American Hog News USDA

[mikey]

Wednesday, October 28, 2009
CME: Wholesale Pork Market May Be Short-lived
US - Hog futures have been buoyed in recent days by a marked improvement in pork wholesale values, write Steve Meyer and Len Steiner in their Daily Livestock Report for 27 October.



The CME nearby lean hog contract closed on Tuesday afternoon at $55.425, 198 points higher than the previous trading session and currently at the highest point since 24 July. Most other lean hog contracts gained as well but much of the increase came in the front months as the recent improvement in hog cutout values provided some optimism that pork demand in Q4 may outperform earlier estimates. One item to look at when assessing pork demand into the holiday season is the price of hams, an item that traditionally helps carry pork cutout values at this time of year.

Ample pork supplies and weak export demand pressured ham values during much of last spring and summer (see chart above) and prices were below year ago and five year average levels for much of 2009. On Tuesday, however, USDA quoted 23-27# hams at $58/cwt, $6 higher than a year ago and only slightly below the five year average. Overall wholesale pork cutout have been steadily improving and they rose to $56.20/cwt on Tuesday, almost $1 higher than on Monday. Cutout values remain below year ago and five year average levels but they have been closing the gap in recent weeks.


There is always the possibility that the recent strength in the wholesale pork market may be short lived and prices could slump again once holiday demand begins to fizzle. The improvement in hams is welcome news but hog values will need to receive support from other carcass parts as well. Trim prices remain weak and pork loins continue to struggle amidst plentiful protein options in the retail case. On the other hand, one needs to consider some of the more longer term factors. Hog numbers have started to moderate and slaughter in the last four weeks has been about 100,000 head or 1 per cent lower than a year ago. Supplies are not exactly tight but as the chart to the right shows, pork production is currently running around 6 per cent over the 2003-07 average.


During the May - August period, weekly US hog production was on average up 12 per cent vs. the five year average. (Please note that in the second chart we purposefully took out 2008 as an outlier year and chose to compare to the five year average for 2003-07). The weak US dollar also provides reason for optimism that pork exports will remain strong going into 2010. The outlook for feed prices is a wild card. Corn futures are up compared to late August but they have declined in the last two trading sessions. More recent lower corn prices are not exactly supportive of higher hog prices but generally the outlook for feed is much more bullish than two months ago, and that could maintain the impetus for herd liquidation into 2010.

[mikey]

Wednesday, October 28, 2009
Weekly Roberts Report
US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.



LEAN HOGS on the CME were higher on Monday. The DEC’09LH contract closed up $0.425/cwt at $54.450/cwt. FEB’10LH futures finished at $60.825/cwt; up $0.375/cwt. Cash hog prices were steady to weak. The US emergency declaration over the H1N1 flu didn’t seem to have any effect on prices. USDA on Friday reported the average pork cutout price at $55.35/cwt; up $0.65/cwt. The latest CME lean hog index was placed at $53.41/lb; up $0.30/lb. According to HedgersEdge.com the average pork plant margin was lowered $5.95/head from last week to a positive $2.60/head. This was based on the average buy of $38.10/cwt vs. the average breakeven price of $39.08/cwt.

CORN futures on the Chicago Board of Trade (CBOT) finished off on Monday. DEC’09 corn futures finished at $3.780/bu; down 19.75¢/bu. The MAY’10 contract closed at $3.986; off 18.75¢/bu. A firmer dollar hurting exports and outlook for better weather pressured prices. USDA reported corn-inspected for export at 23.996 mi bu vs. expectations between 30-35 mi bu. Cash bids in the US Midwest were firm amid slow farm sales. Cash bids in the US Mid-Atlantic States were steady-to-weak down 6¢/bu -9¢/bu cents in many places. Hopefully you got to 80 per cent sold on last week’s advice.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed lower on Monday. NOV’09 soybean futures closed at $9.860/bu; down 19.5¢/bu. The MAR’10 soybean contract closed at $9.882/bu; off 18.5¢/bu. Profit taking, a firmer dollar, and improved weather weighed on the market. Exports were supportive with USDA reporting soybeans-inspected-for-export at 43.778 mi bu vs. expectations between 37-42 mi bu. China announced it would be importing about the same amount of soybeans in November as they did in October. Cash bids for soybeans in the US Midwest were steady-to-weak amid spotty farmer sales depending upon where the elevator was located. Cash beans in the US Mid-Atlantic States were steady. Hopefully the ’09 crop got to 80 per cent sold on last week’s recommendations.

WHEAT futures in Chicago (CBOT) fell on Monday. DEC’09 futures closed at $5.270/bu; off 20.75¢/bu. The JULY’10 wheat contract closed at $5.670/bu; down 22.25¢/bu. Wheat followed corn and soybeans lower pressured by the same elements. However, the slow planting progress of the US soft red winter wheat crop was supportive. Exports were disappointing as USDA placed wheat-inspected-for-export at 14.336 mi bb vs. expectations for 15-20 mi bu. Philippine buyers spurned US wheat over Ukrainian wheat. If you haven’t done so already it is still a very good idea to get another 10 per cent of the ’10 crop priced taking you to 80 per cent priced at this time.

[mikey]

Saturday, October 31, 2009
Weekly Review: Some Doubts About Consumer Demand
US - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

 
Ron Plain
Based on the available price data, pork demand at the consumer level continues to hold well for January-September with a four per cent gain in our demand index. Beef demand at the consumer level for this period was down 2.3 per cent.

Live hog demand for the first nine months of 2009 was down 3.6 per cent and live fed cattle demand was down 8.5 per cent. The weaker live hog demand than pork demand is due in part at least to smaller exports. The weaker fed cattle demand than beef demand due to at least two factors. Smaller exports and a very weak hotel and restaurant demand.

We doubt the consumer demand for pork is as strong as the data indicates compared to last year. We believe the retail price is too high as reported by the USDA. USDA includes the prices when pork is at a special lower price but the give the tonnage sold at the same level as regular prices. This is not what happens in the real world the tonnage sold is much higher with the price special. Given the same tonnage movement with both regular and special prices will give a average price that is higher than consumers are paying.

Having said all of this pork demand at the consumer level is probably as strong as or stronger than a year earlier with completely accurate data.

Weaner and feeder pig prices nationally last week were generally steady with a week earlier. Pigs 50-54 per cent lean 10 pounds sold for an average of $29.09 per head. Pigs weighing 40 pounds sold for an average of $35.50 per head. The formula price per pig for 10 pound pigs was $33.91 and the formula price for 40 pound pigs was $45.07 per head. The cash or spot price for 40 pound pigs was $33.65 per head.

The weight of barrow and gilts in Iowa-Minnesota last week at 269.9 pounds is up 0.8 pounds from a week earlier and up 3.7 pounds form a year earlier.

Pork product cutout this week for Thursday afternoon at $58.68 per cwt, up $3.98 per cwt from a week earlier. Loin prices at $65.00 per cwt, down $1.45 per cwt, Boston butts at $57.77 per cwt up $0.63, hams at $60.09 per cwt up $11.97 per cwt and bellies at $72.68 per cwt up $5.85 per cwt from seven days earlier.

Top live hog prices Friday morning were steady compared to last Friday. Weighted average negotiated carcass prices Friday morning were $0.28 - $0.72 per cwt higher compared to last week.

The top live prices Friday morning for select markets were: Peoria $30, Zumbrota, Minnesota $32 per cwt and interior Missouri $36.50 per cwt. The weighted average negotiated carcass prices Friday morning by area were: western Cornbelt $52.32 per cwt, eastern Cornbelt $49.20 per cwt, Iowa-Minnesota $52.34 per cwt and nation $50.42 per cwt.

Slaughter this week under Federal Inspection was estimated at 2294 thousand head down 3.6 per cent from a year earlier.

[mikey]

CME: Positive News for US Meat Sector
US - Steve Meyer and Len Steiner report that the US meat sector received positive news (yes, that says “positive” for a change!) on two fronts today with reports that China will soon renew imports of US pork and Taiwan will soon ease restrictions on imports of US beef.

The news buoyed CME Group Lean Hogs futures, pushing prices to levels not seen since July. The Taiwan news did little to help CME Group Live Cattle and Feeder Cattle futures as all listed contracts fell — seemingly in spite of several positive developments.

US Trade Representative Ron Kirk and Secretary of Agriculture Tom Vilsack announced the Chinese decision in a morning press release. The decision to stop imports of US pork was made in May, supposedly due to concern about H1N1 influenza. That, of course, was a red herring as China was looking for leverage in a dispute over exports of cooked chicken to the US Those had been blocked by Congressional action in 2007 that prevented USDA from even doing a risk assessment of the proposed shipments. Congress reversed that action three weeks ago and, lo and behold, China is apparently no longer in fear of H1N1 influenza. Isn’t it interesting how that works?

China and its “Special Administrative Region” Hong Kong were major players in the surge of US exports last year. As can be seen in the chart below, the two destinations accounted for 30 per cent of US exports in June and averaged 17 per cent, about 3 times their historical share, for the entire year. While the H1N1-related blockage by China has hurt business this year, it should be noted that thinks were not exactly rollicking along before that early May announcement. Shipments through April were down 75 per cent for China and 54 per cent for Hong Kong. We had expected shipments to Hong Kong to grow sharply in the wake of China’s announcement as product was “back-doored” into Chinese markets. They did, in fact, increase but did not do so by anywhere near enough to make up for the loss of trade with China.


This is, no doubt, good news for the US pork industry but don’t expect 2008’s “happy days” to return. China has rebuilt a substantial part of the hog herd losses it suffered in 2005 and 2006 when “blue ear” disease, a major earthquake and two harsh winters caused large death losses. The Olympics are no more than a glorious memory so the world’s attention is not nearly as focused on China and their humming economy has slowed a bit. About the only factor that was in play last year that is again in play is the weak US dollar — but that has less impact in China than in other export customer countries since the renminbi is pegged to the US dollar. Its value only changes when China’s leaders want it to change — or are forced to change it. As can be seen in the following chart, the renminbi has remained constant visà- vis the dollar since mid-2008 after being allowed to gain about 17 per cent in value from July 2005 through July 2008. What will happen when it is someday allowed to float on world markets?

[mikey]

CME: Another Tough Month for Meat, Poultry Sectors
US - October was another tough month for all of the major meat/ poultry species in terms of profits, write Steve Meyer and Len Steiner.



USDA’s monthly output-to-feed price ratios, released as part of the Agricultural Price report on Friday, showed a decline in the ratios for steers & heifers, hogs and broilers. Monthly data dating back to 1993 is shown in the graph below.


After climbing to 26.3 in September, its highest level in nearly 2 years, the steer & heifer-corn ratio fell by 2.6 points to 23.7 in October. The setback does not suggest a change in the general upward trend of the ratio. That trend dates back to some of the lowest observations on record during the summer of 2008 when corn prices reached record highs. The ratio remains short of levels that would suggest financial health for cattle feeders but the gap is narrowing due to lowercost feeder cattle reaching market weights.

The hog-corn ratio fell to 10.5 in October. That is 9.5 per cent lower than September’s ratio of 11.6. The October ratio is the lowest since January. Note that this ratio has generally followed the “hog cycle” in past years and usually had well –defined and short-lived bottoms. Not so this time as the ratio has languished hear 10 for two years.

The broiler-feed ratio declined by 7.3 per cent in October to 3.8, its lowest level since September ‘08. Note that the broiler-feed ratio uses 58 lbs. of corn and 42 lbs. of soybean meal as its feed component, reflecting the higher importance of soybean meal in chicken diets and production costs.

It is interesting to note that the broiler-feed ratio has shown the same cyclical turning points as the hog-corn ratio cycle since the mid-1990s. This correlation agrees with National Pork Board research that showed a much higher cross-price elasticity for pork and chicken at the retail level during those years. “Pork: The Other White Meat” apparently did move pork closer to chicken at retail.

CME Lean Hogs futures prices rose again, with the exception of the nearby December ‘09 and the October ‘10 contracts, on Friday. Several factors have been positive to Lean Hogs in recent weeks. First, pork cutout values have increased over $4/cwt over the past three weeks, including a gain of $1.73/cwt. or 3 per cent last week. FI hog slaughter has been 2.1 per cent below year-ago levels during those four weeks, very close (only 0.5 per cent below) to the levels expected from the September Hogs and Pigs Report. Pork demand appears to have picked up a bit with hams, bellies and trimmings all making nice gains last week. Some of that strength could be anticipation of renewed exports to Russia in the wake of a growing African swine fever outbreak that severely threatens Russia’s stated goal of becoming self-sufficient for pork by 2012. Most industry observers believe that was a long-shot to begin with, especially after oil prices fell last year. Higher oil prices and the renewed capital inflows they trigger for Russia had rekindled the self-sufficiency hope but this disease outbreak will be both damaging and difficult to control. The UN’s Food and Agricultural Organization (FAO) has warned that the disease could spread to the EU or China. The final factor that has helped Lean Hog prices was the rebalancing of commodity index funds to reduce positions in grains and hold more of other ag commodities, including hogs and cattle.

[mikey]

Tuesday, November 03, 2009Print This Page
Market Preview: Pressures Ease Just a Little
US - Weekly US Market Preview provided by Steve R. Meyer, Ph.D., Paragon Economics, Inc.



There was a lot to be positive about in the pork industry the last week of October. I realize it is difficult to be optimistic when you are still losing $25 to $30/head. I also realize that positive news at this point could be as dangerous as it is welcome. But facts are facts, and we must recognize them.

Pork cutout values continued a rally that has been rather low on magnitude, but is now three weeks old (see Figure 1). The $1.73/cwt. increase last week was driven by increases in hams, bellies and trimmings, so it wasn’t just a one-trick pony. The increase puts this rally at over $4/cwt. during October – a month usually not known for product price rallies.


Slaughter levels have been very close to the levels expected from the September USDA Hogs and Pigs report and average slaughter weights actually got back to a level equal to year-earlier levels for the first time since the week of 28 March. Those two factors have led to much more manageable supplies.

In addition to higher cash pork prices, Chicago Mercantile Exchange (CME) futures markets are offering opportunities to lock in lower costs and higher revenues than just a few weeks ago. Lean Hog futures continued their rally this week with most contracts reaching their highest levels since late July.

And the news was good on the cost side of the ledger, too. Lower corn and soybean meal futures leave my cost estimates for November 2009 through December 2010 at an average of $66.28/cwt., carcass, $1.20 lower than two weeks ago.

Put those two together and the futures markets now suggest profits in six months of 2010 (see Figure 2). Average losses for November ’09 through December 2010 are back down to $2.70/cwt., or roughly $5/head – and that is if your production parameters are equal to those assumed by the Iowa State University (ISU) cost and returns estimates. Many producers have higher productivity and lower cost relationships than are suggested by these “average” numbers from ISU. Friday’s closing futures prices will actually mean profits for those producers.


Pork Export Potential Improving
And then there are exports, or at least the potential for exports. China’s announcement that it would resume imports of US pork was welcome news. It came three weeks after the US Congress reversed its de facto ban on USDA’s doing a risk assessment on Chinese cooked chicken imports. While a market of 1.3 billion people is always lucrative, we should not begin gearing up pork output just yet. China has rebuilt its breeding herd during the past two years and a spotlight as bright as that of the Olympic Games will not be shining on it anytime soon. In addition, China’s currency is pegged to the dollar, so the weakening US dollar will not have as much effect on exports to China as it does on exports to other countries. Good news? Yes. Does it mean a boon for exports in the short run? Probably not.

The other “potential export” development is the apparently worsening African Swine Fever outbreak in Russia. I’m not suggesting in the least that we should take joy in this situation -- just as we should not have (and I don’t think anyone did) take any joy in the pig death losses in China in 2006 and 2007. But it is a fact and the US can play a major role in getting meat protein to Russia’s people if this outbreak gets worse.

Futures Prices Can be “Your” Prices
So, our task is to decide which of these “potential” positives will come true. One certainty is that pork producers can make the “potential” prices of futures markets their actual prices simply by buying the ingredient futures (or call options on them) or selling the hogs futures (or put options on them). There are costs to doing that, of course, but those futures prices are more than pipe dreams. They can be your prices if you deem them acceptable and take action.

The futures-implied hog price for the week of 2 July 2010 is $72.39. The national weighted-average net negotiated price for that same week in 2009 was $58.08, which means the futures market is offering a year-on-year price increase of 24.6 per cent. My calculations using the September Hogs and Pigs report and expected changes in imports from Canada say that slaughter in early July will be 2.5 per cent lower than this past year. Those changes imply a price flexibility of nearly 10:1, where I usually use 3:1 to compute expected price changes from forecasted slaughter changes.

The bottom line is that current Lean Hog futures markets are apparently forecasting much higher demand in 2010. Stronger demand is indeed likely given the challenges we have had in 2009, but the magnitude implied by the futures markets appears to be very large.

[mikey]

Wednesday, November 04, 2009Print This Page
Quick Recovery of US Pork Exports to Mexico
US - After a brief decline during the initial outbreak of H1N1 influenza, US pork exports to Mexico have rebounded quickly and impressively.

 

Since May, pork exports to Mexico have increased steadily and year-to-date (through August) they are exceeding last year’s pace by 38 per cent in volume and 17 per cent in value.

Chad Russell, USMEF regional director for Mexico, the Dominican Republic and Central America, comments on the consumer education and marketing efforts undertaken by USMEF to help restore consumer confidence in the safety of pork.

Gerardo Rodriquez, USMEF director of trade development for the region, adds his insights on targeted marketing techniques that are helping USMEF build a loyal retail customer base for US pork in Mexico.

You can listen to the audio clip of Chad Russell and Gerardo Rodriguez on US pork demand in Mexico by clicking here.

[mikey]

Wednesday, November 04, 2009Print This Page
Pork Gets Support During National Pork Month
US - The Kroger Company, during October, partnered with US pork producers to promote the value of pork during National Pork Month. To support National Pork Month, Kroger, the nation's largest traditional supermarket retailer, is offering specials on fresh pork cuts at great prices throughout its family of stores through 7 November.



In addition to special prices The Kroger Company is offering a $1 coupon off any package of fresh pork at the point of sale and from meat department associates. The Kroger Company's marketing activities were integrated into a national fall marketing campaign by the National Pork Board, which promotes pork on behalf of all 70,000 US pork producers.

"Customers today are looking for affordable, nutritious options to create convenient meals at home and pork offers shoppers great variety and value," said Mark Van Buskirk, vice president of meat and seafood for Kroger.

Chris Novak, chief executive officer of the National Pork Board, applauds the Kroger promotion. "We are aware that the national recession has caused consumers to squeeze more value from their food budget. Pork has always been a great value, but Kroger's ability to extend that value through roughly 2,470 supermarkets during October is greatly appreciated by pork producers, who have been experiencing an extended period of economic distress. We have great retail partners across the country, but we are especially appreciative and fully supportive of Kroger's activities," Novak said. "We expect them to have a very positive impact."

[mikey]

Wednesday, November 04, 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 were higher on Monday. The DEC’09LH contract closed up $1.025/cwt at $57.725/cwt and $3.725/cwt over last week at this time. FEB’10LH futures finished at $64.600/cwt; up $1.000/cwt and $3.775/cwt higher than last report. Could the hard times be over? Even if they are, it will take some time for farmers to recover. Bull spreading and gains in the Dow-Jones and other commodities were supportive while heavier slaughter weights were problematic. In addition, expectations that China will soon announce intentions to lift restrictions on pork imports and pork-production troubles in other parts of the world were helpful for US pork prices. On Friday USDA put the average pork cutout at $58.17/cwt; down $0.51/cwt but $2.82/cwt over last report. The latest CME lean hog index was placed at $53.84/lb; down $0.01/lb but $0.43/lb higher than this time last week. Cash hog prices were steady. According to HedgersEdge.com, the average pork plant margin was raised $4.30/head from last week to a positive $6.90/head. This was based on the average buy of $38.61/cwt vs. the average breakeven price of $41.17/cwt.

CORN futures on the Chicago Board of Trade (CBOT) rallied on Monday. DEC’09 corn futures finished at $3.822/bu; up 16.25¢/bu and 4.25¢/bu higher than last Monday. The MAY’10 contract closed at $4.046; up 16.25¢/bu and 6.0¢/bu higher than last report. Late Monday USDA put the US corn crop at 25 per cent harvested vs. the 5-year average of 71 per cent. Exports had a bearish tone with USDA reporting 23.367 mi bu inspected for export vs. expectations for 16-32 mi bu. Supporting the market were news reports that the European Union commission in charge of grain approved three types of GMO corn for import and concerns over corn toxins developing in the US corn crop from wet weather. Cash bids for corn were weak on Monday amid expectations that harvest would gear up shortly. Funds bought about 11,000 contracts while large speculators registered net bull positions at 5,300 lots. Now is a good time to consider selling the rest of the ’09 corn crop.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. NOV’09 soybean futures closed at $9.974/bu; up 19.5¢/bu and 11.5¢/bu higher than this time last week. The MAR’10 soybean contract closed at $10.000/bu; up 25.0¢/bu and 11.75+¢/bu cents over last report. A weaker dollar and strong exports underpinned the market. USDA placed soybeans-inspected-for-export at 63.675 mi bu vs. estimates for 39-48 mi bu. Late Monday USDA put the amount of US soybeans harvested at 51 per cent vs. the 5-year average of 87 per cent this time of year. Cash soybean prices were weaker early Monday amid harvest pressure. Funds bought about 6,000 lots while large speculators cut net bull positions by 2,800 contracts. Hopefully 80 per cent of the ’09 crop has been sold. It might be a good idea to sell more on the rally.

WHEAT futures in Chicago (CBOT) closed higher on Monday. DEC’09 futures closed at $5.166/bu; up 22. 5¢/bu but 10.5¢/bu lower than a week ago. The JULY’10 wheat contract closed at $5.594/bu; up 22.25¢/bu but 7.75¢/bu lower than last report. Fund buying and a weaker dollar were supporting features, however, exports and the large global supply of wheat continued to pressure prices. USDA placed wheat-inspected-for-export at 11.933 mi bu vs. expectations for 15-18 mi bu. Funds bought 5,000 contracts while large speculators decreased net bear positions by 4,600 lots. Pricing would be advisable on these technical bounces.

[mikey]

CME: Pork Demand Index Higher Than Last Year
US - Consumer-level demand for pork remained strong through September, according to the University of Missouri, report Steve Meyer and Len Steiner.



The index of pork demand gained 0.1 per cent relative to last year and stood 4 per cent higher at the end of February. The higher index means that retail prices have not had to be lowered as much as expected to move the larger quantities of pork that have been placed on the US market since the novel H1N1 influenza situation began in late April. In fact, monthly domestic pork disappearance in June, July and August 2009 were all among the top three in history for the respective month.


Beef demand continued in a difficult year, falling 0.3 per cent farther behing last year’s level. The beef demand index now stands 2.3 per cent lower than last year. Should it end the year at this level, the index will be at its lowest level since 1999.

Chicken demand remained lower than one year ago at – 2.9 per cent but gained 0.5 per cent on last year’s level in September. Chicken demand has improved relative to last year every month so far in 2009 but it began the year at such an abysmal level (-6.3 per cent as of April) that it had little place to go but up. The chicken situation was just the opposite of that faced by pork as retail chicken prices could not be improved enough even with unprecedented reductions in quantity supplied. And chicken prices are still nothing to shout about — as can be seen in the chart.


The biggest culprits relative to 2008 have been legs and leg quarters. Both of those got an apparent windfall in May and June, presumably as substitutes for pork in either domestic or export markets or both. But the surge of leg quarter prices from just under $0.40/lb. to over $0.50/lb lasted only until the end of June and prices have now plummeted to their lowest level ($32.71/cwt last week) since late last year. The leg quarter price pattern is reflected nearly perfectly in the composite price graph.


The good news about breast meat prices is that they have stayed very close to 2008 levels almost all of 2009. Of course, the bad news for breast prices is the same — they have stayed close to the levels of 2008 which were anywhere from $0.15 to $0.30/lb. lower than the average for the previous 5 years.


A healthy portion of the breast meat problem can be attributed to the softness of US foodservice demand since last year but supply played a factor as well. Dr. Paul Aho, noted poultry economist and president of Poultry Perspectives, Storrs, CT, points out that broiler breast meat yields have risen from roughly 15 per cent of live body weight in 1985 to over 22 per cent of live weight in 2009. Add even more weight for the basting (or pumping) done to most chicken breasts and one can see that supply is putting downward pressure on breast prices as well.

And that brings us to wings, the former dead-weight and now star of the chicken value show! Wing prices have exceeded boneless, skinless breast prices for almost all of 2009 and reached a record high nearly $1.67 per pound in mid-October. They are now both a large contributor and consistent contributor to chicken value. While US consumers have apparently passed on chicken breast sandwiches and thick steaks, it appears that a basket of wings and a beer for under $10 is still a great deal. How will that play out as the recession wanes?

[mikey]

Tuesday, November 10, 2009Print This Page
Market Preview: 'Swine Flu' – Time to Move On
US - Weekly US Market Preview provided by Steve R. Meyer, Ph.D., Paragon Economics, Inc.



Something bad has happened to you. It wasn’t deserved and it wasn’t’ fair. The people who did it are callous and heartless (at least in regard to you), and lazy, or they would not have done it. But they did it. It’s over. It’s done. You can whine and wallow in self-pity and martyrdom or pick yourself up, dust yourself off and get on with life and the business of raising quality pork.

Yes, that’s easy for me to say and write about, but that makes it no less true. Swine flu (yes, I used the “s” word) is a done deal, but two truths are now clearly evident:

You are not going to change the name any more than you already have, and
It is pretty clear that the term “swine flu” is having very little impact now (see below).
So, the next time you hear some nimrod (fill in your own noun, if you like) say “swine flu” on television, count to 10, get your heart rate and blood pressure under control and put down any sharp object that may be in your hand. More importantly – think about a more productive way to channel the time and energy you would have spent blowing your lid.

Now, you may not like what I am saying here, and you may not totally agree, but in the back of your mind you probably also know that I am right – at least about this topic. It is simply time to let it go and get on with your business.

What has happened to pork producers in the United States, Mexico and Canada is not at all fair, certainly. And, it has hurt even more coming on the heels of the government driving up the cost of your two major inputs to the point that you have collectively lost $5 billion over a two-year period in which you would not have lost money had it not been for those cost increases.

But, again, it is done. May our indignation and anger (and I include mine) rest in peace. There are loved ones to love, missions to accomplish, pigs to move and that curtain on the sow barn needs fixing before the snow flies. From here forward, “swine flu” will be my cue to think about what positive action I am going to take to make life better for someone. Please join me. Life is too short to spend it angry – even when the anger is completely justified.

Okay, that noise you hear is my soap box sliding back into the closet. I feel better already. I hope you do (or will), too.

Reinforcing Point #2
My two biggest fears for most of this summer have included: “What if demand falls apart when the flu season hits and we have thousands or million cases of novel H1N1 influenza in humans?” and, “What will happen to the poor guy whose herd is the first to be found infected?”

Both of these concerns held pretty chilling possibilities, but neither has happened and pork cutout values have increased by $6.02/cwt. since the first full week of October (Figure 1). That increase put the cutout value above year-ago levels for the first time since the week of 28 March. Last week marks only the sixth week in 2009 in which the cutout value has exceeded the level of one year earlier.


“Big deal,” you say. “The only reason this year is higher than last year is because last year was even more of a disaster.” Granted, you have a point, but consider this: From 1998 through 2007, USDA’s estimated cutout value fell from the first full week of October to the first full first full week of November every year! That includes 2004, when cutout values got into record high territory in December. The average decline was $5.16/cwt. and the largest was last year’s $12.79/cwt.

Further, we have not accomplished this rally by starving the market for pigs and pork. As Figure 2 shows, last week’s slaughter was almost precisely the same as that of one year ago. The September Hogs and Pigs Report said that slaughter should have been 1.8 per cent lower than last year, so we actually brought more hogs to market than were expected and the cutout value went up.


Since 1 September, slaughter has been 1 per cent smaller than last year and 0.3 per cent larger than the level predicted by the September USDA report; more evidence that short supplies have not been the driving force for higher product values.

It is obvious that wholesale pork demand has improved this fall even as the airwaves and some print news outlets have remained inundated with news of swine flu (remember – count to 10 and think of something positive) sicknesses and deaths. And, even as news that novel H1N1 influenza was found in pigs at the Minnesota State Fair and, then, in a commercial herd in Indiana, pork prices improved. Even better, the Indiana producer, his workers and his pigs have recovered. His packer is still buying his hogs and the packer’s customers are still buying the completely safe pork produced from those hogs.

So, please join me in my pledge to move on. Learn the lessons that should be learned, but I urge you to adopt my new strategy for dealing with “swine flu” (one, two, three, four . . . ). You now know the drill.

[mikey]

Wednesday, November 11, 2009Print This Page
$50 Million in Pork Bought for Food Programme
US - The USDA is to buy $82.6 million worth of pork, cherry, plum and apple products for federal food nutrition assistance programmees.

 

US Agriculture Secretary Tom Vilsack made the announcement at the National Association of Farm Broadcasters annual convention.

"These purchases will assist pork, cherry, plum and apple producers, who are currently struggling due to depressed market conditions," said Vilsack.

"Today's actions will help stabilize prices and markets, stimulate the economy, and provide high quality food to Americans in need of USDA's nutrition assistance programmes."

USDA intends to purchase $50 million of pork, $12.2 million of tart cherries, $1.8 million of dried plums and $18.6 million of apples. The Department will seek the lowest overall costs by surveying potential suppliers and publicly inviting bids to assure contracts are awarded to responsible bidders.

The pork purchase will help farmers greatly reduce their sow herd in a market where production costs continue to exceed market value. The tart cherry, dried plum and apple purchase will help alleviate the stress caused by higher inventories and low prices that farmers are receiving for their commodities.

Each year, USDA purchases a variety of high-quality food products to support the National School Lunch programme, the School Breakfast Programme, 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 focus on ensuring all purchased food is healthy and nutritious. Food items normally are required to be low in fat, sugar and sodium. The commodities must meet specified grade requirements and be USDA-certified to ensure they meet government standards of quality. USDA purchases only commodities produced in America.

[mikey]

Wednesday, November 11, 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 were higher on Monday. The DEC’09LH contract closed up $0.100/cwt at $55.800/cwt but $1.925/cwt lower than this time last week. FEB’10LH futures finished at $63.325/cwt; up $0.475/cwt but $1.275/cwt higher than last report. Falling US dollar values rallied futures when weak cash markets couldn’t attract selling interest despite the large premium of futures to the CME lean hog index. Funds were new buyers into the April 2010 contract while selling December and buying February. A couple of floor traders said that the market anticipated falling packer demand as farmers complete harvest and get more time to sell hogs. USDA on Friday put the average pork price at $58.63/cwt; down $1.03/cwt from the previous close but $0.63/cwt higher than last report. According to cold storage reports packers have enough hams in the freezer to meet all the holiday demand as demand for turkeys overcome ham demand this time of year. The latest CME lean hog index was placed at $55.32/lb; up $0.57/lb but $1.48/lb higher than last Monday. According to HedgersEdge.com, the average pork plant margin was lowered $2.20/head from last week to a positive $4.70/head. This was based on the average buy of $39.76/cwt vs. the average breakeven price of $41.51/cwt.

CORN futures on the Chicago Board of Trade (CBOT) finished up on Monday rallying late in the session. DEC’09 corn futures finished at $3.860/bu; up 19.0¢/bu and 3.75+¢/bu higher than last Monday. The MAY’10 contract closed at $4.102; up 19.25¢/bu and 5.75¢/bu higher than last report. The tremendously weak US dollar; gains in crude oil, gold, and the Dow; and fund buying provided support near the close. The US dollar has not been near the .75 index since 15 months ago. Late Monday USDA put the US corn crop at 37 per cent harvested vs. the 5-year average of 82 per cent. USDA placed corn-inspected-for-export at 26.852 mi bu vs. estimates between 25-32 mi bu. The World Agriculture Supply & Demand Estimate (WASDE) is due out tomorrow and many are thinking USDA will lower the corn production yield estimate due to the bad weather. A quickening harvest pace held futures in check all day. In other news China is sending signals for more corn imports and dry weather in Argentina is not helping corn planting in that country. Cash corn bids were weak amid heavy corn harvest this week. Funds bought between 8,000 – 9,000 contracts. The carry is weakening so unless your storage costs are less than 24.0¢/bu now is a good time to consider selling the rest of the ’09 corn crop and sell 10 per cent of the ‘10 crop.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. NOV’09 soybean futures closed at $9.642/bu; up 16.25¢/bu but 33.25¢/bu lower than this time last week. The MAR’10 soybean contract closed at $9.780/bu; up 17.25¢/bu but 22.00¢/bu cents under last report. The falling dollar, good export reports, gains in outside markets, and fund buying countered the bearish impact of much better harvest weather. USDA placed soybeans-inspected-for-export at 59.939 mi bu vs. estimates of 45-55 mi bu. Late Monday USDA put the amount of US soybeans harvested at 75 per cent vs. the 5-year average of 92 per cent this time of year. Heavy rains flooded newly planted soybean fields in Brazil’s Matto-Grasso area. It is expected that USDA will slightly increase its soybean crop estimates in Tuesday’s WASDE report. Funds bought over 4,000 contracts. Cash soybeans weakened amid a good harvest pace last week. Basis is expected to weaken further as Hurricane Ida aims for the Gulf coast area and backs up ships. The carry does not justify holding onto soybeans unless you can store for less that 24.0¢/bu through March. Hopefully 90 per cent of the soybean crop was sold through last week. It would be a good idea to consider selling 10 per cent of the ’10 crop at this time.

WHEAT futures in Chicago (CBOT) finished up on Monday. DEC’09 futures closed at $5.200/bu; up 22.75¢/bu and 3.5¢/bu higher than a week ago. The JULY’10 wheat contract closed at $5.652/bu; up 23.5¢/bu and 5.75+¢/bu higher than last report. Rising corn and soybeans; strong exports; the falling dollar; fund buying; and stronger outside markets (crude, gold) were very supportive. USDA put wheat-inspected-for-export at 17.230 mi bu vs. estimates for 13-17 mi bu. Bangladesh, Jordan, Taiwan, and Saudi Arabia tendered offers. Lower wheat yield estimates in Canada and Bulgaria were also supportive. Funds bought almost 4,000 contracts. Pricing again would be advisable on these technical bounces.

[mikey]

CME: Hog Futures Bounce Back from the Lows
US - Livestock futures closed last week on a somewhat upbeat note as cattle and hog futures were generally higher on the day, write Steve Meyer and Len Steiner.



As the charts below show, however, nearby live cattle futures remain mired in a bearish trend while lean hogs have bounced back from the lows established back in the summer and have made some notable progress, partly due to reportedly good export sales but more so because US domestic pork sales have not been impacted by the H1N1 flu outbreak as much as previously thought.


Cattle slaughter for the week drifted lower compared to the week before, largely due to a light kill on Wednesday. Total cattle slaughter was reported to be 625,000 head, 0.64 per cent lower than the week before but 0.53 per cent higher than year ago levels. Fed cattle slaughter for the week was estimated to be 481,000 head, 1.69 per cent higher than the comparable period a year ago.

Cow and bull slaughter, on the other hand, was estimated to be 144,000 head, 1.4 per cent lower than year ago levels. Dressed weights were reported to be sharply lower at 791 pounds, compared to 797 pounds the week before. The number is preliminary so it may be revised in the coming weeks. Seasonally, however, weights tend to drift lower into December so the decline is not all that unusual.

Hog slaughter for the week was reported to be 2.290 million head, 0.52 per cent lower than the week before and now 1.31 per cent lower than year ago levels. As the 1 September inventory report indicated, hog slaughter in Q4 should be below year ago levels and so far that has been generally the case. It appears that the improvement in out-front hog prices also has provided some support to the sow market. Sow prices have showed a notable improvement in recent weeks although they remain below year ago levels.

Sow slaughter also has slowed down and for the week ending Oct 31 (reported with a two week lag) sow slaughter was noted to be 65,200 head, 1.08 per cent lower than the week before and 2.06 per cent lower than year ago levels. As for broiler supplies, the main competitor to beef and pork, producers continue to hold the line on lower production levels. Current slaughter remains below year ago, as do egg sets and chick placements, which were down 1.6 per cent and 1.03 per cent respectively compared to year ago.

[mikey]

Saturday, November 14, 2009Print This Page
Weekly Review: Pork Cutout Down from a Week Ago
US - Weekly review of the US hog industry, written by Glenn Grimes and Ron Plain.

 
Ron Plain
The November USDA estimate of the 2009 corn crop is for a yield of 162.9 bushels per acre, down from the October estimate of 164.2 bushels per acre. This will still be a new record high for corn yield if it comes true.

The current estimate of the 2009 corn crop is 12.921 billion bushels, down from 13.018 billion bushels in the October estimate.

Carryover stocks of corn at the end of the 2009-2010 marketing year is estimated at 1.625 billion bushels down from 1.672 billion bushels in the October estimate.

The midpoint estimate of the 2009-2010 marketing year corn price was increased to $3.55 per bushel up $0.25 per bushel from the October estimate. The future market on Tuesday following the November report had increases of $0.01-0.04 per bushel. Not big changes but if they come true will make financial conditions in the hog industry a little more challenging.

The November estimate for the 2009 soybean yield was increased to 43.3 bushels per acre, up from 42.4 bushels per acre in the October estimate.

This higher yield increased the 2009 soybean crop to 3.319 billion bushels, up from 3.254 billion bushels in the October estimate. This will be the largest soybean crop of record.

Even though the size of the soybean crop was increased a little, soybean meal price for the 2009-2010 marketing year was increased from $275 per ton in the October estimate to $280 per ton in November. USDA believes the higher corn prices will pull soybean meal price a little higher.

Feeder pig prices nationally last week were $3-6 per head higher than a week earlier. Pigs weighing 10 pounds 50-54 per cent lean sold for an average of $34.82 per head, 40 pound pigs averaged $38.33. The formula price for 10 pound pigs was $35.79 and for 40 pound pigs $55.86 per head. Cash price for 10 pound pigs was $34.12 and 40 pound $37.74 per head.

Gilt and sow slaughter data indicates any reduction in the breeding herd is at a quite slow rate.

Cash live barrow and gilt prices Friday morning were steady to $1.00 per cwt higher compared to a week earlier. Weighted average negotiated barrow and gilt price Friday morning were up $0.10 to down $1.48 per cwt compared to seven days earlier.

The live prices were: Peoria $35 per cwt, Zumbrota, Minnesota $36 and interior Missouri $38.50 per cwt.

Weighted average negotiated carcass price by area were: western Cornbelt $52.02 per cwt, Iowa-Minnesota $52.02 per cwt and nation $51.95 per cwt.

The live barrow and gilt weights for Iowa-Minnesota last week at 271.3 pounds per head up 0.9 pound from a week earlier and up 4.3 pounds from a year earlier. Average barrow and gilt carcass weights for the week ending October 31 at 200 pounds per head up one pound from 12 months earlier.

Pork cutout through Thursday this week was down $2.54 per cwt from a week earlier at $57.12 per cwt.

Slaughter this week at 2290 thousand head down 1.3 per cent from a year earlier under Federal Inspection.