work force. More specifically, four of five component agencies GAO reviewed have assessed the sufficiency of their veterinarian work force to perform routine activities and have identified current or future concerns. This includes USDA's Animal and Plant Health Inspection Services (APHIS), Food Safety and Inspection Service (FSIS) and Agricultural Research Service (ARS); and DOD's Army. Current and future shortages, as well as noncompetitive salaries, were among the concerns identified by these agencies.

HHS's Food and Drug Administration (FDA) does not perform such assessments and did not identify any concerns. In addition, at the department level, USDA and HHS have not assessed their veterinarian work forces across their component agencies, but DOD has a process for doing so. Moreover, there is no government-wide effort to search for shared solutions, even though 16 of the 24 federal entities that employ veterinarians raised concerns about the sufficiency of this work force.

Further exacerbating these concerns is the number of veterinarians eligible to retire in the near future. GAO's analysis revealed that 27 per cent of the veterinarians at APHIS, FSIS, ARS, Army and FDA will be eligible to retire within three years.

Efforts to identify the veterinarian work force needed for a catastrophic event are insufficient. Specifically, agencies' plans lack important elements necessary for continuing essential veterinarian functions during a pandemic, such as identifying which functions must be performed on-site and how they will be carried out if absenteeism reaches 40 per cent – the rate predicted at the height of the pandemic and used for planning purposes.

In addition, one federal effort to prepare for the intentional introduction of a foreign animal disease is based on the unrealistic assumption that all affected animals will be slaughtered, as the United States has done for smaller outbreaks, making the resulting veterinarian work force estimates irrelevant.

A second effort lacks crucial data, including data on how the disease would spread in wildlife. If wildlife became infected, as they have in the past, response would be greatly complicated and could require more veterinarians and different expertise. Officials from federal and state agencies involved in four recent zoonotic disease outbreaks commonly cited insufficient veterinarian capacity as a work force challenge. However, 10 of the 17 agencies that GAO interviewed have not assessed their own veterinarian work force's response to individual outbreaks and are thus missing opportunities to improve future responses. Moreover, none of the entities GAO reviewed has looked across outbreaks to identify common work force challenges and possible solutions.

[mikey]

Tuesday, February 24, 2009Print This Page
Pork Production Lower than a Year Ago
US - Commercial red meat production for the United States totalled 4.17 billion pounds in January, down six per cent from the 4.42 billion pounds produced in January 2008, reports the USDA's National Agricultural Statistics Service (NASS).

 

Pork production totaled 2.03 billion pounds, six per cent below the previous year.

Hog kill totaled 9.92 million head, six per cent below January 2008.

The average live weight was down one pound from the previous year, at 272 pounds.

January 2008 contained 23 weekdays (including two holidays) and 4 Saturdays.
January 2009 contained 22 weekdays (including two holidays) and 5 Saturdays.

US Monthly Commercial
Red Meat Production
 

US Monthly Commercial Slaughter
Hogs
 

US Monthly Commercial Slaughter
Average Live Weight
Hogs
 

US Monthly Federally Inspected
Average Dressed Weight
Hogs
 

US Monthly Federally Inspected
Average Dressed Weight
Barrows and Gilts
 

US Monthly Federally Inspected
Average Dressed Weight
Sows

[mikey]

Wednesday, February 25, 2009Print This Page
CME: Pork and Beef Prices Higher Than a Year Ago
US - CME's Daily Livestock Report for 24 February 2009.



We have been saying for some time that US retail meat and poultry prices had to eventually rise in order to generate enough income at the retail and foodservice level to pull producer level demand up and compensate growers for higher costs. That entire process is in some jeopardy now as consumer incomes and wealth levels fall and consumers begin to deal with much tighter family budget situations. USDA’s retail price data for January indicated a bit of a mixed bag for average retail prices but the pattern still fits our expectations: Higher retail meat and poultry prices in 2009 LED BY POULTRY.

Poultry’s leadership position in this matter is driven by two factors. First, chicken is the most consumed animal protein in America on a retail weight basis and trails beef by less than two pounds per person on a boneless equivalent basis. Chicken is a major component of both foodservice and retail meat sales and dominates convenience food offerings. More important in our minds, though, is the fact that chicken can respond more rapidly to market conditions than any other animal protein species. Only 8 to 11 weeks, depending on end weights, are required to go from an egg placed in an incubator to a ready-for-slaughter bird. It takes nearly one year to go from breeding a sow to having a finished market hog and more than two years from breeding a beef cow to having a market-weight fed steer or heifer.

Therefore, we have expected chicken to be the first of the animal protein species to be able to respond to higher costs. The process has been slower and has exacted more pain on poultry companies that we expected but it appears to be happening. Egg sets and broiler slaughter reductions have been happening since July and prices are finally responding, as can be seen in the top graph below.

 


Composite broiler prices were record high in January, reaching $1.837/lb., 3.1 per cent higher than in December and 8.4 per cent higher than in January 2008. Turkey prices, which would be expected to respond rather quickly to higher feed costs as well, also set a record in January at $1.365/lb., 2.5 per cent higher than in December and 13.1 per cent higher than one year ago.

Both beef and pork prices declined from December levels in January but began this year higher than one year ago. USDA’s All-Fresh beef price fell 7.4 cents/lb from December to settle at $3.927/lb. That price is still 2.7 per cent higher than one year ago. The composite pork prices declined just less than 1 cent/lb. from December. January’s $2.996/lb. was 4.9 per cent higher than one year ago. Note that both beef and pork retail prices set all-time records in September before declining during the fourth quarter. That decline is quite normal for pork but was far more pronounced for beef this year — likely owing to the financial crisis and lower incomes.

Of course when it comes to demand, relative prices are paramount —whether the relationship be to each other or to income. The lower graph above shows beef, pork and turkey prices as a percentage of the chicken price. It appears that both beef and pork are relatively less expensive than they have been in the past. That could be due to weaker demand or just a lag relationship with chicken prices. When both species’ relative prices fell in early 2008, they came roaring back to set September’s records. Might it happen again?

[mikey]

Thursday, February 26, 2009Print This Page
US Maintains Access to Philippine Pork Market
US - In a victory for US pork producers, the Philippine government indicated this week that it will maintain current rules for the administration of its tariff rate quota (TRQ) for pork, preserving US access to a fast-growing market for US pork exports.



The Philippine government had threatened in recent months to severely restrict pork imports by denying to legitimate Philippine importers the licenses they need to import pork within the country’s 54,210 metric ton pork TRQ. (Amounts of imported pork below the TRQ are subject to a lower, or in-quota, tariff rate. Once imports reach the TRQ threshold a higher tariff rate kicks in.)

In response to that threat, the National Pork Producers Council filed a petition with the Office of the US Trade Representative in December 2008, requesting removal of the Philippines from the US Generalized System of Preferences (GSP). In filing the petition, NPPC noted that the Philippine action would have violated World Trade Organization rules and a 1999 Memorandum of Understanding between the United States and the Philippines.

GSP is a program designed to provide developing countries such as the Philippines with preferential duty access to the US market. In 2007, the Philippines exported $1.1 billion worth of products to the United States under the GSP program.

"We are delighted the Philippine government has lived up to its international obligations and given Philippine importers full access to the pork TRQ," said NPPC President Bryan Black, a pork producer from Canal Winchester, Ohio. "In light of that, we have withdrawn our GSP petition. However, we will remain vigilant to ensure the Philippine government continues to give the US pork industry full access to its pork market."

The Philippine decision to maintain its current TRQ administration rules preserves a growing market for US pork exports. US pork sales to the Philippines in 2008 surged by 360 percent to 25,300 metric tons valued at $46 million.

[mikey]

Saturday, February 28, 2009Print This Page
Weekly Review: Cycle in Pork Demand Observed
US - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

 
Ron Plain
Retail pork prices in January were down 0.3 per cent from December but up 4.9 per cent from a year earlier. Live hog prices in January were 12.7 per cent above 12 months earlier.

All segments of the pork industry benefited from the nearly five percent increase in retail pork prices in January. However, in late January and so far in February packers’ margins have been very undesirable with deep red ink part of the time.

Surprising as it may seem to be our demand index for November 2008 through January 2009 shows about a two percent increase in pork demand and above a one percent increase in live hog demand.

There appears to be a cycle in pork demand and the rate of decline in demand was decreasing through fall.

Certainly, three months is not a long enough period to project a trend; but with the weak general economy, we will take stronger demand for any length of time we can get it.

Our gilt and sow slaughter data continues to support the belief that producers have stopped the decline in the size of the hog breeding herd. Some observers of the hog industry believe we need to reduce the herd another five percent or about 300 thousand head. To get this much more reduction will take some time and producers are likely to feel substantially more pain in accomplishing this goal.

Feeder pig prices at United Tel-O-Auction this week were steady to $5 per cwt below two weeks earlier. United only had pigs in the 50-60-pound category this week and they sold for $107 per cwt.

The national average price last week for early-weaned pigs 10-pound basis sold for an average of $37.72 per head. The national average for 40-pound basis pigs was $55.45 per head. I would still rather be the seller than the buyer at these prices.

Pork cutout was pushed lower again this week with the cutout Thursday afternoon at $56.67 per cwt, down $0.65 per cwt from seven days earlier. Loins at $71.97 were down $0.09 per cwt, Boston butts at $60.91 were down $2.84 per cwt, hams at $40.65 per cwt were up $0.62 per cwt, and bellies at $71.26 per cwt were down $1.00 per cwt from a week earlier.

Live barrow and gilt weights for Iowa and Minnesota continued the seasonal decline at 262.4 pounds, down 0.8 pound from a week earlier but still 0.6 pound above a year earlier. Barrow and gilt carcass weights under Federal Inspection for the week ending February 14 were still two pounds above a year earlier.

This weight data supports the belief that the larger marketings than expected in the last few weeks are not due to pulling marketings forward. Based on weights, marketings have slowly become less current in the last six months.

Live hog prices Friday morning were $2.50 - $4.25 per cwt lower compared to a week earlier. Weighted average negotiated carcass prices Friday morning were $2.79 – $4.66 per cwt lower compared to seven days earlier.

The top live prices Friday morning for select markets were: Peoria $34 per cwt, Zumbrota, Minnesota, $36 per cwt and interior Missouri $38.75 per cwt. The weighted average negotiated carcass prices Friday morning were: western Cornbelt $54.21 per cwt, eastern Cornbelt $51.07 per cwt, Iowa-Minnesota $54.21 per cwt and nation $51.84 per cwt.

Slaughter this week under Federal Inspection was estimated at 2,179 thousand head, down 0.5 per cent from a year earlier.

[mikey]

Monday, March 02, 2009Print This Page
CME: What's to Determine Meat Prices in 2009?
US - CME's Daily Livestock Report for 27 February 2009.



We have discussed the rather obvious fact that demand is a huge risk factor for 2009 and, since we doubt that the people in charge in Washington are going to offer any meat demand stimulus packages, our concern remains high. The year-on-year change figures in this week’s Production and Price Summary add some credence to those concerns. FI cattle slaughter was DOWN 2.23 per cent last week from one year ago at the same time that live and dressed steer prices were DOWN as well. Not exactly a relationship that supports a downward sloping demand curve. FI hog slaughter and hog prices last week were also both below the levels of one year ago. Chicken slaughter/production and the 12-city composite broiler price had the same year-on-year change signs last week — though the Georgia dock broiler price, which represents a smaller bird usually destined for foodservice, was over 10 per cent higher this year. Even turkey prices were lower last week versus 2008 while turkey supplies were down over 6.5 per cent.

We have seen some instances of this in past weeks, especially in the beef sector but this is the first week that the relationships was expressed in all species. We fully realize that one week does not a trend make but the breadth of these same-sign relationships at farm and wholesale levels are troubling and are certainly worthy of watching closely in weeks to come.

Now we wouldn’t be living up to our economist pedigree if we didn’t chime in with an “On the other hand . . . “ — so consider the most recent demand information from the University of Missouri. Professor Glenn Grimes’ released demand indexes last week for the 3-month period from November through January that indicate that US consumerlevel demand actually improved relative to one year ago. Professor Grimes figures show pork demand up 2 per cent, beef demand up 1 per cent, broiler demand up 5.6 per cent and turkey demand up 3.8 per cent during that period. In addition, live hog demand was 1 per cent higher while fed cattle demand was down 5.1 per cent.

How do these square with recent markets? First, remember that they are for November through January and markets have been pummeled by continued bad news and negative expectations since then. Second, Professor Grimes quite correctly uses deflated retail prices as part of his calculations to determine the whether a demand curve has moved. Under “normal” inflationary conditions, these real prices generally fall from year to year, requiring a larger per capita consumption increase if an increase of demand is to be shown. But from November through January, there was no inflation (the all-item CPI actually fell by 1.3 points or 0.6 per cent). That means that smaller volume increases (or, depending on what direction retail prices moved, even volume declines) were needed to conclude that demand had increased. And the domestic per capita consumption increases needed to support a conclusion that demand is higher are much easier to come by now as exports have softened. Finally, the retail prices of all species are significantly higher than one year ago as the retail market finally responds to the lower domestic availability that started last year when exports increased.

Which of these dueling demand stories will prevail in 2009? The answer to that will be a major determinant of livestock and meat prices.

[mikey]

Tuesday, March 03, 2009Print This Page
Weekly Outlook: Producers May Still Return to Profits
US - Pork producers may be on the verge of returning to profitability after experiencing losses dating back to October 2007, writes Chris Hurt, Extension Economist at Purdue University.

 Chris Hurt
Extension Economist
Purdue University
 

Hog prices are expected to rise seasonally in coming months and costs for feed continue to drop under the concerns of slowing world economic activity. For the year, hog producers are expected to see an average live price of about $47.50 per hundredweight, but costs of production are expected to drop to near $45.50, providing a modest profit.

The crisis in the world economy is having negative impacts on pork demand, but is also helping to lower feed costs as corn and soybean meal prices decline. In fact, yearly average hog prices had very little variation in 2006, 2007, 2008, and now in 2009 when average prices were between $47 and $48. Wide fluctuations in costs of production are the primary reason for an estimated profit of $27 per head in 2006 and an estimated loss of $17 per head in 2008. Changing prices of corn and soybean meal have been the drivers of returns.

Hog prices will not see much enhancement this year due to reductions in demand, particularly export demand. The robust pace of pork export demand in 2008 is not going to be maintained as USDA anticipates a 14 per cent drop. Even though domestic pork production will drop one to two percent in 2009, fewer exports mean that pork supplies available for US consumers will rise modestly for the year, but with some differences by quarter.

Pork available per person is expected to rise modestly in the first quarter and be 6 per cent higher in the second quarter. The large increase in domestic supplies in the second quarter are because of large exports to China in the same quarter a year-ago. More modest Chinese purchases in the second quarter 2009 will leave considerably larger amounts for US consumers. Availability will be about unchanged in the third quarter and down four percent in the final quarter.

Hog prices on a live weight basis are expected to average $42.50 for 51 to 52 per cent lean carcasses in the first quarter of 2009. Prices are expected to begin to rise immediately from the low $40s currently, to near $50 by May. Late spring and summer prices are expected to be in the lower $50’s. Seasonal declines are anticipated after August with prices dropping to the mid-$40s by year end. By quarter, 2009 prices are expected to average about $42.50, $50, $51, and $46, respectively.

How much will declining corn and soybean meal prices lower costs of production in 2009? Estimated costs for farrow-to-finish operations increased from about $37 per live hundredweight in 2006 to a record high of $54 in 2008. The previous record high estimated annual cost was $48 in 1996. The current estimated 2009 corn price of $3.36 is down from $4.78 last year. High protein meal price this year of $261 per ton would be down $70 per ton from 2008. Estimated 2009 prices for corn and soybean meal are based on the actual prices for the first two months and adjusted futures prices as of 2 March 2009.

Given these hog price and costs estimates, pork producers are expected to return to profitability in April of this year. Estimated losses of $11 per head in the first quarter would give way to profits in the second through fourth quarter of $12, $15, and $6, respectively. For the entire year, profits would be about $5 to $6 per head.

Like all sectors of agriculture, pork producers face large uncertainties from the general economic conditions. This means that reductions in the breeding herd will likely continue throughout the year. Smaller pork supplies into 2010 would seem to put a brighter face on profit prospects, but further loss of pork demand in a weakening economy could offset those gains.

The extreme uncertainty of the moment implies that pork producers, like all of agriculture, should be conservative and defensive this year. Perhaps management decisions in 2009 should be focused on increasing odds of survival, rather than looking for big opportunities.


 

[mikey]

Wednesday, March 04, 2009Print This Page
Weekly Roberts Report
US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech. Thank you to everyone for your thoughts and condolences in our time of loss. Now, let’s get back in the saddle.



LEAN HOGS on the CME closed down on Monday. The APR’09LH contract closed at $60.275/cwt; down $0.625/cwt. The JUNE’09LH contract lost $1.050/cwt to $71.475/cwt. Futures closed lower on the souring economy and other commodity declines despite higher cash hog prices. There was a slaughter slowdown last week based on Smithfield Foods closing of one of its Smithfield, VA plants. USDA on Monday reported cash hogs up $2.22/cwt at $57.53/cwt. USDA on Friday put the Pork Cutout at $56.35/cwt; down $0.22/cwt. According to HedgersEdge.com the average pork plant margin for Monday was a negative $0.45/head based on the average buy of $39.98/cwt vs. the average breakeven of $39.82/cwt. Sell hogs when ready. It would be a good consideration to put off buying feed needs for a couple of weeks if possible.

CORN futures on the Chicago Board of Trade (CBOT) closed off on Monday. MAR’09 corn futures closed at $3.434/bu; off 7.25 ¢ /bu. The JULY’09 contract closed at $3.594/bu; down 9. 0 ¢ /bu. DEC’09 corn futures finished at 3.802/bu; down 10.75 ¢ /bu. A drop in crude oil, plunging equity markets, and gains in the US dollar pressured prices. Japan placed an order to import corn for feed from Romania over the US for the first time in ten years. USDA placed corn inspected for export at 31.39 mi bu vs. expectations for between 24.0-30.0 mi bu. Corn exports are shown off last year’s pace in the table below.

Period
Ended Corn % chg
YTD 08/09 774,575 -39.5
YTD 07/08 1,280,038 NA
-2009-
Feb 26 31,390 10.1
Feb 19 28,500 -17.4
Feb 12 34,522 15.8

Cash corn in the US Midwest was steady to firm. Cash corn in the U.S. Mid-Atlantic states were 11.0- 15.0 lower. Funds were net sellers having sold over 6,000 lots. A couple of floor traders said most traders think the CBOT corn market is overpriced. Ethanol futures closed off 3.0 ¢ /gal finishing at $1.510/gal. New surveys show that many producers have ’08 corn still in the bin. It would be a very good idea to get it sold at this time. It might be a good idea to price up to 45 per cent of the 2009 crop.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. MAR’09 soybean futures closed at $8.484/bu; off 26.0 ¢ /bu. The NOV’09 contract closed at $7.930/bu; down 34.5 ¢ /bu. The same market influencers plus one weighed in on soybeans. The additional factor pushing soybeans lower is the news that the Argentinean government is interested in taking over their large soybean industry so they may regulate prices to their own buyers. USDA put soybeans-inspected-for-export at 27.22 mi bu vs. expectations for between 25.0 – 28.0 mi bu. It was reported that China will shift its business to South America from the US. This should pressure US prices as 64 per cent of this week’s US export total belonged to China and is typical of the last few weeks. The table below illustrates how exports have fallen off pace.

Period
Ended Soybeans % chg
YTD 08/09 821,975 12.9
YTD 07/08 728,073 NA
-2009-
Feb 26 27,219 -10.1
Feb 19 30,283 -37.6
Feb 12 48,550 0.2

Large specs are in net bear positions by about 1,400 lots as of Feb. 24. Cash soybeans are steady to stronger. It might be a good idea to get all old crop beans sold and price up to 25 per cent of the ’09 crop.

WHEAT futures in Chicago (CBOT) closed down on Monday. The MAR’09 contract closed at $4.496/bu; off 15.75 ¢ /bu. JULY’09 wheat futures finished down 15.25 ¢ /bu at $5.180/bu. The same outside markets weighing on other commodities pressured the wheat markets. There are reports that Iran will need to import 7 million tonnes (257 mi bu) this coming year. Spain is said to import more wheat from the Black Sea area after delays in current orders. Two floor sources stated that the market is waiting on word from an Iraq tender that closed over the weekend to see who got the bid. However, they acknowledged that Canada and Russia are expected to get the bulk of the order as US wheat is too expensive. There is some fundamental support as rain is needed in the US Plains wheat growing area. However, the main focus on the wheat market this week will continue to be focused on the floundering US stock market and crude oil. US wheat exports were off with USDA placing wheat-inspected-forexport at 8.66 mi bu vs. expectations for between 13.0 – 16.0 mi bu. The table below shows year-to-date running behind last year at this time.

Period
Ended Wheat % chg
YTD 08/09 775,149 -19.9
YTD 07/08 967,359 NA
-2009-
Feb 26 8,664 -16.4
Feb 19 10,359 -2.3
Feb 12 10,604 -45.0

For large speculators net positions remained short by 2,539 lots for the week of Feb. 24. It would be a good idea to hold off selling any more of the ’09 wheat crop as wheat demand will most likely remain inelastic (stable) for food demand.

[mikey]

Monday, March 09, 2009Print This Page
Livestock Slaughter 2008 Summary - March 2009
US - Total red meat production for the United States totaled 50.4 billion pounds in 2008, 3 per cent higher than the previous year, according to the United States Department of Agriculture (USDA).

 

Red meat includes beef, veal, pork, and lamb and mutton. Red meat production in commercial plants totaled 50.2 billion pounds. On-farm production totaled 137 million pounds.

Commercial hog slaughter totaled 116.5 million head, 7 per cent higher than 2007 with 99.1 per cent of the hogs slaughtered under federal inspection.

The average live weight was down 1 pound from last year, at 268 pounds.

Barrows and gilts comprised 96.6 per cent of the total federally inspected hog slaughter.

There were 818 plants slaughtering under federal inspection on 1 January 2009 compared with 807 last year. Hogs were slaughtered at 618 plants, with the 12 largest plants accounting for 55 per cent of the total.

Iowa, Kansas, Nebraska, and Texas accounted for 50 per cent of the United States commercial red meat production in 2008, similar to 2007.