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mikey
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« Reply #210 on: August 22, 2009, 06:49:00 AM »

CME: Producers Prepare for Continued Cutbacks
US - The latest numbers from Statistics Canada confirmed what many market watchers already knew, inventories of cattle and hogs in Canada continue to drift lower and they are now significantly smaller than only a few years ago, write Steve Meyer and Len Steiner.



Based on the 1 June and 1 July inventories for US and Canada, respectively, the combined US + Canada cattle inventory currently stands at 116.640 million head, 1.8 million head or 1.6 per cent lower than a year ago. This is the smallest combined cattle inventory number since at least 1996 (no Canadian data available prior to that year). The combined hog inventory now stands at 78.184 million head, 2.2 million head or 2.7 per cent lower than the previous year.

Despite the big decline in overall hog numbers, however, the combined hog inventories in US and Canada are by not means small. They are just 0.6 per cent smaller than in 2007 and the third largest on record. The North American hog industry expanded rapidly, thanks to strong global demand for pork and it will take time for the market for find the right balance given current industry losses.

While current inventories paint a picture of the overall supply picture in North America, the breeding stock numbers provide a glimpse of what is to come. In both cases, the outlook is for smaller supplies due to a sharp contraction in the beef cow and sow inventories.


The combined US and Canada beef cow inventory was 36.788 million head, 1.9 per cent smaller than a year ago and the second consecutive year of big inventory reductions. The inventory of beef cows in US and Canada has been declining for over a decade and this is the lowest since at least 1996. The semi-annual surveys show that there is little appetite for expansion, in the US or Canada. The number of US heifers held back for beef cow herd rebuilding on June 1 was 4.5 million head, 2.2 per cent smaller than a year ago. Canadian heifers held back for beef cow replacement were 638,400 head, 2.5 per cent less than a year ago. The situation in the hog complex has changed even more dramatically, considering that only two years ago this was still a growing industry. The combined US and Canada sow inventory declined 2 per cent last year and another 3 per cent this year.

As we noted a few days ago (8/17), the Canadian sow herd has been declining for some time. But because the US sow herd accounts for more than 80 per cent of the total North American breeding stock, it will take significant changes in US operations in order to see a meaningful impact in the combined breeding stock. The Canadian report showed that, just as in the US, producers are preparing for continued cutbacks going forward. Canadian producers indicated that farrowings in Q3 are expected to be down 4.1 per cent and decline 5.5 per cent in Q4. Some of this will likely be offset by increased productivity, which in the case of the US will likely offset most of the decline in farrowings.







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« Reply #211 on: August 22, 2009, 06:50:45 AM »

US and Canadian Hog Inventory Down 3 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 20 August 2009.

 

US and Canadian inventory of all hogs and pigs for June 2009 was 78.2 million head. This was down 3 per cent from June 2008 and down 1 per cent from June 2007. The breeding inventory, at 7.35 million head, was down 3 per cent from a year ago and down slightly from last quarter. Market hog inventory, at 70.8 million head, was down 3 per cent from last year but up 1 per cent from last quarter. The pig crop, at 35.9 million head, was down 2 per cent from 2008 but up slightly from 2007. Sows farrowed during this period totaled 3.71 million head, down 4 per cent from last year.

US inventory of all hogs and pigs on 1 June 2009 was 66.1 million head. This was down 2 per cent from 1 June 2008 but up 1 per cent from 1 March 2009. The breeding inventory, at 5.97 million head, was down 3 per cent from last year and down slightly from the previous quarter. Market hog inventory, at 60.1 million head, was down 2 per cent from last year but up 1 per cent from last quarter. The pig crop, at 28.5 million head, was down slightly from 2008 but up 2 per cent from 2007. Sows farrowed during this period totaled 2.97 million head, down 3 per cent from last year.

Canadian inventory of all hogs and pigs on 1 July 2009 was 12.1 million head. This was down 7 per cent from 1 July 2008 and down 18 per cent from 1 July 2007. The breeding inventory, at 1.38 million head, was down 5 per cent from last year and down slightly from last quarter. Market hog inventory, at 10.7 million head, was down 7 per cent from last year but up 2 per cent from last quarter. The pig crop, at 7.3 million head, was down 6 per cent from 2008 and down 8 per cent from 2007. Sows farrowed during this period totaled 738,500 head, down 7 per cent from last year.


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« Reply #212 on: August 22, 2009, 11:35:14 PM »

US Pork Outlook Report - August 2009
Summer prices for pigs and pork cuts remain at low levels due to slow demand for pork products, according to the USDA ERS August 2009 Livestock, Dairy and Poultry Outlook.

 

Highlights
Summer prices for hogs and pork cuts continue to languish at year-over-year lower levels due to lacklustre demand for pork products. Second-quarter pork exports were 31 per cent lower than a year ago, largely due to lower demand for US pork in Asia.

Hog and Pork Prices Significantly Lower than a Year Ago
Summer prices for hogs and pork cuts continue to languish at year-over-year lower levels at a time of year when prices are typically buoyant. Lackluster demand from recession-battered consumers—both domestic and foreign—is ultimately the culprit for low pork and hog prices. Unwillingness/inability of consumers to pay year-over-year higher pork prices is reflected in lower wholesale prices. Wholesale US pork prices in July – approximated by USDA’s Estimated Pork Carcass Cutout – were almost 18 per cent below prices in July 2007, and nearly 27 per cent below July of last year, when China was a strong presence in the US pork market.

Weak domestic and foreign demand reflected in lower wholesale prices, together with stronger-than-expected July production, kept July live equivalent 51-52 per cent hog prices at $42.74 per cwt, more than 24 per cent below prices a year ago.

Third-quarter hog prices are expected to average $40-42 per cwt, with production almost two per cent below the same period last year. For 2009, USDA expects hog prices to average $40-41 per cwt, almost 15 per cent below 2008. Commercial pork production for 2009 is expected to be 22.8 billion pounds, more than two per cent below last year.

Higher Cold Stocks Reflect Lower Demand
Lower pork supplies, such as those forecast for this year, should cause prices to move higher. Part of the reason that lower 2009 pork production has failed to boost prices of hogs and pork cuts is that pork demand – domestic and foreign – has fallen faster than the decline in production. Most of the pork products not exported or marketed in the United States are being held as cold stocks. In fact, the projected average quarterly pork stocks-to-disappearance ratio for 2009 is 0.14, whereas this ratio averaged about 0.11 for the period 2000-2008.

Ending stocks for June were more than nine per cent larger than a year ago, and 23 per cent above the 2006-08 average.

Pork products not exported and not stored are marketed to US consumers.

Although slightly more pork will be available to US consumers this year than last year due to weak demand, US population increases have reduced per capita pork disappearance by about 0.5 of a pound. Retail per capita pork disappearance this year is expected to be 49 pounds, down about 1 per cent from 49.5 pounds in 2008.

Lower Exports on Weak Asian Demand
Second-quarter US pork exports dropped sharply from a year ago. Total shipments were 952 million pounds, down 31 per cent from the same period last year. The 10 largest foreign markets for US pork products are listed below for the second quarter and the first half of 2008 and 2009. All major export destinations, with the exception of Mexico, imported less US pork in the second quarter. Lower exports are most likely attributable to lower consumer incomes and uncertainty resulting from the worldwide recession. Surprisingly, the impacts of H1N1 concerns in Mexico appear limited.

Although exports to Mexico were three per cent lower in May, exports in June were almost 27 per cent higher than a year ago, representing a resumption of strong year-over-year increases of exports to Mexico in 2009.

The 10 largest foreign markets for US pork products: first-half of 2009 and 2008

2009 Pork, Swine Imports Decline from a Year Ago
Second-quarter 2009 imports of more than 196 million pounds were almost five per cent below a year ago. Larger imports from Canada, which accounts for more than 80 per cent of US pork imports, were not sufficient to offset declines from other import sources. Imports from Denmark, which typically accounts for over 10 per cent of US imports, were almost 11 per cent below second-quarter 2008. First half imports were five per cent below same period last year. Lower imports so far this year are more than likely due to reduced incentives to import pork that derive from lower domestic pork prices.

Second-quarter 2009 live swine imports of 1.6 million head of Canadian animals were 25 per cent below a year ago. Imports of slaughter-ready animals and breeding animals continue to decline the most year-over-year. Imports of animals weighing between 15 and 51 pounds, however, were actually higher than second-quarter 2008, an indication, perhaps, of the recent willingness of some US packers to process Canadian-origin animals. Total first-half imports were more than 33 per cent lower than the same period last year. Lower swine imports are largely due to ongoing industry contraction from continued dismal producer returns in Canada.

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« Reply #213 on: August 25, 2009, 12:11:25 PM »

CME: Bearish Undertones for Pork Supplies
US - USDA issued two supply related reports (Cattle on Feed and Cold Storage) on Friday afternoon and both held some surprises that may affect livestock futures, write Len Steiner and Steve Meyer.



Below is a brief recap of the cold storage numbers, including details:

The cold storage numbers held some bearish undertones, especially with regard to pork supplies. USDA reported that total pork in cold storage as of 31 July was 547.3 million pounds, 8.3 per cent larger than a year ago and 24.8 per cent higher than the five year average.

Supplies of ham in cold storage continued to rise at a fast pace, although they remain below year ago levels thanks to some significant revisions to year ago numbers. Total ham stocks at the end of July were 137.8 million pounds, 5 per cent less than last year but a whopping 23.6 per cent higher than the five year average. Ham prices normally help carry hog carcass values in Q4 but with such an increase in ham stocks, demand in Q4 could be softer than usual and negatively impact overall pork values.

Beef stocks were reported to be 448.2 million pounds, 4 per cent higher than a year ago and 2.3 per cent higher than the five year average. Broiler supplies remain below year ago levels but they are also showing some upward movement. Total whole broiler and broiler meat stocks at the end of July were 677.7 million pounds, 8.3 per cent lower than a year ago and 5.5 per cent lower than the five year average. Combined beef, pork, broiler and turkey stocks were reported to be 2.313 billion pounds, 0.8 per cent higher than a year ago and 7.9 per cent higher than the five year average.

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« Reply #214 on: August 25, 2009, 12:13:11 PM »

July Red Meat Production Below Previous Year
US - Commercial red meat production for the United States totaled 4.12 billion pounds in July, down 3 per cent from the 4.25 billion pounds produced in July 2008, reports the USDA's National Agricultural Statistics Service (NASS).

 

Pork production totaled 1.83 billion pounds, down 1 per cent from the previous year.

Hog kill totaled 9.15 million head, down 3 per cent from July 2008.

The average live weight was up 5 pounds from the previous year, at 267 pounds.

January to July 2009 commercial red meat production was 28.4 billion pounds, down 3 per cent from 2008.

Accumulated pork production was down 3 per cent from last year.

July 2008 contained 23 weekdays (including one holidays) and 4 Saturdays.
July 2009 contained 23 weekdays (including one holidays) and 4 Saturdays.

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« Reply #215 on: August 26, 2009, 11:34:43 AM »

Weekly Outlook: 'How Much Longer?' Ask Producers
US - Equity has eroded and is continuing to erode quickly. Hog producers are asking how long the hog market will continue to drain their net worth, writes Chris Hurt, Extension Economist at Purdue University.

 Chris Hurt
Extension Economist
Purdue University
 

How big has the equity drain been? That depends on the financial position of each producer, but a comparison to the 1998/99 financial disaster reveals the seriousness. Using estimates of losses in the 1998/99 disaster, a 10,000 head per year producer would have lost $213,000 in the seven quarters of loss beginning with the first quarter of 1998. In contrast in the first seven quarters of losses in the modern period, the 10,000 head per year operation would have estimated losses of $315,000. That spans the period from the fourth quarter of 2007 through the second quarter of 2009. Unfortunately, current forecasts are for losses to continue to mount for three additional quarters, through the first quarter of 2010, and rise to $396,000 of accumulated losses. This downturn is both longer and more severe than in 1998/99.

Producers have been slow to reduce the breeding herd this time. In the past two years, the US breeding herd has dropped by just three per cent. In contrast, from mid-1998 to mid-2000, the breeding herd was down ten per cent. There are at least four potential reasons for the slower rate of liquidation. The first may be that this time the industry’s losses were primarily related to much higher feed prices. Perhaps producers were not convinced that feed prices would stay high after their acceleration in late 2007.

Second may have been a miss-reading of the pork export surge in the spring and early summer of 2008, primarily driven by China and a cheap dollar. That surge was the primary stimulus for live hog prices moving from $39 in March 2008, to $58 in May, and to highs above $60 in August. Prices that high meant $5 per bushel corn was not as big of threat as earlier thought and unfortunately this delayed breeding herd liquidation. Looking back, that export surge was a onetime unique event, as exports have returned to much lower, but more normal levels.

Third, industry structure may be a culprit in such a slow downward herd adjustment. The industry has never had to make such a large downward adjustment with such a concentrated set of producers.

Finally, while the current string of losses has been large, the profits and net worth accumulated in the generally profitable period from 2000 until the current downturn began in the final quarter of 2007 were large. Taking the hypothetical 10,000 head producer’s accumulated returns from the start of 1998, the losses accumulated to $213,000 by the end of the third quarter of 1999. But then the industry returned to overall profitability for a long run. By the third quarter of 2007, the farm had overcome the losses of 1998/99 and accumulated $1.45 million of profits. For the farm continuously in production since 1998 the current losses that may accumulate to near $400,000 on this downturn may be coming from a high equity base.

This makes the point that all hog farms are probably not in financial trouble. Those most vulnerable to the current financial losses are those that have started production in the last three years, those that have had large expansions in the past few years, and those that diverted some of their hog earnings in 2000 to 2007 into assets such as stocks or residential housing that plunged in value as well.

How much longer? I expect modest losses this fall, with live hog prices averaging about $40 to $42 and all costs near $45. For the winter, hog prices are expected to be in the low to mid $40s with costs near $46. Profits may return in the spring of 2010 with prices rising to the higher $40 and costs remaining in the $46 to $47 range. For all of 2010, I expect a modest profit of $2 to $5 per head.


 
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« Reply #216 on: August 26, 2009, 11:36:36 AM »

Tuesday, August 25, 2009Print This Page
CME: Canadian Breeding Herd Down from July
US - We discussed the combined US and Canadian hog and cattle numbers last Thursday but thought some more detailed information on the Canadian pork industry might be helpful since the changes there have been so large for so long, write Steve Meyer and Len Steiner.



Some key information from Statistics Canada’s Hog Statistics report are:

Canada’s swine breeding herd is down 4.6 per cent from July 2008 to 1.38 million head. That herd is 15.6 per cent smaller than Canada’s peak breeding herd back in January 2005. The curious part of the July number is that is was only fractionally lower than the April figure in spite of the liquidation of Stomp Farms (about 12,000 sows) in June.


The reduction of Canada’s herd plus the slow reduction of the US herd puts the combined breeding herds 3 per cent lower than one year ago (graph below). The pace of decline slowed for both countries this summer but it is very likely that it has picked up again after the huge selloff in Lean Hogs futures contracts during July. Many analysts believe that the two countries need to cut an additional 400,000 sows, about the same as they have cut since October 2007 when the combined herds peaked at 7.752 million head.

Canada’s market herd on 1 July numbered 10.725 million head, 6.7 per cent lower than on year ago. As has been the case for some time, the largest decline in Canadian pig numbers can in the under-20 kg category, which was down 11.3 per cent. In the past, these larger declines in the light-weight inventory have been driven by larger exports of Canadian weaned and feeder pigs to the US But those shipments are 1.135 million (26 per cent) lower this year. The larger decline in light-weight pigs is more likely driven by the fact that producers of these pigs have borne a huge share of the economic pressure this year. That is especially true for those who sell on spot markets where pig prices have been below $10/head for several weeks.


Farrowings in the April-June quarter were 7.7 per cent lower than one year ago — a number probably more reflective of the spring quarter’s breeding herd that was over 6 per cent lower than in April 2008. Producers in the western provinces farrowed nearly 10 per cent fewer sows than one year ago while those in the east farrowed 4.6 per cent fewer litters. That also continues a longrun pattern of larger cuts in the west — a fact at least partially (and many believe largely) attributable to Quebec’s provincial farm support programs.


Farrowing intentions for the fall Q3 and Q4 show this regional disparity even more starkly. Nationwide, Canadian producer intend to farrow 7.5 per cent fewer litters in Q3 — the west is down 14.4 per cent and the east is down 0.5 per cent. The Q4 numbers aren’t that out of balance but western producers plan to farrow 4.5 per cent fewer litters while the eastern producers plan to farrow 0.6 per cent fewer. Nationally, Canadian producers plan to farrow only 2.5 per cent fewer litters in Q4.
NOTE: All these numbers came from a survey done in early July and represent 1 July figures. While they are of value for plannint, much has changed since then and we suspect that the September report data will be different.



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« Reply #217 on: August 27, 2009, 11:36:20 AM »

Weekly Roberts Report
US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.



LEAN HOGS on the CME were off on Monday. OCT09LH futures finished down $1.025/cwt at $46.825/cwt; but $2.125/cwt higher than a week ago. The DEC09LH contract closed down $1.325/cwt at $46.000/cwt; but $1.425/cwt higher than last report. The run has been good but will it last? Better cash pork prices and expectations that pork prices may improve on seasonal demand were supportive. However, poor export prospects, bearish technical signs showing possible outside reversal chart formations weighed on prices. USDA’s cold storage report on Friday was bearish showing as of July 31 pork stocks were up 42 mi lbs (8.3 per cent) from this time last year. USDA on Friday put the average pork cutout price at $53.79/cwt; up $2.45/cwt from the previous report but only $1.27/cwt over last week’s report. The latest CME Lean Hog Index was placed at 49.04; up $0.02 but $0.69/cwt lower than a week ago. Some processors were looking to fill lines for the rest of the week. According to HedgersEdge.com the average pork plant margin was raised $3.00/head to a positive $9.25/head. This was based on the average buy of $34.45/cwt vs. the average breakeven price of $37.93/cwt. Several floor sources on Monday said the bearish overtone to the market will continue until sow numbers decline in earnest.

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The SEPT’09 contract closed at $3.294/bu; up 7.75¢/bu and 15.25¢/bu higher than a week ago. DEC’09 corn futures finished at $3.554/bu; up 9.25¢/bu and 33.75+¢/bu over last week at this time. Support from strong gains in the soy complex, better crude oil prices, and a firmer stock market supported prices. The market traded on the notion that USDA’s crop condition report late Monday would reflect a decline of 1 per cent point to remaining even. However, USDA late Monday raised the US Corn crop in good-to-excellent condition 2 per cent points to 70 per cent vs. 68 per cent last week. This and expectations for good corn-growing weather should weigh on prices Tuesday. The Pro Farmer tour is also reporting good crop conditions while expecting large corn and soybean crops. Exports were steady to weaker with USDA placing corn-inspected-for-export at 38.6 mi bu vs. estimates for between 39.0-42.0 mi bu. Cash corn was steady to weaker amid quiet farmer selling in the US Midwest. Cash corn prices in the US Mid-Atlantic states were firm ranging from 10.0-23.0¢/bu higher. It was announced today that the CFTC had closed a loophole that allowed large non-commercial speculators to have large positions. This could mean more liquidation of bullish positions by large non-commercial speculators. There was some evidence of this on Monday as funds bought 6,000 lots while large speculators turned net bearish by 1,485 contracts finishing at 13,941 net short positions. Hopefully 70 per cent of the ’09 crop has been sold.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The SEPT’09 contract closed up 57.0¢/bu at $10.800/bu. The NOV’09 contract closed at $10.074/bu; up 34.5¢/bu. Support came from increased Chinese demand for US soybeans, a gripping drought in China, monsoons in India, and concerns the US soybean crop won’t be able to mature before frost on already tight supplies. According to USDA data the nation’s stocks will be 110 mi bu at the close of the ’08-’09 marketing year on August 31. This will be 46 per cent lower than this time last year and the lowest since the ’76-’77 crop year. In its crop rating late Monday USDA raised the US soybean crop good-to-excellent condition 2 per cent to 69 per cent. Floor sources were expecting USDA to leave it unchanged or lower it by 1 per cent. The recent Pro Farmer tour is reporting a good soybean crop so far. Exports were neutral with USDA placing soybeans-inspected-for-export at 7.6 mi bu vs. expectations for between 6.0-9.0 mi bu. Cash soybeans in the US Midwest were steady to weak while those in the US Mid-Atlantic States ranged 35.0-55.0¢/bu higher amid slow farmer sales. The CFTC as of last Tuesday showed large non-commercial speculators trimming net bull positions by 21,900 lots to 45,200 contracts. Up to 70-80 per cent of the new crop should be priced at this time.

WHEAT futures in Chicago (CBOT) were up on Monday. The markets were technically oversold and due for some upswing activity. SEPT’09 wheat futures finished up 11.5¢/bu at $4.716/bu; almost even with this time last week. The JULY’10 wheat contract closed at $5.440/bu; up 12.25¢/bu and 2.75¢/bu higher than last Monday. Support came from strong soybeans and corn futures. Exports were somewhat supportive with USDA placing wheat-inspected-for-export at 16.7 mi bu vs. expectations for between 14.0-17.0 mi bu. Australia and Argentina are facing drought while rains in the US have delayed the harvest of spring wheat. Late Monday USDA placed the harvest rate for the US Spring wheat crop at 22 per cent vs. the 5-year average of 66 per cent. The CFTC reported last Tuesday large non-commercial speculators increased net bear positions in CBOT wheat futures by 3,400 lots to 57,600 contracts. It would be wise to get up to 30 per cent of the 2010 crop sold on these upticks as the world still has ample supplies of wheat.

The following are the cash hog/corn ratios as calculated by Dow Jones using industry-accepted fob cash hog prices from USDA and cash corn prices from private sources. Historically ratios at or above 20-1 for hogs on a live basis have resulted in expansion of production while a ratio of 15-1 or less has resulted in contraction.


The table below shows ratios using lean hog futures (dressed basis) versus corn futures. The lean hog futures contract specification is for 51-52 per cent lean carcasses with .80-.99 inches of back fat at the last rib or equivalent. Note that in hogs, the ratio for dressed is about 33 per cent higher than its equivalent live-based ratio. Therefore, the historic threshold for expansion on a dressed-based ratio would be 27-1, with less than 20-1 resulting in contraction.


Herd contraction is expected judging from these ratios but reported US sow numbers just aren’t coming down enough to suit pit traders. Meanwhile many report they do not believe the Chinese hog herd numbers. They believe they are higher than reports show.

Lean Hogs October 2009, 24 August 2009
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« Reply #218 on: August 29, 2009, 07:53:27 AM »

CME: Breeding Herd Reduction Finally Underway
US - The long-anticipated, apparently late and, according to many analysts, BADLY needed reduction of the US swine breeding herd may have finally gotten underway the week of 15 August, write Steve Meyer and Len Steiner.



FI sow slaughter for that week, released today by USDA’s Agricultural Marketing Service (AMS) was 69.1 million head, up 17 per cent from the prior week and 3.1 per cent from one year ago. This marks the first week since JANUARY that weekly US sow slaughter has exceeded the level of the corresponding week in 2008.


One of the difficulties in discerning what is going on in the swine breeding herd is that sow slaughter data runs two weeks behind. AMS estimates weekly hog slaughter for each week on Friday of that week but that number includes all hogs — barrows, gilts, sows, and boars. AMS does not break out the sexes or classes of animals until the Thursday two weeks hence. AMS does, though, have daily data on the number of sows purchased by packers who must report under the mandatory price reporting system.

The current MPR rules became one year old in mid-July so they now provide current data that is comparable to the data generated one year ago, providing a frame of reference. Since 1 January, the number of sows purchased each week has run about 16,000 head lower (since some sow slaughter companies are not covered by the MPR system) than actual sow slaughter. Adjusting the purchase data for this difference indicates that slaughter for the week of 22 August should again be near 70,000 head. Anecdotal evidence from producers, bankers and sow brokers tell us it may well be higher.

The graph below shows cash prices implied by CME Lean Hogs futures back on 24 April, actual negotiated barrow/ gilt prices and cash prices implied by Lean Hogs futures on Monday, 25 August. 24 April was the day before H1N1 influenza became big news. The difference in the "expected" prices in April and the actual prices to date have reduced hog producers’ revenues by about $1 billion, with nearly $246 million of that reduction coming since 1 August when cash prices began to fall sharply. That drop in actual revenue and the accompanying downward shift in the red line representing futures- implied cash prices through March 2010 have apparently put enough pressure on producers and bankers to get liquidation rolling.

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« Reply #219 on: August 30, 2009, 09:14:17 AM »

Weekly Review: Canadian Inventory Lower than a Year Ago
US - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

The 1 July hogs and pigs inventory in Canada was down 6.7 per cent from a year earlier. The breeding herd was down 4.6 per cent, the market herd was down 7.0 per cent, sows farrowed in the second quarter were down 6.9 per cent and the second quarter pig crop was down 6.4 per cent from 12 months earlier.

Canada has reduced the hog herd more than the United States, but both countries need to reduce more to get prices up into profitable levels.

Consumer demand for pork in the United States is doing quite well with a 4.0 per cent increase in the last year for the January-July period. Beef demand at the consumer level was down 1.5 per cent, broiler demand was down 3.5 per cent and turkey demand was up 4.5 per cent.

Both live hog demand and live fed cattle demand for January-July were down from a year earlier with live hog demand down 2.7 per cent and live fed cattle demand down 8.1 per cent.

As has been stated several times this year, our problem in the hog industry is not demand relative to the past but high costs of production because of ethanol. However, the only way to solve the problem is to reduce production because feed costs are going to stay high relative to history.

Current gilt and sow slaughter indicates any reduction in the hog herd is at a slow rate. Sow slaughter for the year through the week ending August 15 is down 7.8 per cent, and gilt slaughter for this period is down 0.1 per cent from a year earlier. But sow slaughter for the week ending August 15 was up 6.0 per cent from 12 months earlier.

Feeder pig prices were lower again last week nationally and this week at United Tel-o-auction pigs were $10-20 per cwt lower than two weeks ago. All of the Tel-o-auction pigs weighed between 50-60 pounds and sold for $30-37 per cwt.

Nationally last week 10-pound pigs averaged $15.32 per head with 40-pound pigs at $13.47 per head. The formula priced 10-pound pigs sold for $30.56 per head and the 40-pound pigs sold for $37.66 per head. The spot priced 10-pound pigs sold for $6.91 per head and the 40-pound pigs sold for $12.17 per head. The lowest priced 10-pound pigs sold for $2.00 per head and the lowest priced 40-pound pigs sold for $8.00 per head.

Pork product prices moved counter seasonally with very good gains this week. For Thursday afternoon the cutout at $58.57 per cwt was up $7.23 per cwt from a week earlier. Loins at $66.49 per cwt were down $0.04 per cwt, Boston butts at $61.83 per cwt were up $6.19 per cwt, hams at $52.56 per cwt were up $12.14 per cwt and bellies at $58.61 per cwt were up $2.43 per cwt from seven days earlier.

Live hog prices Friday morning were $0.75 per cwt lower to $2.00 per cwt higher compared to last Friday. Weighted average negotiated carcass prices Friday morning were $0.26 - 1.26 per cwt higher compared to a week earlier.

The top live prices Friday morning were: Peoria $27 per cwt, Zumbrota, Minnesota $30 per cwt and interior Missouri $32.75 per cwt. The weighted average negotiated carcass prices Friday morning were: western Cornbelt $46.90 per cwt, eastern Cornbelt $44.57 per cwt, Iowa-Minnesota $46.90 per cwt and nation $45.90 per cwt.

Slaughter this week under Federal Inspection was estimated at 2,196 thousand head, down 1.4 per cent from a year earlier.



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« Reply #220 on: September 02, 2009, 07:32:11 AM »

CME: High Consumer Level Demand for Pork
US - First — We do indeed realize that it would take 20+ years to slaughter 69.1 million sows in the US, write Steve Meyer and Len Steiner.



That should have read 69.1 THOUSAND in Thursday’s DLR. We still haven't discovered the optimal number of proofreads for just one person to do. It is obviously more than three!!! In addition, we also now realize that US sow slaughter for the week of 25 July was indeed higher than one year ago, so that 69.1 THOUSAND total for the week that ended 15 August was the second week this year that has seen sow slaughter exceed one year ago. The point remains that we haven’t slaughtered many sows this year — not near enough yet to make any significant difference in the sow herd.

The University of Missouri’s July estimates for demand indexes for the three largest meat/poultry species showed more of the same: Higher for pork, lower for both beef and broilers. These indexes measure the position of a demand curve in a standard P-Q supply demand diagram relative to its positioning in 1985. We then present these indexes as a percent change from one year ago. Beef demand is down 1.5 per cent for the year to-date while pork demand is up 4 per cent and chicken demand is down 3.5 per cent.


Some readers may wonder how the pork industry can be in such a financial crisis while consumer level demand for pork is higher. The answer, in part, is that hog demand is lower as is shown in the chart below. The consumer-level demand index does not measure the impact of exports, a critical factor so far in 2009, or packer margins which, until recently had been so low that they have actually HELPED hog demand relative to consumer-level demand for much of this year. Higher consumer-level pork demand has been driven by 1.5 per cent higher per capita consumption through June. The reasons for that jump, of course, have been higher production and export difficulties which have forced product on to the US market. But the reason that the demand index is higher is that retail prices have not fallen by as much as would be expected for that increase in domestic consumption. They have, in fact, RISEN by 3 per cent, YTD.


Both the beef and fed cattle indexes are down, year-to-date. Per cap beef consumption has fallen by 2.9 per cent YTD and retail beef prices have risen by only 1.4 per cent, a smaller amount than would have happened has demand been constant. Fed cattle demand has been helped by exports this year but hurt by MUCH lower by-product values.

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« Reply #221 on: September 02, 2009, 07:33:57 AM »

CME: Breeding Herd Reduction Finally Underway
US - The long-anticipated, apparently late and, according to many analysts, BADLY needed reduction of the US swine breeding herd may have finally gotten underway the week of 15 August, write Steve Meyer and Len Steiner.



FI sow slaughter for that week, released today by USDA’s Agricultural Marketing Service (AMS) was 69.1 million head, up 17 per cent from the prior week and 3.1 per cent from one year ago. This marks the first week since JANUARY that weekly US sow slaughter has exceeded the level of the corresponding week in 2008.


One of the difficulties in discerning what is going on in the swine breeding herd is that sow slaughter data runs two weeks behind. AMS estimates weekly hog slaughter for each week on Friday of that week but that number includes all hogs — barrows, gilts, sows, and boars. AMS does not break out the sexes or classes of animals until the Thursday two weeks hence. AMS does, though, have daily data on the number of sows purchased by packers who must report under the mandatory price reporting system.

The current MPR rules became one year old in mid-July so they now provide current data that is comparable to the data generated one year ago, providing a frame of reference. Since 1 January, the number of sows purchased each week has run about 16,000 head lower (since some sow slaughter companies are not covered by the MPR system) than actual sow slaughter. Adjusting the purchase data for this difference indicates that slaughter for the week of 22 August should again be near 70,000 head. Anecdotal evidence from producers, bankers and sow brokers tell us it may well be higher.

The graph below shows cash prices implied by CME Lean Hogs futures back on 24 April, actual negotiated barrow/ gilt prices and cash prices implied by Lean Hogs futures on Monday, 25 August. 24 April was the day before H1N1 influenza became big news. The difference in the "expected" prices in April and the actual prices to date have reduced hog producers’ revenues by about $1 billion, with nearly $246 million of that reduction coming since 1 August when cash prices began to fall sharply. That drop in actual revenue and the accompanying downward shift in the red line representing futures- implied cash prices through March 2010 have apparently put enough pressure on producers and bankers to get liquidation rolling.

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« Reply #222 on: September 03, 2009, 10:19:16 AM »

CME: Improvement in Cash Pork Prices
US - Lean hog futures were one of the few green spots in a sea of red on Tuesday, report Len Steiner and Steve Meyer.



Most agricultural futures were lower on the day following sharp declines in equity and energy markets. Grain futures were lower, led by a reversal in soybean futures. The nearby September soybean contract was down 86 cents while the nearby corn market was down 14 cents per bushel. It is sort of odd to see hogs leading the parade after a lost summer rally and an ever worse outlook for the fall. Some of the talk in the market about recent hog gains centered on the apparent strength of the hog prices in the cash market. The IA/MN lean hog carcass value (wt.avg) was quoted on Tuesday at $49.46 /cwt, $1.76 higher than the previous day and $3.73 higher than the previous week.

Cash hog prices have followed higher prices for pork at the wholesale level. Gains for some pork items, especially hams, boosted overall cutout values and provided some hope that maybe not all was lost for hogs this fall, hopes that a sudden surge in export orders could boost packer demand going forward. Indeed, as the charts to the right show, there was some improvement in cash pork prices last week, especially with regard to hams. The price of 23- 27# hams rose from around $44/cwt on 18 August to as high as $65/cwt on 28 August.

Indeed, as the charts below show, there was some improvement in cash pork prices last week, especially with regard to hams.

 


The price of 23- 27# hams rose from around $44/cwt on August 18 to as high as $65/cwt on 28 August. The spike caught many by surprise and was attributed to a rush of export orders that apparently cleaned up the spot market and caused domestic end users looking to fill routine orders to raise bids in order to secure product. But the ham story is old news at the moment and looking at the wholesale pork market, it is difficult to get real excited. Ham prices have declined in the last two days and the price for 23-27# hams on Tuesday was at $59/cwt, still a higher than it was two weeks ago but $6 lower than on Friday. Even more importantly, much of the increase in overall cutout values was due to the rise in ham prices rather than a broad based improvement in pork prices.

On Tuesday, the pork cutout value was quoted by USDA at $54.71/cwt, $3.11/cwt lower than on Monday. In order for the rise in hog prices to be sustained this fall, demand has to keep up at a time when hog supplies tend to be at the highest point for the year. High cold storage inventories and uncertainty following predictions of a second outbreak of the flu virus this fall will continue to weigh on pork prices. How long hog values defy gravity remains to be seen.



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« Reply #223 on: September 03, 2009, 10:20:59 AM »

Weekly Roberts Report
US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.



LEAN HOGS on the CME were mixed on Monday. OCT’09LH futures finished up $0.075/cwt at $48.150/cwt; and $1.325/cwt higher than a week ago. The DEC’09LH contract closed down $0.225/cwt at $46.225/cwt; but $0.225/cwt higher than last report. Reports showing higher sow slaughter were supportive. A recent firmness in retail prices, steady cash hog calls, and higher processed numbers were supportive. USDA put the average pork cutout price at $57.90/cwt; down $0.67/cwt from the previous report but $4.11/cwt higher than a week ago. The latest CME Lean Hog Index was placed at $48.56/lb, down $0.24/lb and $0.48/lb lower than last Monday. According to HedgersEdge.com the average pork plant margin was raised $8.00/head from last week to a positive $17.25/head. This was based on the average buy of $34.50/cwt vs. the average breakeven price of $40.97/cwt. It is a good idea to move hogs when ready.

CORN futures on the Chicago Board of Trade (CBOT) were mixed on Monday. The SEPT’09 contract closed at $3.262/bu; up 5.25¢/bu but 3.25¢/bu lower than a week ago. DEC’09 corn futures finished at $3.296/bu; up 0.75¢/bu but 28.75+¢/bu lower than last week at this time. The rest of the deferreds were down on falling soybean prices. Short covering, end-of-month fund buying to balance positions, and a zesty demand were supportive. Exports were somewhat bearish with USDA posting corn-inspected-for-export at 34.9 mi bu vs. estimates for between 37-42 mi bu. A drought in China’s corn growing region helped prices. Cash corn in the US Midwest were steady to weaker early on Monday while in the US Mid-Atlantic States corn bids were 1.0¢/bu – 2.0¢/bu higher in most places. Deliveries are expected to remain light because of good basis levels. Funds bought 2,000 lots while large speculators sold contracts bringing their net bear position in CBOT corn to 21,500 shorts. Hopefully 70 per cent of the ’09 crop has been sold.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The SEPT’09 contract closed off 35.75¢/bu at $11.000/bu but 20.0¢/bu higher than a week ago. The NOV’09 contract closed at $9.794/bu; down 31.5¢/bu and 28.0¢/bu lower than last Monday. Fears that Chinese owned firms will terminate derivative contracts for over-the-counter hedging services pressured the market. Prospects for good production weather also contributed to the bearish tone. Exports were bullish. USDA reported soybeans-inspected-for-export at 17 mi bu vs. expectations for between 7-11 mi bu. China bought 10.4 mi bu of those exports as drought persists in that country. Cash soybeans in the US Midwest were strong with buyers in the US Mid-Atlantic-states bidding 31.0¢/bu -52.0¢/bu lower. Funds sold 4,000 contracts while large speculators trimmed net bull positions by 3,700 lots. Up to 70-80 per cent of the new crop should be priced at this time.

WHEAT futures in Chicago (CBOT) were up on Monday. SEPT’09 wheat futures finished up 4.0¢/bu at $4.710/bu. The JULY’10 wheat contract closed at $5.434/bu; up 3.5¢/bu. Large global supplies and brisk sales competition from Russia, France, and Canada pressured prices. Some end-of-month position squaring was noted. USDA placed wheat-inspected-for-export at 15.5 mi bu vs. expectations for between 11.0-16.0 mi bu. Drought in Argentina and New South Wales continues while monsoons in India destroy the wheat crop there. Large speculators increased net bear positions by 1,500 lots while funds bought an estimated 3,000 contracts. Today’s short covering is viewed as a bounce at best. It would be a good consideration to stay at 30 per cent new-crop sold for now.

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« Reply #224 on: September 04, 2009, 08:08:14 AM »

Cost of Organic Pork Production
Iowa State University's Ben Larson and Professor James Kliebenstein (Department of Economics) and Associate Professor Mark Honeyman (Department of Animal Science) investigate the cost of organic pork production. Not surprisingly, they found it costs more to produce organic pork than conventional pork. There were also seasonal differences: moving from a seasonal (summer only) farrowing system to continuous farrowing had significant cost implications.

 

Introduction
Niche markets in the pork industry are still relatively small but are growing in importance. An example of a niche market is the organic pork market, a relatively new and expanding segment of the industry. Market opportunities are expanding as specific consumer preferences are better identified.

One issue, which frequently surfaces in the organic pork production industry is the relatively limited information on production costs. It is well known that cost of organic pork production is greater than traditional pork production due to increased feed costs and decreased swine performance. The industry has dealt with these differences by paying premiums to producers who produce the product.

The objective of this report is to determine the cost of organic pork production. This report addresses the issue by examining the increase of costs involved in expanding a seasonal (summer only farrowing) organic pork production system to continuous production of organic hogs. Both a seasonal and a continuous system of production are used to provide a basis to determine cost differences between the two types of production systems. It is also necessary to examine the production cost differences between summer and winter for the continuous system.

Materials and Methods
Projected costs for two organic pork production systems are provided: a seasonal system and a continuous production system.

The seasonal system has spring and summer only farrowing. Farrowing occurs in April, June/July, and September. One group is farrowed in April and again in September/October, whereas another group is farrowed in June/July. The April and September farrowing are sows retained from the June/July gilt farrowings of the previous year. With continuous farrowing, there are six groups of females farrowed twice per year. Farrowing occurs every month. The seasonal system has two groups of 80 females, whereas the continuous system has six groups of 27 females each. Facility and breeding herd investment levels are determined for each system.

Information in Table 1 shows the investment level for the two organic pork production systems analyzed. Gilt prices were $175, whereas boars were $750.00 When breeding herd investment is adjusted for sow and boar cull values, the net annual investment is $19,681 for the seasonal organic system and $16,970 for the continuous system.

Table 1. Facility, equipment and breeding herd investment for organic pork production
  Seasonal System Continuous System
Total ($) Annual ($) Total ($) Annual ($)
Facility and equipment 273,150 48,622 287,012 51,340
Breeding herd   39,894   30,708
Breeding herd-neta   19,681   16,970
aThese values represent adjustment for cull sow and boar sales

Ration costs per pound are as follows: 10.9 cents for the nursery, 9.3 cents for the grower, 8.0 cents for the finishing, 8.8 cents for lactation, and 7.3 cents for gestation. Winter feeding uses 10 per cent more feed to produce a pound of gain. These relationships are what has been shown over time at the Iowa Sate University Rhodes Research/Demonstration Farm on seasonal pork production. The overall feed efficiency used for the seasonal system is 3.89 lbs of feed per pound of gain. It is 4.00 for the continuous system.

Results and Discussion
Information from Table 2 summarises organic pork production costs for the seasonal production system and the continuous production system. Costs from the traditional seasonal outdoor farrowing system were adjusted to reflect the differences between winter and summer farrowing as well as organic production. Costs from an organic budget previously prepared by Becker, Kliebenstein and Honeyman were adjusted for additional costs for winter-farrowed organic hogs such as iron and a decrease in pigs farrowed and marketed. Bedding use was taken, in part, from current research on hoop buildings at the Iowa State University Rhodes Research Farm with bedding costs added for farrowing and increased for winter farrowed groups. Annual repairs were set at 10 per cent of the initial facility price. Record keeping was set at $5,000 per year for each system due to the requirements for maintaining records for organic audits as well as a mandatory one per cent charge on sales revenue for hogs sold organically. Labour was placed at $10.00 per hour and was set at 13 hours per litter for the continuous system (12 in the summer and 14 in the winter) and 10 hours per litter for the seasonal system. This difference is due to increased cleaning required for the floored insulated sheds, smaller batch sizes of feed prepared, increased snow removal and additional winter farrowing care.

The cost of production per hundred pounds was $63.88 for pigs from the continuous system compared with $59.45 for the seasonal system – a difference of $4.43 per hundred pounds or $11.09 per market pig.

Table 2. Organic pork production costs for seasonal and continuous production
Total cost comparison
Continuous farrowing Seasonal (summer farrowing) Differences
Variable costs Total costs Per Head Variable costs Total costs Per Head
Feed $179,490 $86.97 Feed $175,872 $83.71 $3.26
Health costs 1,032 0.50 Health costs 735 0.35 0.15
Bedding 10,319 5.00 Bedding 8,929 4.25 0.75
Repairs 3,842 1.86 Repairs 3,633 1.73 0.13
Record keeping 5,000 2.42 Record keeping 5,000 2.38 0.04
Fuel/utilities 4,128 2.00 Fuel/utilities 3,152 1.50 0.50
Sub-total $203,812 $98,75 Sub-total $197,322 $93,92 $4.84
Interest 10,191 4.94 Interest 9,866 4.70 0.24
Labour 42,120 20.41 Labour 31,500 14.99 5.42
Breeding herd 16,970 8.22 Breeding herd 19,681 9.37 (1.14)
Trucking 5,160 2.50 Trucking 5,253 2.50 0.00
Total variable $278,252 $134.82 Total variable $263,621 $125.47 $9.35
Fixed costs $51,340 $24.88 Fixed costs $48,622 $23.14 $1.73
Total $329,592 $159.70 Total $312,244 $148.61 $11.08
Total hogs sold 2,064 Total hogs sold 2,101
Total weight sold 515,970 Total weight sold 525,263
Production cost/cwt $63.88 Production cost/cwt $59.45
Total production cost difference per hundred pounds $4.43

It is also necessary to compare production costs between the winter and summer seasons for the continuous production system. Table 3 provides a total cost comparison of the winter farrowed (October-March) and the summer farrowed hogs (May to September) within the continuous system.

The largest difference between systems is the labor costs with a $5.07 per head difference. The facilities, which differ by an impermeable pad provided for winter farrowing is the second largest cost difference at $4.87/pig due largely to the fact that there is a 0.3 difference in pigs finished per litter.

Winter-farrowed pigs have also $0.89 more in feed costs than the summer-farrowed pigs. This result may, at first, appear as low but the winter-farrowed pigs are in the grow-finish phase during the spring and summer months. The break-even production costs per hundred pounds was $66.92 for the winter-farrowed pigs compared with $61.11 for the summer-farrowed pigs – a difference of $5.81 per hundred pounds or $14.52/ pig.

Table 3. Organic pork production costs for continuous production winter versus summer
Winter Summer Difference
Variable costs Total Per head Variable costs Total Per head
Feed $85,977 $87.43 Feed $93,513 $86.54 $0.89
Health costs 671 0.68 Health costs 361 0.33 0.35
Bedding 5,418 5.51 Bedding 4,902 4.54 0.97
Repairs 1,921 1.95 Repairs 1,921 1.78 0.18
Record keeping 2,500 2.54 Record keeping 2,500 2.31 0.23
Fuel/utilities 2,476.66 2.52 Fuel/utilities 1,651.10 1.53 0.99
Sub-total $98,963 $100.64 Sub-total $104,840 $97.03 $3.61
Interest 4,948 5.03 Interest 5,242 4.85 0.18
Labour 22,680 23.06 Labour 19,440 17.99 5.07
Breeding herd 8,485 8.63 Breeding herd 8,485 7.85 0.78
Trucking 2,458 2.50 Trucking 2,701 2.50 0.00
Total variable $137,535 $139.86 Total Variable $140,718 $130.23 $9.64
Fixed costs $26,970 $27.43 Fixed costs $24,370 $22.55 $4.87
Total $164,505 $167.29 Total $165,088 $152.78 $14.51
Total hogs sold 983 Total hogs sold 1,081
Total weight sold 245,835 Total weight sold 270,135
Production cost/cwt $66.92 Production cost/cwt $61.11
Total production cost difference per hundred pounds $5.81

Table 4 provides a summary of the production costs (break-even prices) of the two systems as well as the break-even values for the summer- and winter-farrowed pigs within the continuous production system.

The lowest cost is with the seasonal system or summer-only farrowing. The highest cost occurs for the winter-farrowed group.

Table 4. Organic pork production cost ($) by system and season
System or season Per pig Per CWT
Seasonal 148.61 59.45
Continuous 159.70 63.88
Winter continuous 167.29 66.92
Summer continuous 152.78 61.11

Summary and Implications
This report has shown that it costs more to produce organic pork than conventional pork. This result has been documented and supported by previous studies as organic feed ingredient costs per unit are higher and feed efficiency for organic pork production is not as good.

This study also provides a seasonal comparison of organic pork production costs. Cost increases incurred by producers in moving from a seasonal (summer only) farrowing system to a continuous farrowing organic production system can be significant. Incentives are needed to encourage producers to shift to continuous production practices that provide a more uniform supply of fresh pork. Cash flow difficulties can be created if premiums do no reflect seasonal differences in production costs.

One of the key questions involved in the relevance of the production cost projections is the scale of production used. The production system that was developed is larger than many of the organic operations that are currently in use. However, the information is on a per pig comparison. Cost of production values can be adjusted to fit alternative sizes of production systems. For example, the system can be reduced to half of the current size with very little added per pig cost by reducing the size of the groups of sows that are being farrowed by 50 per cent in the continuous system and by reducing sow numbers in the seasonal system. These adjustments would not have a significant impact on the difference on costs. The facilities are not capital-intensive and there are not significant economies of size for building construction. Facility costs represent approximately 15 to 16 per cent of production costs.

Organic pork production cost per hundred pounds was projected to be $59.45 for the seasonal system. This cost compared with $63.88 per hundred pounds for the continuous system. The seasonal system had a cost advantage of $4.43 per hundred pounds. When comparing organic pork production costs by season of the year in the continuous system, cost for winter farrowing was $5.80 per hundred pounds over summer farrowing. Production costs for winter farrowing was $66.92 compared with $61.11 for summer farrowing in the continuous system.

This result clearly points out that production costs differ by production system and seasons of the year.

August 2009
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