American Hog News USDA

[mikey]

Market Preview: Pig Crop Projections and Long-Term Trends
US - Weekly US Market Preview provided by Steve R. Meyer, Ph.D., Paragon Economics, Inc.



This afternoon, USDA will release its estimates of US hog and pig inventories on 1 March. Watch your e-mail on Monday for a summary of the report and its implications for supplies and prices through the first quarter of 2010.

Figure 1 contains the results of DowJones’ quarterly survey of analysts for their pre-report estimates. The expectations are obviously for more reductions in supplies over the next two quarters, but those heavyweight pig inventories are larger than were suggested for the same pig groups in the December report. In addition, analysts’ expectations of farrowings and litter sizes for the rest of this year suggest supplies near year-earlier levels for Q4-09 and Q1-10.


Long-Term Trends
Where is US pork supply headed on a long-term basis? That question is being asked by many observers and market participants as we head into this report and the 2009 crop-growing season. To explore an answer, let’s consider some history.

Figure 2 shows long-term annual US pork production back to 1930. To that actual data I have added two trend lines. The solid black line represents the trend for the entire time period. Beginning in 1930, this trend says that US pork production has grown at an average rate of 1.27 per cent -- at least that is the rate that results in a line with the best fit to all of the data points.


But note that this line has fallen farther and farther behind actual production levels for the past 11 years. Now those data points are part of the computations that go into the 1930-2008 trend line, but they are outweighed by that 65 or so years of data that covered a slower-growth period from 1930 to 1997.

So, what is the growth trend of the “modern” US pork production system? I went back to 1984 and computed a linear trend line (the blue diamonds) that grows at a rate of 1.8 per cent. I chose 1984 because it marked the end of the wild fluctuations in pork output that followed the major shifts of grain prices and inflation in the early 1970s. It also marked the beginning of some major technology shifts – climate-controlled buildings, gestation stalls, advanced nutrition concepts, artificial insemination and others.

Finally, it marked a new era in hog and pork trade. Pig imports from Canada began to grow quickly in the late 1980s (remember the countervailing duty that was then in place to offset the Canadian Tri-Partite support system?), and US net imports of pork reached their largest levels in 1985-1987 at roughly 1 billion pounds. The remainder of the time covered the period that US pork exports were growing – often dramatically.

But the clear lesson is this: The output growth of the past two years is not sustainable. A less clear lesson is very likely. The output levels of the past two years may not be sustainable either.

The 2007 observation exceeds the “new trend” for US production by 539 million pounds or 2.45 per cent. That is a pretty large number considering the US per capita consumption has been basically constant for 50 years.

But the 2008 number is pretty shocking. It exceeds the “new trend” by 1,558 million (or 1.558 billion) pounds – nearly 6.7 per cent. If we could see exports grow by 50 per cent every year, that level of output and growth may be okay. But 50 per cent growth when exports are now taking 20 per cent of our production is very, very unlikely.

Trim Sow Herd Another 3-5 Per Cent
Will the numbers in Figure 1 get this done? No. US sow numbers have fallen – but only by 163,000 head (2.6 per cent) since the most recent peak in December 2007. Canadian numbers have declined more (229,100 head or 14 per cent) since their all-time high of 1.634 million head in January 2005. But the major contributor to the surge of output in 2007 and 2008 is a dramatic increase in productivity. Circovirus vaccines were the most important driver of that increase, but genetics and management are playing big roles as well in realizing larger litters.

The expected “hole” in marketings this spring is no indictment of your productivity efforts. The productivity piece driving the December report’s estimate of a short pig crop last fall is litters per sow – primarily because we culled and slaughtered a good number of pregnant sows last summer when corn prices skyrocketed.

How many less sows do we need to return to “reasonable” profit levels? That depends on one’s definition of “reasonable,” but 3 per cent would be a good start and 4 to 5 per cent would be even better, given that at least a third of the reduction will be offset by productivity gains. The trouble is that financial losses this year may not be large enough to get much of that done – especially if my long-predicted spring rally finally arrives.

 



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

[mikey]

Tuesday, March 31, 2009Print This Page
Hogs & Pigs Report Once Again Bullish
US - USDA’s quarterly Hogs and Pigs report, released on Friday, was once again a mixture of bullish and bearish numbers with market supplies a bit bearish and breeding herd numbers a bit bullish in the long run, writes Steve Meyer, Ph.D., Paragon Economics, Inc.



The key numbers in the report appear in Table 1.


Some highlights of the report are:

Sharply higher reproductive performance. The 9.48 pigs saved per litter for December-February is the highest ever for that quarter, the fourth highest since 1983 and the highest mark since June-August 1996. The increase continues a string of seven quarters of year-on-year growth of 1.8 per cent or more with the December-February 2.6 per cent increase being the largest. The increases coincide with two major changes in the US industry. First, producers began late in the process of moving to later weaning ages on many farms. That change had two main benefits: Higher quality pigs and larger litters in subsequent litters due to allowing the sow a bit more recovery time. It appears to be paying off. The other change was, of course, circovirus vaccines. While most of the impact has been felt at the grow-finish level, the vaccines have had a positive impact on sow units as well. As Figure 1 shows, litter sizes have been going up more quickly, matching the pace set back in 1995-1997, a time of major structural change in the industry.

A smaller-than-expected US breeding herd. USDA estimates that the herd is at 6.011 million head, 3 per cent smaller than last year. But will this reduction result in fewer pigs? Given the growth of average litter size, that is the question. December-February farrowings are right in line with the breeding herd, so adding 2.6 per cent from larger litters would drive pig numbers close to last year, right? Wrong! The December-February pig crop is pegged at 97.4 per cent of last year in spite of 97 per cent as many litters and litter size at 102.6 per cent. Those figures don’t fit, but we usually charge on using the pig crop number which implies lower June-Aug. farrowing intentions. But we will make a note to follow up on these figures in future reports.


Somewhat larger-than-expected middle-weight market hog inventories, implying that the “shortage” of pigs this spring may not be as large as I thought last fall. Recall that the September-November farrowings were sharply lower (down 6 per cent) than those of 2007 and that the September-November pig crop was 3.7 per cent lower than one year earlier. However, this report says that the two weight categories comprised of those pigs are only 2.5 per cent smaller than last year. Those are 1.3 per cent larger than analysts expected, so that may take some luster off the May, June and July contracts on Monday (30 March). We will watch closely over the next few weeks to discern whether slaughter follows the December report pattern more or less than this pattern from the March report.


Summer farrowing intentions that are reasonably in line with the sow herd, but lower than analysts’ predicted. These could be bullish for deferred contracts.
Canadian Imports Hold the Key
The trick for predicting supplies using this report has nothing to do with the report. It is how far imports of Canadian pigs will decline this year vs. last year. Market hog imports will impact slaughter immediately, while reduction in weaned/feeder pigs imports will reduce slaughter 20-24 weeks later. I use 21 weeks, realizing that it may not be 100 per cent accurate.

Figure 2 shows my forecasts for weekly slaughter levels using reductions of from 2 per cent down to 0.4 per cent down for lower market hog imports through year’s end. I also reduced future slaughter by 2 per cent starting in early August when early March imports would be ready for market. My feeder pig import reduction falls gradually to 0.4 per cent in Q1-2010.


The net impact of the March report is to increase my forecast for 2009 federally-inspected slaughter marginally to 110.5 million head, 3.5 per cent lower than that of 2008. Those numbers compare to my December forecasts of 110.456 million head, 3.6 per cent lower than in 2008.

If the March report is correct, then the quarterly patterns will change a bit, though with Q2 being higher and Q3 being lower. I expect Q2 slaughter to be 3.4 per cent lower while Q3 slaughter is 4.9 per cent lower. Q4 slaughter will be 3.6 per cent lower, but will still amount to 28.498 million head.

As predicted in December, the first quarter of 2009 has indeed been a tough one. National weighted average net price averaged $56.91/cwt., carcass, through last week, about $2/cwt. lower than my Q1 forecast coming out of the December report, which in spite of Q1 slaughter, has been about 1 per cent lower than I expected.

I now expect the average national weighted average net prices for both Q2 and Q3 to be in the range of $74 to $78/cwt., carcass. I expect Q4 prices to be in the $61-$64/cwt., carcass, range bringing the forecast range for the 2009 annual average to $66 - $69/cwt., roughly $1 lower than I had forecast in December.

Watch this week’s North American Preview for my normal table including the slaughter and price forecasts of several noted analysts.

[mikey]

Tuesday, March 31, 2009Print This Page
March Quarterly Hogs & Pigs Report Summary
US - USDA's 1 March Hogs & Pigs Report came in a little more bullish than the trade estimates for the breeding herd but were within the potential sampling error, write Glenn Grimes and Ron Plain.

 
Ron Plain
The breeding herd was down 3 per cent according to the report. The average of the trade estimates was for a 2.1 per cent decline. The market herd and the total herd were down 2.7 per cent based on the USDA estimate. The trade estimate was for the market herd to be down 3.2 per cent and the total herd down 3.1 per cent.

March slaughter on a daily basis from domestic production was down 1.7 per cent and the 180-pound and heavier market hog inventory was down 2.4 per cent. So, slaughter was somewhat larger in March than indicated by the report.

Imports of live slaughter hogs from Canada during December, January, and February were down enough to reduce total US slaughter by 2.2 per cent. Imports from Canada are expected to continue to decline through most of 2009.

The breeding herd was about 1 percentage point smaller than indicated by our gilt and sow slaughter data but was well within the possible sampling error for both sets of data.

The heavier weight market hog inventories in March were larger than indicated by the lightweight market inventories in December. On 1 December the under 60-pound market inventory was down 5.5 per cent from 12 months earlier but the 1 March heavy weight inventory was down only 2.4 per cent.

Demand for pork at the consumer level was up 1.6 per cent for December-February according to our demand index. In fact, demand for both beef and pork at the consumer level was up during this period. Therefore, the financial problems in the US hog industry are due to large supplies and high feed costs rather than weak demand. With current production costs, we are just producing too many hogs to make a profit. Costs are not likely to get much, if any, lower this year than they are now. However, when the general economy starts to improve, it is likely to carry oil prices somewhat higher and corn prices are likely to follow the price of oil.

Retail pork prices in February were down 1.2 per cent from January but were up 4.8 per cent from February 2008. January and February retail pork prices were up 4.9 per cent. Everyone in the pork industry except the packer benefitted from these higher retail prices. In January and February the processor-retailer margin was up 7.4 per cent from 12 months ago and live hog prices were up 5.5 per cent from these months in 2008. However, the packer margin was down 8.6 per cent and deteriorated more in March based on preliminary data.

Pork exports in January were down 8.7 per cent from a year ago and imports were down 1.7 per cent. Net pork exports were 12 per cent of US pork production in January 2009 as compared to 13 per cent in January 2008. That gap is expected to continue to widen through the summer of 2009.

US pork exports in January compared to a year ago were up 20.9 per cent to Japan, up 62.8 per cent to Mexico, down 9.3 per cent to Canada, down 19.9 per cent to South Korea, down 75 per cent to Russia, down 90.1 per cent to mainland China, down 17.8 per cent to Hong Kong, up 70 per cent to Australia, up 74 per cent to Taiwan, and down 7.5 per cent to other countries.

Based on USDA's heavier weight market inventory and the likelihood that slaughter hog imports will be down enough to reduce slaughter by 2 per cent, we are forecasting slaughter for the April-June quarter to be down 4.5 per cent from 2008. This is a somewhat larger slaughter than indicated by the lightweight market inventory on 1 December.

For July-September, we expect slaughter to be down 5 per cent from 12 months earlier. As for the second quarter, we expect slaughter hog imports from Canada to continue to decrease through the third quarter compared to a year earlier.

March-May farrowing intentions indicate slaughter in the fourth quarter will be down near 3 per cent. Some additional decline is likely because of fewer imports from Canada.

USDA's June-August farrowing intentions indicate a 4 per cent decrease from a year earlier. This looks like too much of a decline with the breeding herd down only 3 per cent and the productivity growth experienced in recent years. We expect slaughter from domestic production to be down less than 4 per cent in the first quarter of 2010.

Our estimates of slaughter and prices for the next 4 quarters are in Table 4. Despite a forecasted decline of 4 per cent in hog slaughter, our annual price forecast is similar to last year due to an expected decline in pork exports.

Table 1.  Hog Inventories March 1, U.S.
______________________________________________________________
 
                                           2009 as % of 2008
       Market                                     97.3
       Kept for breeding                          97.0
       All hogs and pigs                          97.3
______________________________________________________________
 
 
Table 2.  Market Hogs on Farms March 1, U.S.
______________________________________________________________
 
     Weight Category                       2009 as % of 2008
        Under 60 pounds                           96.9
        60 - 119 pounds                           97.5
        120 - 179 pounds                          97.5
        180 pounds and over                       97.6
______________________________________________________________
 
 
Table 3.  Sows Farrowing and Intentions, U.S.
______________________________________________________________
 
                                            2008 as % of 2007
    September-November                           94.0
 
                                            2009 as % of 2008
       December-February                           97.0
       March-May                                   97.1
       June-August                                 96.0
______________________________________________________________
 
Table 4.  Estimated Commercial Hog Slaughter by Quarter and Live Hog Prices
______________________________________________________________________________________
 
                  Commercial  Terminal Mkt. 51-52% Lean  Non packer sold
                  Slaughter  Barrow & Gilt    Hogs       Hogs (avg. net
Period           (mil. hd.)  (price/cwt)   (price/cwt) carcass price/cwt)
_________________________________________________________________________
 
2003 1              24.654      $33.32       $35.38         $50.40
     2              23.922       39.86        42.64          58.92
     3              24.747       38.66        42.90          59.27
     4              27.608       34.15        36.89          52.36
     Year          100.931       36.50        39.45          55.25
 
2004 1              25.717      $40.82       $44.18         $60.56
     2              24.737       51.56        54.91          72.74
     3              25.817       53.72        56.58          74.73
     4              27.192       50.58        54.35          71.58
     Year          103.463       49.17        52.51          69.90
 
2005 1              25.538      $48.46       $51.92         $69.33
     2              25.030       49.08        52.09          70.25
     3              25.528       46.72        50.51          68.37
     4              27.486       42.20        45.54          61.68
     Year          103.582       46.62        50.02          67.43
 
2006 1              26.208      $39.23       $42.63         $58.37
     2              24.839       45.81        48.45          65.96
     3              25.810       46.92        51.83          69.13
     4              27.880       41.56        46.13          62.04
     Year          104.737       43.38        47.26          63.86
 
2007 1              26.684      $41.49       $46.04         $62.69
     2              25.526       48.14        52.55          71.39
     3              26.566       45.07        50.34          69.17
     4              30,396       33.61        39.44          56.83
     Year          109.172       42.08        47.09          65.04
 
2008 1              29.601      $33.86       $39.64         $57.41
     2              27.941       46.68        52.51          72.24
     3              28.696       51.76        57.27          78.05
     4              30.214       37.82        41.92          61.38
     Year          116.452       42.53        47.83          67.27
 
2009 1 (part. est.) 28.515      $37.20       $42.20         $60.40
     2 (projected)  26.700      43 - 47      48 - 52        66 - 71
     3 (projected)  27.250      46 - 50      51 - 55        70 - 75
     4 (projected)  29.300      39 - 43      44 - 48        60 - 65
     Year (proj.)  111.765      41 - 44      46 - 49        64 - 68
 
2010 1 (projected)  27.600     $38 - 42     $42 - 46       $58 - 63
_________________________________________________________________________

[mikey]

Wednesday, April 01, 2009Print This Page
United States Pig Herd Continues to Shrink
US - The United States pig inventory on 1 March shows a continuing decline in the national herd, down three per cent from March last year, and down two per cent since December.


Farrowings during the March-May this year are predicted to be down three per cent.

Farrowings for June-August will be down four per cent.

[mikey]

Wednesday, April 01, 2009Print This Page
USDA to Purchase Pork and Turkey to Aid Sectors
US - Agriculture Secretary Tom Vilsack yesterday announced USDA's intention to purchase turkey, pork, lamb, and walnut products for federal food nutrition assistance programmes.

 

"These purchases will assist the turkey, pork, lamb and walnut sectors, which are currently struggling due to depressed market conditions," said Secretary Vilsack. "Today's announcement will help mitigate further downward prices, stabilise market conditions, stimulate the economy, and provide high quality, nutritious food to recipients of our nutrition programmes."

USDA intends to purchase $60 million of turkey, $25 million of pork, $2 million of lamb, and $29.7 million of walnuts. With today's announcement to buy commodities, USDA will survey potential suppliers to seeking the lowest overall cost by publicly inviting bids and awarding contracts to responsible bidders.

These purchases reflect a variety of high-quality food products each year to support the National School Lunch Program, the School Breakfast Program, the Summer Food Service Programme, the Food Distribution Programme on Indian Reservations, the Commodity Supplemental Food Programme and The Emergency Food Assistance Programme. USDA also makes emergency food purchases for distribution to victims of natural disasters.

Government food experts work to ensure that all purchased food is healthy and nutritious. Food items are normally required to be low in fat, sugar and sodium. The commodities must meet specified grade requirements and be USDA-certified to ensure quality. USDA only purchases products that are grown in America.

NPPC Commends USDA Decision
The National Pork Producers Council has commended the decision made by the USDA.

“The action by USDA to buy additional pork will benefit America’s pork producers, the US economy and the people who rely on the government’s various food programmes,” said NPPC President Don Butler. “We are extremely pleased with Secretary Vilsack’s decision to purchase more pork. It will help our industry bring supply and demand closer into balance and allow producers to continue to provide consumers with economical, nutritious pork.”

NPPC asked Secretary Vilsack to take action to address a crisis that over the past 18 months has cost the pork industry more than $3 billion in equity. Due mostly to higher feed costs, producers since October 2007 have lost an average of $20 on each hog marketed.

In a 30 January letter, NPPC urged USDA to buy pork products from market hogs for emergency food programs, food pantries, senior and elderly feeding programs, hunger programmes or other non-commercial food channels. NPPC suggested that the agency purchase cooked sausage patties, pork crumbles, trimmings, picnics (shoulders) and boneless picnic meat.

This is the second time in less than a year that USDA has agreed to a supplemental pork purchase. Last April, at NPPC’s request, the agency agreed to a $50 million purchase of pork products derived from sows as a way to reduce the national herd and stabilise pork prices. (Some industry economists estimate that recent productivity gains – more pigs per sow – will reduce the herd by two to four per cent.)

In its most recent request, NPPC also asked Secretary Vilsack to use USDA resources, including the Market Access Program and the Foreign Market Development Program, to support pork exports, which in 2008 were at record levels and helped temper pork producers’ losses.

[mikey]

Wednesday, April 01, 2009Print This Page
US Swine Economics Report
US - USDA’s latest survey of the US swine herd said the market herd was down 2.7 per cent on 1 March and the breeding herd was down 3.0 per cent compared to 12 months earlier, according to Professor Ron Plain.

 
Ron Plain
The total inventory of hogs and pigs was down 2.7 per cent. The breeding inventory was a bit smaller than trade expectations and the market hog inventory was a bit larger than the average of trade forecasts.

USDA said December-February farrowings were down 3.0 per cent and forecast March-May farrowings to be down 2.9 per cent and June-August farrowings to be down 4.0 per cent. USDA’s forecast of summer farrowings was well below the trade forecast. Pre-release trade estimates put December-February farrowings at down 3.4 per cent, forecast March-May to be down 2.0 per cent and June-August down 1.5 per cent.

Pigs per litter in the December-February quarter averaged 9.48 head, up 2.6 per cent compared to a year earlier, the 22nd consecutive quarter above year-ago levels, and the biggest year-over-year increase since the summer of 1992.

USDA said the inventory of market hogs weighing 60-179 pounds was down 2.5 per cent on 1 March. If correct, daily hog slaughter during the second quarter should be down 2.5 per cent plus the drop in slaughter hogs from Canada. Look for hog slaughter during April-June to average at least 4 per cent lower than last year and carcass hog prices to average in the mid to upper $60s.

USDA said the inventory of market hogs weighing less than 60 pounds was down 3.1 per cent on 1 March, implying hog slaughter during the third quarter of 2009 will be down roughly 5% given the sharp downward trend in hog imports from Canada. I expect third quarter carcass hog prices to average close to $70/cwt.

I expect 2009 hog slaughter will be down about 4 per cent and carcass hog prices in 2009 will average close to $63/cwt. Unfortunately, the cost of production could average close to $69/cwt on a carcass basis, resulting in a loss of $6/cwt or roughly $12 per head.

Perhaps the most interesting numbers in the March report is the mis-match in market hog numbers. USDA says the December inventory of pigs weighing less than 60 pounds was 5.5 per cent below year-earlier levels but the March inventory of hogs weighing over 60 pounds is only down 2.5 per cent. Imports of feeder pigs from Canada were down 35 per cent during December-February. What explains the difference? I don’t know.

[mikey]

Monday, April 06, 2009Print This Page
AVMA Warns of Continued Veterinary Shortages
US - The American Veterinary Medical Association (AVMA) expects the shortage of farm animal veterinarians to continue despite producers cutting back their flock and herd sizes.



Meat, poultry, and dairy producers have overall been cutting back the sizes of herds and flocks, according to the AVMA. But there will be 'huge demand' for food supply veterinarians for a long time, said Dr David M. Andrus, who headed a research team for the May 2006 Food Supply Veterinary Medicine Coalition Report and is a professor at Kansas State University's College of Business Administration.

"There was such a huge shortage that even a fall in production of animals won't overcome the need for more food supply veterinarians," Dr Andrus said.

That is not to say the production cutbacks will not affect veterinarians through reduced spending and delayed payments by clients.

Use of corn for ethanol, drought, increased oil prices, price drops for some animal by-products and high-end meat cuts, and declines in export demand have all contributed to the recent financial woes experienced by animal agriculture producers, according to several agricultural economists.

James Robb, director of the Livestock Marketing Information Center, said that in 2008, US cattle feeders, for example, lost more money on average for each animal sold than any other time in history, and through January 2009 they had 20 consecutive months of negative returns on cattle sold. The number of cattle available for slaughter may not increase until 2013, he said.

"Beef cow numbers will decline for at least two more years, so that means less work to deal with beef cows," Mr Robb said. "Dairy cow numbers, because of low milk prices, were declining precipitously."

Reports from the Department of Agriculture state the following:

For 2008, the number of cattle and calves in the US dropped about 2 per cent, from 96 million head to 94.5 million. The year's calf crop was also down 2 per cent.
During the fourth quarter of 2008, about 198 million chicken eggs were set in incubators weekly, down 7.3 per cent from the previous year. The number of chicks placed for growth averaged 161 million weekly, or 6.8 per cent lower.
There were 66.7 million head of hogs in the US on 1 December, down about 2 per cent from a year earlier. The breeding inventory, at 6.08 million head, was also down about 2 per cent from a year earlier, and the market hog inventory of 60.6 million head was down 2 per cent.
By 1 January 2009, the breeding sheep inventory decreased 4 per cent from a year earlier, from 4.43 million head to 4.25 million. The total inventory of sheep and goats declined about 2.8 per cent, or about 251,000 head, in the same period.
Turkey meat production for 2009 has been predicted to total 6 billion pounds, about 3.6 per cent less than in 2008.
Despite predicting continued declines, Mr Robb also said, "We still don't have enough large animal vets."

Dr Andrus said he does not think temporary fluctuations in production based on economic conditions will have an impact on long-term demand.

"As the world population grows also, there'll be greater demand for animal protein, which the US supplies quite a bit of with beef, swine and poultry," Dr Andrus said.

Dr Michael J. Gilsdorf, executive vice president of the National Association of Federal Veterinarians, said he thinks the cutbacks by producers are part of a cyclical rise and fall related to supply and demand, and he does not expect a substantial impact on members of his association. He said changes in production are not severe, and the shortage of food supply and food safety veterinarians remains.

While some slaughter plants may close, Dr Gilsdorf said those changes have more to do with management than widespread changes in production. He said those operations will be picked up by other plants.

Feed's cost in creating food
High prices for feed, particularly corn, are part of the reason food animal industries are not growing, Mr Robb said. Corn cost less than $2 per bushel in 2005, $3.40 in 2007, and $8 at its peak in 2008, according to the USDA.

Mr Robb attributed the record-high corn prices set in mid-2008 to use of the grain in producing ethanol. Dr Kenneth Mathews, an agricultural economist with the USDA Economic Research Service, said export demand for corn also rose, contributing to the jump in prices.

Information from the USDA also states the yearly average soybean price was $6.43 per bushel in 2006, $10.10 in 2007, and $9.25 in 2008.

Mr Robb said cattle herds are also declining in Argentina, Australia, Brazil, Canada, Europe, Mexico and Uruguay. And he said grain prices and economic conditions "really have the worldwide livestock numbers on the defensive at a minimum and probably declining more than many people realize."

Cutbacks
Shayle Shagam, livestock analyst with the World Agricultural Outlook Board for the USDA, said the past two years of contraction of the cattle herd was at least partly related to drought and poor forage conditions for supporting herds as well as the high grain prices. Producers of hogs, cattle, and chickens have, on average, been experiencing poor or negative returns.

Dr Mathews also said high feed and energy costs probably set cutbacks in motion, and several years of drought were a contributing factor.

Ronald L. Plain, professor of agricultural economics at the University of Missouri, said weak sales of steaks and spareribs may impact veterinarians' pay, despite strong sales of less-expensive cuts.

"The net result is lower livestock prices and more red ink for producers, and I suspect that means less money available to pay their veterinarians," Professor Plain said.

By February, hide and offal prices had declined about one-third from a year earlier, Mr Robb said. By-product sales are heavily tied to leather sales.

Strong demand for dairy exports pushed producers to continue expanding their operations in 2008, despite high feed costs, said Dr David Anderson, a livestock economist with Texas AgriLife Extension Service. That came to an end when milk prices collapsed in early fall 2008, and the USDA forecasts that global recession, increased production abroad, and a strong dollar will hinder exports in 2009.


 

[mikey]

Tuesday, April 07, 2009Print This Page
Weekly Outlook: Have Hog Producers Made It?
US - There has been some recent good news for the hog industry, but some bad news as well, writes Chris Hurt, Extension Economist at Purdue University.

 Chris Hurt
Extension Economist
Purdue University
 

But breakeven covers all costs, including full capital replacement and family labor costs. After a year and one-half of losses, average cost hog producers should finally make money this spring and summer.

The best of the news is that hog prices should soon begin a strong increase related to the normal seasonal pattern. Hog prices tend to move higher from mid-April into the spring. In the last five years, as an example, live hog prices have increased an average of about $10 per hundredweight from the second week of April to mid-May. Participants in futures markets expect a similar increase this year. As of this writing, the May lean hog futures price is $9.60 per live hundredweight higher than the April futures price.

This expected rally would take live hog prices from the current low $40s into the low $50s over the next four weeks or so. These higher prices tend to be maintained through August and would be expected to be in a range from about $50 to the mid $50s, depending on the week. Second quarter prices are expected to average $51 with costs around $49. This small quarterly profit would be the first after six consecutive quarters of losses dating back to the fourth quarter of 2007.

There are a few other positives as well. The size of the US breeding herd and upcoming farrowings are somewhat smaller than had been expected. The March inventory from USDA indicated the breeding herd is now down three percent and that farrowings will be down three percent in the spring and four percent in the summer. Also adding to a smaller US slaughter supply this year will be 2.3 million fewer hogs coming from Canada as the breeding herd there has dropped sharply under heavy financial losses.

Offsetting these positive attributes are the prospects for higher feed prices and weak pork export demand. The tone toward higher corn and meal prices came from smaller than expected planted acres and 1 March stocks. Since the release of those reports on 31 March, higher corn and soybean meal prices have added to costs of hog production by $1.25 to $1.50 per live hundredweight. Those costs are estimated in the very high $40 for 2009 and about $50 for 2010.

Reduced pork exports from the US are the other major factor keeping the industry from registering better profits. Pork exports are expected to be down 14 per cent this year from last year when China was an enormous buyer. This means there will be almost 700 million pounds less pork shipped out of the country, and that will have to be absorbed by domestic consumers.

In summarizing the positive and negative factors, there will be about two percent less domestic pork produced in 2009, but the per capita supplies will be nearly unchanged from last year due to reduced exports. This means that 2009 average hog prices probably will not be much different than last year’s level around $48 live. The difference in profitability, then, is due to expected lower feed costs this year with total estimated costs at $48.50 versus $54 in 2008.

Hog prices are expected to exceed costs in the second and third quarter this year before returning to modest losses in the fourth quarter and first quarter of 2010. Some further reduction in the size of the US and Canadian breeding herds is expected into 2010 and this, along with recovery in the world economy, may provide a slightly more positive tone for hog prices in 2010.

Unfortunately, an improving world economy would also increase grain and soybean utilization and likely strengthen feed prices as well. This suggests that the hog industry must continue to cut the herd size somewhat to elevate hog prices to parity with costs of production in 2010.

Feed prices remain a concern for 2009. Tighter than expected corn and soybean inventories mean that harmful growing weather this spring and summer would force higher prices and rationing of short supplies. However, it is not likely that corn and meal prices would have the upward potential experienced in the spring of 2008. The world is much different today with a stronger U.S. dollar, a less robust US ethanol industry, and reduced world incomes.

[mikey]

Tuesday, April 07, 2009Print This Page
New Food Wash Kills Pathogens Fast
US - Georgia scientists have created a technology that kills pathogens on food at home and in restaurants, grocery stores and food-processing facilities.



Created at the University of Georgia's Center for Food Safety, the technology has been licensed to the maker of FIT Fruit and Vegetable Wash, reports UPI.

University researchers said the process can kill significant numbers of E. coli and salmonella bacteria in less than one minute. The technology can be used as a food wash, with commercial applications for the produce, poultry, meat and egg processing industries.

"The re-formulated FIT food wash will kill more harmful microbes faster," said Mike Doyle, Center for Food Safety director, who invented the technology with microbiologist Tong Zhao. He added that the new anti-microbial food wash is orders of magnitude more powerful and twice as fast as previous similar products.

Dr Doyle said the wash has no effects on smell, taste or appearance of the foods that are treated.


 

[mikey]

Tuesday, April 07, 2009Print This Page
Meeting Addresses Antibiotic Use in Food Chain
US - A conference last week entitled Minimizing Antibiotic Resistance Transmission Through the Food Chain revealed widespread concern among academics and the USDA that antibiotic resistance remains a problem.


"The rapid emergence of antibiotic resistant pathogens has major public health and social impact," said Dr. Hua H. Wang, a food scientist at Ohio State University, Columbus, Ohio, at a conference here addressing the growing tendency of disease-causing organisms to be able to resist antibiotic drugs and drug therapy meant to fight them, both in animals and humans.

The conference, Minimizing Antibiotic Resistance Transmission Through the Food Chain, was jointly sponsored by the Cooperative State Research, Education, and Extension Service (CSREES) of the US Department of Agriculture, the Ohio State University Extension, and Ohio Agriculture Research and Development Center. Leading the conference, in addition to Dr Wang, were Dr John N. Sofos, Center for Meat Safety and Quality, Colorado State University, Fort Collins, Colorado, and Dr Thaddeus B. Stanton of USDA's Agricultural Research Service, Ames, Iowa.

Dr Wang said in the last couple of decades, an intensive discussion on the correlation between the use of antibiotics in human and veterinary medicine, food animal production, agriculture applications and the development of resistance in human pathogens has been a hot topic in science which has led to several government policy changes in both the EU and the US. "The problem of antibiotic resistance still exists," she said.

Speakers at the conference noted bacteria and other microorganisms causing infections are remarkably resilient and can develop ways to survive drugs meant to weaken them. This antibiotic resistance is due largely to the increasing use of antibiotics, although several speakers noted the problem is complex and cannot be tied simply to this use. Speakers pointed out that that food-producing animals are given antibiotic drugs for important therapeutic, disease prevention or production reasons. However, these drugs can cause microbes to become resistant to medications used to treat human illnesses, ultimately making some human sicknesses more difficult to treat.

Does this mean antibiotic use in agriculture should be curtailed? That was the question addressed by keynote speaker Dr Abigail Salyers, from the Department of Microbiology, University of Illinois, Urbana, Illinois. She said even though antibiotics are usually used at very low concentrations in agriculture, they can still select for antibiotic-resistant bacteria.

"The resistant bacteria then enter the food supply. A potential hazard of consuming such food is that resistant bacterial pathogens such as Salmonella typhimurium can cause disease," she said. "Another potential hazard seldom considered but probably more serious is the transfer of resistance genes from bacteria passing through the human intestinal tract to bacteria normally occupying that site. Such bacteria are common causes of post-surgical infections." There is not yet enough data to enable scientists to quantify the risks associated with such scenarios, but there is evidence such scenarios are possible, she added.

In speaking about antibiotic resistance in meats and other foods, Dr Sofos pointed out antimicrobials find numerous beneficial applications in human, animal and plant health, as well as in food production. Their selective pressure, however, may lead to the emergence of resistant pathogen strains.

"Therefore, it is important to maintain the ability of pathogens to be affected by antimicrobials," he said. "The best approach to minimising antibiotic resistance negative impact is through risk assessments. Major recommendations for control include prevention of disease; use of antibiotics of lesser importance to human medicine, and treatment with alternative methods, including vaccines."

Dr Sofos noted in tracking resistance of Salmonella to antibiotics in eight beef plants, resistance occurred mostly on cattle hides, but only a small amount of resistance to antibiotics existed on beef carcasses, notes the Meat and Poultry report. "There was more resistance by the Campylobacter pathogen in poultry," he noted. "Research should also focus on the potential of antibiotics to enter animal production environments through waste streams."

[mikey]

US Breeding Herd Tumbles (April 2009)
By Chris Harris, Senior Editor. Our snapshot of the ongoing global pig industry trends as reported in April 2009 Whole Hog Brief.


Check out this month's contents
at the foot of the page
The total stock of hogs, pigs and breeding herd in the US has dropped by three per cent from March 2008 according to the latest US Hogs and Pigs Census.

The Whole Hog reports that the inventory of 65.4 million is also down by two per cent on the previous quarter.

The breeding herd at 6.01 million is three per cent down on March 2008 and one per cent down on the last quarter of 2008.

However, the Whole Hog also shows that US pork exports of cuts and variety meats rose again in January this year to 149,383 tonnes - a rise of 1.7 per cent on December last year and 6.7 per cent up on the same month the previous year.

At the same time, US pig meat imports fell by 7.3 per cent on December to 31,169 tonnes.

Exports of Canadian pork are also still rising, with total shipments in January reaching 83,542 tonne, 3.4 per cent up on January 2008.

The Whole Hog says that the rise in mainly due to an in crease in exports to Taiwan, Australia and Japan.

Chinese Pig Meat Production

The Whole Hog reports that Chinese pig meat production is expected to rise by four per cent in 2009, to reach 48.7 million tonnes.

However, in reporting the figures from the USDA FAS, it says that the rise in production is expected to be slower than last year when it rose at a rate of eight per cent.

The rise has been helped by subsidies following the blue ear disease outbreak in 2007, which helped in the increased imports of breeding sows.

However, while production is increasing at four per cent, consumption is expected to rise by five per cent to 48.8 million tonnes.

Global Pig Prices on the Edge
The Whole Hog's monitor of global pig prices shows that they are just about holding up.

It says that they are rising and falling without ever achieving previous peaks.

The main prop to global pig prices is the Canadian price, but this is not going to be sufficient to sustain the cycle's peak.

"We are definitely on the edge," the Whole Hog says.

"The market is unclear and yet the message is becoming clear. We are poised for a turn in the price cycle."

The Rise and Fall of Hungary's Pig Sector
The latest figures from the Hungarian Agriculture Ministry shows that the total number of pigs in the national herd was 3.38 million with a breeding herd of 320,000.

This is a fall from 9.368 million in 1974, which at the time was enough to cover national needs and some exports to the then Soviet Union, the Whole Hog reports.

However, it predicts that the pig sector in Hungary is threatened with further contraction, with production forecast to fall by a further 10 per cent this year.

EU Prices Don't Look Like a Single Market
EU average pig producer prices for March are 1.9 per cent up on February but down by 4.1 per cent year on year, at €137.03 per 100 kg.

However, the Whole Hog shows that in Spain Germany prices were way above the average at €145.06 and €140.76 respectively, while the French prices were below the average at €131.80.

The Whole Hog said that Easter was expected to see a brisk demand for pig meat and prices will stabilise.

Japanese Imports Rise
The latest figures from Japan show a rise in imports of pork by eight per cent between November and December last year and seven per cent year on year.

Imports from the US rose by 4.3 per cent and from Canada they were up by 25.3 per cent month on month.

In South Korea, imports reached 21,381 tonnes in January - a 1.9 per cent rise on December, but 33.5 per cent down on January 2008.

Imports from South Korea's leading shipper, the US, were down by 3.1 per cent the Whole Hog reports.

The latest figures from Australia show that exports in December last year slipped to 2,935 tonnes, down by 21.1 per cent.

At the same time, the Whole Hog reports that total pig meat imports to Australia increased by 10.9 per cent compared to December 2007.


Chris Harris, Senior Editor


--------------------------------------------------------------------------------
Whole Hog Brief is published monthly.

[mikey]

Tuesday, April 14, 2009Print This Page
CME: Meat and Poultry Exports Surprisingly Strong
US - CME's Daily Livestock Report for 13 April 2009.



NOTE: Our data for US pork and beef exports and exports of variety meats of both species come direct form the Foreign Ag Service’s website. They represent USDA’s product weight numbers for those categories. We have seen other published data that differ from these, presumably because some other items (sausage casings, fat, etc.) have been added in. At this point we have chosen to stick with the actual muscle cut and variety meat data as reported by USDA. We just wanted DLR readers to know why these data may be different from others they have seen.

US meat and poultry exports were, in many observers’ eyes, surprisingly strong in February. US beef exports were 11.1 per cent higher than last year with South Korea being the big contributor to growth, increasing by 8,862 per cent (see Figure 1). That percentage increase, of course, was from a number very near zero one year ago but the shipment volume of 28.2 million pounds was a major reason for year-on-year growth. The other major contributor to beef export growth was Vietnam, which nearly doubled its year-todate imports through February to become the fourth largest destination for US beef. Shipments to Japan grew slightly from last year’s levels as shipments to Mexico and Canada stand 15 per cent and 18 per cent smaller than last year, respectively. One reason for that decline, of course, is that cattle imports from both of these countries have been driven lower by mandatory country of origin labeling, leaving more cattle available for domestic packers in Mexico and Canada, thus increasing domestic production and supplanting US exports. The value of US beef exports through February stands 10.8 per cent higher than last year with South Korea and Vietnam accounting for nearly all of the growth in this item as well. The value of shipments to Canada is down 23.4 per cent YTD.


US pork exports were 9.7 per cent smaller in February versus one year ago. That brought YTD pork exports down to 7.1 per cent lower than last year (see Figure 2) with China/Hong Kong (-68 per cent) and Russia (-51 per cent) the primary reasons for the reduction. Shipments to Mexico amounted to 44.04 million pounds product weight, 54 per cent higher than in 2008, and drove YTD exports to Mexico to +60.3 per cent. That in spite of a sharply devalued peso. YTD shipments to Japan are also up — 16.6 per cent — while Australia and Taiwan saw small unit gains. On the value side, US shipments through February have actually increased by 0.7 per cent with Japan (+33.5 per cent) and Mexico (+59.6 per cent) leading the way. Exports to Canada are down in both volume (10.5 per cent) and value (11.4 per cent) this year, in part due to higher Canadian pork production from MCOOL-reduced Canadian market hog imports.


The huge success story for pork in February was variety meats — up 54.3 per cent in volume and 52.5 per cent in value through February (Figures 3 and 4). While China/Hong Kong has been a disappointment on the meat side, they have been a boon on the by-product side, taking 32% more product and paying 47 per cent more dollars for it thus far in 2009. Mexico remains our largest pork variety meat market and has exhibited remarkable growth again this year.

 

[mikey]

Wednesday, April 15, 2009Print This Page
Weekly Roberts Report
US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.



LEAN HOGS on the CME closed down on technical selling Monday with the exception of April futures. The APR’09LH contract closed at $58.175/cwt; up $0.175/cwt but $1.550/cwt lower than this time last week. The JUNE’09LH contract was off $0.175/cwt at $74.100/cwt but $1.350/cwt higher than last Monday. Good packer demand was not enough to offset losses on a shrinking DOW and crude oil losses. There is hope that cash hogs will trade $1-$2/cwt higher on Tuesday and news that packers will need hogs unless they continue to reduce production levels this week. Several plants shut down on Monday for the Easter holiday and some of those may remain closed for one more day, according to several pit sources. On Monday, USDA placed slaughter at 290,000 head vs. 415,000 head last week and 433,000 head a year ago. USDA also placed the Pork Carcass Cutout at $59.99/cwt; up $0.51/cwt. The CME Lean Hog Index was off $0.230/cwt to $57.16/cwt and down $0.02/cwt from this time last week. According to HedgersEdge.com, the average pork plant margin was raised $9.45/head as that margin rose to a positive $2.60/head. This was based on the average buy of $41.16/cwt vs. the average breakeven price of $42.14/cwt. It is a good idea to price feed needs now and hold hogs to heavier weights if possible.

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday. MAY’09 corn futures closed at $3.874/bu; off 2.75¢/bu and 18.0¢/bu lower than last week. The JULY’09 contract closed at $3.972/bu; down 2.5¢/bu and 18.5¢/bu lower than last Monday. DEC’09 corn futures finished at $4.192/bu; off 2.5¢/bu and 17.5¢/bu under last report. Corn futures closed near session highs. A weak DOW and lower crude oil prices weighed on prices. The market rebounded on wet-weather fears delaying planting. Late Monday USDA put corn seedings at 2 per cent vs. a 5-year average of 6 per cent for this time of year. Exports were neutral-to-slightly bearish with USDA placing corn-inspected-for-export at 31.4 mi bu vs. expectations for between 33.0-37.0 mi bu. Funds increased net-bull positions by 4,233 contracts to 293,981 lots while large speculators also grew net bullish positions to 96,099 contracts; up 1,680 lots. Cash corn bids were steady amid slow farmer selling of old crop supplies in the US cornbelt. Cash bids in the US Mid-Atlantic States were steady as well with opening bids ranging from $3.98-$4.08/bu for old crop and $3.94-$4.09/bu for new. Hopefully some of the ’09 crop has been sold. Feed purchasers should consider pricing some feed needs at this time.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were up on Monday. MAY’09 soybean futures closed at $10.214/bu; up 14.5¢/bu and 22.0¢/bu over this time last week. The JULY’09 contract finished up 13.75¢/bu at $10.156/bu and 22.25¢/bu over last Monday. The NOV’09 contract closed at $9.272/bu; up 5.25¢/bu and 15.75¢/bu higher than last report. The Chinese are seen as supporting the global soy market at this time while exports from Argentinean farmers are being held hostage to local politics. China normally buys from Argentina this time of year but are now buying Brazilian and US soybeans because of farmer and government turmoil. Bullish fundamentals are supportive as USDA’s report last week showed a shrinking supply of US soybeans due to increased exports for this time of year. USDA placed soybeans-inspected-for-export at 20.481 mi by vs. expectations for between 17.0- 21.0 mi bu. Right at 10.4 mi bu of that was headed for China. Funds bought over 3,200 contracts increasing net-bull positions to 111,171 lots while large speculators increased net-bull positions by 15,209 lots to 47,776 net long contracts. Cash soybeans in the US Midwest were steady while those in the US Mid-Atlantic States were also steady ranging from $9.92-$10.42/bu. It is a really good idea to sell 45 per cent of the ’09 crop now. Soybean users might want to consider locking in some needs at this time as prices are expected to go higher.

WHEAT futures in Chicago (CBOT) closed up on Monday. The MAY’09 contract closed at $5.232/bu; up 1.25¢/bu but 32.5¢/bu lower than this time last week. JULY’09 wheat futures finished up 1.25¢/bu at $5.346/bu but 34.5¢/bu lower than a week ago. The markets traded both sides in chart-based activity and sell or buy stops. Farmers in the global economy supplied wheat on short stocks and now wheat prices are declining. Spring wet weather has been good for winter wheat crops as the CME Group reports that even though wet weather has slowed maturation of soft red winter wheat ample moisture shows promise of boosting yield potential. Exports were somewhat supportive with USDA placing wheat-inspected-forexport at 20.7 mi bu vs. expectations for between 16.0-20.0 mi bu. It has been reported that US wheat had made up 15 per cent of Iranian imports for the ‘08/’09 year. Funds bought about 1,000 contracts as large speculators increased net-bull positions in wheat futures and options. It was a very good idea last week to have 25 per cent of the 2009 crop sold. It is a good idea to hold off pricing any more for now.

[mikey]

Monday, April 20, 2009Print This Page
Swine Nutrition Research Meets Economic Value
US - The way Iowa State University animal science associate Professor John Patience sees it, pork producers who don’t include nutrition and diet information as part of their whole farm plan are missing the boat.

 

Professor Patience, who went to ISU in 2008 following a 21-year stint at Prairie Swine Centre in Saskatchewan, Canada, said it’s crucial for producers to integrate the design of their feeding program into the plan of the whole farm.

"For example, some producers’ goal is to maximize throughput growth rate yet minimize feed costs,” he said. “This is one time when the two objectives disagree and a major disconnect occurs. Farmers must work together with the nutritionist to make sure feeding is included in the major plan."

Professor Patience and his lab manager Amanda Chipman are focusing their research on possible solutions to economic issues facing farmers, with the goal of helping create economic success. Their specific applied swine nutrition studies target energy metabolism, alternative feed ingredient evaluation, and feeding and management of weanling and grow-finish pigs.

"Our current projects will take from two to seven years, with longer times possible for more complex parts," Professor Patience said. "We’re combining nutrition with related issues, in order to help improve long term sustainability of the pork industry."

As Professor Patience meets with producers and others in the state’s pork industry, he said there are some important "take home" messages.

"Producers can use alternative feeding ingredients to help minimize feed costs, because doing so offers more flexibility and more options. This can translate into more control over feed costs, especially if that product is competitively priced," he said. "However, if a producer isn’t familiar or has not experience with a particular product, there’s the possibility of increased risk."

Professor Patience said research like his plays a major role in assisting producers because it provides quality information on new products that producers can trust.

"For example, even though corn and soybean meal rations dominate swine diets in Iowa, pigs can perform equally well on rations with different ingredients just as they did in the past," he said. "Farmers just need to conquer their fear of using new products as long as the economics are favorable to that use. Our research will help determine that."

[mikey]

Wednesday, April 22, 2009Print This Page
Swine Flu Reported in Two Children; Doctors Warned
CALIFORNIA, US - The Centers for Disease Control (CDC) has published case reports of two children in southern California who became ill as the result of a new form of the H1N1 swine influenza virus in March and April 2009.



On 17 April 2009, CDC determined that two cases of febrile respiratory illness occurring in children who resided in adjacent counties in southern California were caused by infection with a swine influenza A (H1N1) virus.

The viruses from the two cases are closely related genetically, resistant to amantadine and rimantadine, and contain a unique combination of gene segments that previously has not been reported among swine or human influenza viruses in the United States or elsewhere.

Neither child had contact with pigs; the source of the infection is unknown.

Investigations to identify the source of infection and to determine whether additional persons have been ill from infection with similar swine influenza viruses are ongoing.