American Hog News USDA

[Mustang Sally Farm]

Monday, January 16, 2012
WASDE Raises 2011-12 Pork Production Estimate
US - USDA's January World Ag Supply and Demand Estimates report (WASDE) was noted for its larger-than-expected estimate of 2011 corn production and 2012 ending stocks. March, May and July corn futures were down the limit on Thursday, writes Ron Plain.
 
Ron Plain
The report also raised USDA's estimate of 2011 and 2012 pork production. USDA is now forecasting that 2012 pork production will be up 1.9 per cent from 2011. They are forecasting 2012 hog prices to average only $1 lower than in 2011, thanks in large part to a forecasted 2.8 per cent drop in the production of competing meats. Beef production is expected to be down 4.7 per cent and broiler production down 2.0 per cent compared to 2011. Red meat and poultry consumption in 2012 is forecast to be 199.1 pounds per person, the lowest since 1991.

The futures market is predicting 2012 corn prices will average close to $6 per bushel. That should yield a breakeven hog price of $65/cwt (live) or $86/cwt (carcass). Lean hog futures are predicting hog prices will average $87/cwt this year, just enough for a small profit.

The US is reopening to pork shipped from the state of Santa Catarina in Brazil. This is not likely to have a measurable impact on the market. Thus far this century, the biggest pork imports from Brazil were in March 2008 when 0.4 per cent of US pork imports came from that country.

Hog prices were steady to $2 higher this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $82.63/cwt, up $2.19 from last Friday. The morning price quotes for both the western corn belt and Iowa-Minnesota were $84.47/cwt. The eastern corn belt averaged $81.60/cwt this morning. Friday's top live hog price at Peoria was $57.50/cwt. Zumbrota, MN had a top of $57/cwt. The top for interior Missouri live hogs was $60/cwt, the same as the previous Friday.

USDA's Thursday afternoon calculated pork cutout value was $84.11/cwt, down 22 cents from the previous Thursday. Loins, hams and butts were lower; bellies were higher. This week's pork cutout is the lowest since this time last year. Are packer margins tight? The western corn belt hog price this morning was higher than the pork cutout value.

Hog slaughter totaled 2.212 million head this week, up 7.2 per cent from the week before and up 4.0 per cent compared to the same week last year. Barrow and gilt carcass weights for the week ending 31 December averaged 207 pounds, up 3 pounds from the week before and up 1 pound from a year ago. Iowa-Minnesota live weights for barrows and gilts last week averaged a record 278 pounds, up 0.1 pound from the week before and up 3.3 pounds compared to last year.

Today's close for the February lean hog futures contract, $85.60/cwt, was up $1.70 from the previous Friday. The April lean hog futures contract settled at $87.05/cwt, down 70 cents for the week. May hogs settled at $94.85/cwt. June hogs ended the week at $96.10/cwt.

[Mustang Sally Farm]

Wednesday, January 18, 2012
Antibiotics in Pig Feeds Increases Resistance
US - Antibiotics in pig feed increased the number of antibiotic resistant genes in gastrointestinal microbes in pigs, according to a study conducted by Michigan State University and the US Department of Agriculture's Agricultural Research Service.


Published in the current edition of the Proceedings of the National Academy of Sciences, the comprehensive study focused on understanding the effects of conventional, in-feed antibiotics in US farms.

For decades, many producers of pigs, chickens and other farm animals have used antibiotics not only to protect their livestock from disease, but also to boost growth rates and enhance feed efficiency, a measure of how well animals convert feed into weight gains.

Scientists don't know precisely how antibiotics enhance growth rates and feed efficiency, but they are concerned that on-farm use of these medications may contribute to the development of strains of microbes resistant to conventional antibiotics, which are potentially harmful to humans and animals, said James Tiedje, MSU University Distinguished Professor of microbiology and molecular genetics and of crop and soil sciences.

"The growth of antibiotic resistance in pathogens is a huge challenge for society around the world," said Mr Tiedje, an MSU AgBioResearch scientist. "Studies to understand what contributes to the spread and what interventions can help control the problem are vital."

Both diversity and abundance of antibiotic resistance genes increased in the intestinal microbial communities of the pigs treated with antibiotics. Longer term studies are needed. Some of the genes found in the treated pigs were unexpected and usually linked to antibiotics not used in the study.

Microbial genes associated with production and use of energy by microbes increased in abundance in the antibiotic-fed pigs, which may shed light on how antibiotics increase livestock growth and feed efficiency. E. coli populations increased in the intestines of the treated pigs. Further study is needed to clarify this observation.

"To our knowledge, this study is the first of its kind to look at the collateral impacts of in-feed antibiotic use in farm animals, using a comprehensive approach to detect shifts in the function and the makeup or membership of the microbial community in the model animal's gastrointestinal tract," said Torey Looft, USDA researcher.

[Mustang Sally Farm]

Thursday, January 19, 2012
Ingredients that Lower Feed Cost for Weanling Pigs
US - An extension swine specialist with Kansas State University says producers of weanling pigs can reduce feeding costs without sacrificing productivity by substituting less costly ingredients into their diets, Bruce Cochrane writes.

 University news is a Wonderworks Canada Production. Visit us at www.universitynews.org 
Researchers at Kansas State University have been striving to lower diet costs while maintaining some of the key important ingredients in baby pig diets to stimulate feed intake and get them off to a good start.

"Less costly diets for weanling pigs" is being discussed as part of the 2012 Banff Pork Seminar, underway until Friday.

Dr Bob Goodband, an extension swine specialist with Kansas State University, emphasizes getting weaned pigs off to a good start when they transition from a liquid diet on the sow to a dry diet in the nursery is key for future growth performance and feed efficiency.

Dr Bob Goodband-Kansas State University
First of all the nutrient fortification is going to be a lot higher in the younger pig and that's because the young pig's potential for lean growth is very very high as opposed to an older pig.

Nutrient fortification, the key ingredients, the key nutrients such as lysine levels, other amino acid, calcium and phosphorus concentrations are all very very important.

The next area we like to emphasize are some of the key ingredients that provide those nutrients.

For example in baby pig diets we talk a lot about milk proteins or lactose sources and the most common one that we use in diet formulation comes from dried whey.

We like to keep its concentration relatively high because again, if you remember, the young pigs has been drinking sow's milk which is very high in lactose and milk proteins and we want to ease that transition through the weaning process onto a diet that's also very high in lactose and milk proteins.

Dr Goodband acknowledges savings will vary but by changing their starter programmes, producers he's worked have saved around 50 cents per pig.

[Mustang Sally Farm]

Wednesday, January 25, 2012
Weekly Roberts Market Report
US - China has suspended imports of soybean oilmeal from India after finding contamination in rapeseed last year, writes Michael T. Roberts.

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

LEAN HOGS on the CME closed up on Monday on short covering and spillover from other commodities.. The FEB’12LH contract closed at $86.475/cwt; up $1.150/cwt. MAY’12LH futures closed at $96.250/cwt; up $0.800/cwt. AUG’12LH futures finished up $0.75/cwt at $96.700/cwt. Futures rallied Monday on thinking that prices have bottomed. Floor sources are optimistic about prices. Futures were supported by last week’s broad rise in wholesale pork prices. Wholesale USDA pork prices rose $1.79 during the week, including a gain of $0.87 Friday. Cash hogs were mostly steady. Monday USDA put pork carcass cutout at $85.27/cwt; down $0.37/cwt from Friday. The latest CME lean hog index for Monday, 1/23/12 was placed at $85.39; up $0.12.

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. MAR’12 futures closed at $6.200/bu; up 8.5¢/bu. The DEC’12 contract closed up 4.5¢/bu at $5.562/bu. Slower-than-expected moisture counts in South America, higher cash markets, and a weaker U.S. dollar were supportive. The larger-than-expected supply forecast last week cast a bearish tone over the market. However, most marketers and traders don’t really expect the report to hold up. Exports were neutral with USDA putting corn-inspected-for-export at 35.198 mi bu vs. estimates of 32-38 mi bu. Exports were up 5 mi bu over last week. Slow farmer sales have cash markets soaring. Farmers are holding back waiting on a return to higher prices. According to several floor sources in Chicago and a dozen merchandisers across the Corn Belt the cash market is very hot right now. Exporters are snapping up supplies to meet international demand. It might be a good idea to buy some near-to-medium term supplies before the end of the week.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The MAR’12 contract closed at $12.174/bu; up 30.5¢/bu. NOV’12 futures closed at $12.074/bu; up 23.75¢/bu. Worries over harsh weather in Argentina, brisk cash sales, and weak dollar were supportive. Exports were neutral at 35.666 mi bu vs. estimates for 33-39 mi bu. Disappointing rainfall in Argentina leaving over one-third of the corn and soybean producing area is hurting South American supply. Argentina is the world’s third largest exporter of soybeans and the largest exporter of soymeal and soyoil.



Loading Soymeal in Rosario, ArgentinaAnother international demand element factoring into higher prices is that China has suspended imports of soybean oilmeal from India after finding contamination in rapeseed last year. The dollar fell against a number of currencies, with the euro hitting a near three-week high. Several floor sources said the weaker dollar was really driving prices. A weaker dollar makes commodities priced in U.S. currency more attractive to exporters.

WHEAT futures in Chicago (CBOT) closed up on Monday. The MAR’12 contract closed at $6.196/bu; up 9.25¢/bu. JULY’12 wheat futures finished at $6.542/bu; up 10.5¢/bu. Positive momentum from last week and a weaker U.S. dollar making wheat more competitive in global markets was supportive. However, global wheat stocks are the highest in more than a decade weighing on prices. Exports were neutral with USDA putting wheat-inspected-for-export at 17.106 mi bu vs. estimates for 15-20 mi bu. Chart signals continue to indicate speculators may be interested in buying wheat futures soon. All it will take is a global trigger to indicate supply will be removed more quickly than is thought now.

[Mustang Sally Farm]

Thursday, January 26, 2012
US Hog Margins
US - Margins started 2012 off on a strong note, improving noticeably since the end of the year, writes Doug Lenhart.
 

Both nearby and deferred periods saw improvement from late December, with margins above the 90th percentile of the past five years through Q3 and back above the 80th percentile in both Q4 as well as into early 2013.

Hog prices appear to have stabilized after a steep drop during December, while feed prices have plunged following the USDA’s January crop report. USDA reported Dec. 1 corn stocks well above market expectations, reflecting the lowest Sep-Nov feed and residual usage since 1996.

Production was also revised up on a higher yield forecast, leaving projected ending stocks virtually unchanged from December. Soybean ending stocks increased 45 million bushels due to lower projected demand, with both crush and export estimates reduced from last month.

Deferred hog prices have recently moved higher, perhaps stemming from uncertainties over potential expansion plans this spring and summer. As a result, projected finishing margins in late 2012 through early 2013 have improved back above the 80th percentile, and many producers are now considering either establishing or adding to protection in these forward periods.

First Qtr ’12 Most Recent Offering of $5.88, the low was ($4.22), the high has recently been $13.87 and the five year percentile of 93.5 per cent.

Second Qtr ’12 Most Recent Offering of $13.28, the low was $2.42, the high has recently been $19.39 and the five year percentile of 92.0 per cent.

Third Qtr ’12 Most Recent Offering of $10.93, the low was $1.20, the high has been $14.07 and the five year percentile of 87.1 per cent.

The Hog Margin calculation assumes that 73 lbs of soybean meal and 4.87 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $40 per cwt for other feed and non-feed expenses. Thank you to Commodity & Ingredient Hedging, LLC (CIH) for the margin data.

[Mustang Sally Farm]

Monday, January 30, 2012
Hog Outlook: Hog Prices Ended Last Week Evenly
US - Mandatory Price Reporting (MPR) data indicates that for barrows and gilts purchased in 2011 on a carcass weight basis by non-small packers, 4.2% were negotiated purchases, 38.4% were market formula contracts (formula priced from reported hog or pork prices), 9.8% were priced off of the futures market, 15.2% were other types of contracts, 4.7% were purchased from another packer, and 27.6% were raised by the packer that slaughtered them.
 
Ron Plain
Over the 10 year history of MPR, the biggest change has been in the number of negotiated purchases (down 10.4 percentage points) and packer owned (up 10.2 percentage points). Negotiated sales may not be a viable pricing method much longer. They have declined at slightly over one percentage point per year for the last decade.

The average retail price of pork in December was $3.461 per pound, down 5 cents from the month before, but up 27.3 cents from December 2010. Pork prices have been above a year-ago for 21 consecutive months.

The average December price for 51-52% lean hogs was $62.14/cwt. That was $11.22 higher than 12 months earlier.

Calculated pork demand was up 4% in December and up 1.3% for the year, based on preliminary data.

Hog prices ended the week even with the previous Friday. The national average negotiated carcass price for direct delivered hogs on the morning report today was $82.30/cwt, up 50 cents from last Friday. The were not enough hogs sold early today for a morning price quote in either the western corn belt or Iowa-Minnesota. The eastern corn belt averaged $81.05/cwt this morning. Friday's top live hog price at Peoria was $59.50/cwt. Zumbrota, had a top of $60/cwt. The top for interior Missouri live hogs was $61.50/cwt, up 50 cents from the previous Friday.

USDA's Thursday afternoon calculated pork cutout value was $83.29/cwt, down $1.48 from the previous Thursday, the lowest since January 11, and second lowest in the last year. Loins, butts and hams were lower; bellies were higher. The national average hog price this morning was 98.8% of the pork cutout value.

Hog slaughter totaled 2.167 million head this week, down 2.4% from the week before and down 0.8% compared to the same week last year. Barrow and gilt carcass weights for the week ending January 14 averaged 206 pounds, down 1 pound from both the week before and from a year ago. Iowa-Minnesota live weights for barrows and gilts last week averaged 275.3 pounds, down 1.1 pounds from the previous week, but up 1.0 pound compared to a year earlier.

Today's close for the February lean hog futures contract, $86.67/cwt, was up $1.35 from the previous Friday. The April lean hog futures contract settled at $87.37/cwt, up 32 cents for the week. May hogs settled at $96.17/cwt. June hogs ended the week at $97.35/cwt.

[Mustang Sally Farm]

Tuesday, January 31, 2012
Pork’s Demand Indicators Holding Strong
US - It appears 2011domestic pork demand will end the year showing a gain compared to 2010. I say "it appears" because the final pieces of data – December pork exports and imports – will not be available until mid-February, writes Steve Meyer in this week's "Market Preview" featured in National Hog Farmer magazine.


My calculations for December 2010 through November 2011 show demand 1.2% higher than the same period 12 months earlier. Plus, the calculations of University of Missouri Agricultural Economist Ron Plain, who used estimated December trade figures, indicate demand will be positive for the 2011 calendar year.

That record was built with solid gains in the first half of the year and "hanging on" in the second half as burgeoning exports reduced the amount of pork available in the United States and, I believe, a softening economy slowed the pace at which retail prices could be increased. Retail prices still set a record in September at $3.56/lb. and remained near that level ($3.46/lb.) in December, but steady demand would have pushed those values even higher given larger exports and concurrent lower domestic availability/consumption.

What Lies Ahead?
Domestic US pork demand is a key determinant of the demand for live hogs since nearly 80% of our muscle meat products are sold here at home. But it is far from the only factor.

Live hog demand is also directly impacted by export demand for US pork and the demand for pork by-products, such as organ meats and skins.

Muscle cut exports in 2011, as we all know, are going to end the year with record-high levels in terms of quantity and, more important, value. Through November, the value of US pork muscle cut exports was 30.1% higher than in 2010, while volume was up “only” 22.2%. Average value per unit for January-November was $3.04/lb. compared to $2.85/lb. during the same period in 2010.

While exports of variety meats have not grown by as much as those of muscle cuts, 2011 will almost certainly be a new record for those shipments as well. Through November, variety meat shipments were up 6.2% in volume and 18.9% in value. That means the average price of US variety meats this year through November was $1.335/lb. That compares to $1.192 for the same time period in 2010.

Add those in and US hog demand has been strong indeed. Figure 1 shows the history of the hog price-pork production relationship since 1962. In spite of some short-term setbacks, the pattern is clearly a march toward higher output and higher prices, two factors which, when combined, mean higher demand. That should not be a surprise as US population grows by 0.8 to 1.0% per year and this time period represents major advances in the opening of international markets. There were simply more and more potential buyers of US pork and pork by-products both at home and abroad.


In addition, the economic well-being of most of those buyers was increasing, providing them with more money to spend on food. Significant growth in disposable incomes in the United States and its key export markets in Asia provided the wherewithal for consumers to pay more even as they bought more. The two factors are the essence of higher demand.

I have just "eye-balled" the graphics added to this scatter diagram, but the difference of the hypothesized demand relationship for the 1990s is interesting. All of the other blue arrows have roughly the same slope – save for the one for the ’90s. I believe the steady closure of packing plants and right-sizing of the packing sector during that decade left far less volume flexibility in the US packing sector and caused hog demand to get much more inelastic.

Additions to capacity have helped the situation since the dawn of the 2000s. Add in a much more carefully aligned production-processing system and I believe we have seen far fewer output surprises that have put significant negative pressure on prices in the past. The low prices observed for 2009 were partly due to higher-than-expected supplies that summer, but the primary driver was H1N1 influenza and its short-term impact on domestic demand and longer-term impact on exports.

It appears we moved to a new price-quantity relationship in 2011. Can we stay there? Absolutely – IF exports remain strong and domestic demand can get back toward the growth we saw in the first half of that year. I think both are quite possible, so I have 2012 prices very near that new blue line through the 2011 observation.

 



As published in National Hog Farmer's Weekly Preview.

[Mustang Sally Farm]

Wednesday, February 01, 2012
Weekly Roberts Market Report
US - It would be a good idea for corn producers to consider pricing a portion of the 2012 corn crop at this time, writes Michael T. Roberts.

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

LEAN HOGS on the CME finished lower on Monday. The FEB’12LH contract closed at $86.450/cwt; off $0.225/cwt and $0.25/cwt lower than last report. MAY’12LH futures closed at $96.025/cwt; up $0.150/cwt and $0.225/cwt lower than a week ago. AUG’12LH futures finished down $0.175/cwt but $0.325/cwt higher than last Monday at $97.025/cwt. Wholesale markets reflecting slack demand continued to pressure prices. Pork processors, much like beef packers continue to face dauntingly negative margins on sluggish domestic demand. Several processors interviewed last week said they plan to trim slaughter numbers again this week. USDA put Monday’s slaughter at 406,000 head, down 21,000 head from a week ago but 25,000 head over this time last year. USDA put pork carcass cutout at $83.26/cwt; down $0.03/cwt from Friday and $2.335/cwt lower than a week ago. Cash hog prices were steady-to-weak with cash prices ranging from $59-$62/cwt on a live basis. According to HedgersEdge.com, the average packer margin was placed at a negative $7.45/head based on the average buy of $62.45/cwt vs. the breakeven of $59.74/cwt. Late Monday the CME lean hog index was placed at $87.71; up $0.36 and $2.32 over last Monday.

CORN futures on the Chicago Board of Trade (CBOT) finished down on Monday. MAR’12 futures closed at $6.316/bu; down 10.0¢/bu but 11.75¢/bu over this time last week. The DEC’12 contract closed at $5.646/bu; off 6.25¢/bu but 8.5¢/bu higher than a week ago. Short covering, profit taking, a higher US dollar, improved weather in South America, and lower-than-expected exports weighed on corn prices. The dollar rose against the euro indicating a bearish signal for US grains. Crop-friendly rainfall is expected this week through all of Argentina and also Brazil. Several sources polled indicate bearish feelings that US corn prices may fall by as much as 15% by the end of the year. Much will depend upon the next key USDA expected plantings report. Exports were bearish for US corn. Late Monday USDA put corn-inspected-for-export at 22.690 mi bu vs. estimates for 29-33 mi bu. In addition, economic sanctions on Iran are holding up grain movements in the area increasing transportation costs. Iranian assets are frozen so cargoes will not be unloaded until someone agrees to pay for the grain. A recent graph by ERS shows that the US is still the world’s largest corn exporter. See below:


SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The MAR’12 contract closed at $11.852/bu; down 33.75¢/bu and 32.25¢/bu lower than a week ago. NOV’12 futures closed at $11.944/bu; down 27.75¢/bu and 13.0¢/bu off from last report. Better crop weather in South America and a stronger US dollar weighed on prices. Exports were supportive. USDA put soybeans-inspected-for-export at 41.503 mi bu vs. estimates for 24-32 mi bu. One interesting development in soybean exports from Argentina allowed increased exports from that country. Port authorities in Argentina’s Rosario grains hub dislodged a vessel that ran aground earlier this month, and all delayed ships have been able to get going with their grain cargoes. This will most likely create pressure on US exports as importers meet needs with cheaper soybeans. Argentina is one of the world’s top suppliers of soybeans and soybean by-products. It might be a good idea to price a good portion of the 2012 crop at this time.

WHEAT futures in Chicago (CBOT) were down on Monday. The MAR’12 contract closed at $6.446/bu; down 2.5¢/bu but 25.0¢/bu higher than last report. JULY’12 wheat futures finished at $6.712/bu; off 3.5¢/bu but 17¢/bu lower than last week at this time. Prices were pressured on news from the USDA attaché in Australia report that wheat production in that country continues to increase. In the past the Australian wheat crop has been damaged by wet weather reducing wheat acceptable for export. Year-on-year production of wheat, barley, and sorghum has yielded back-to-back record wheat crops and are projected to support another banner year. See graph below:


Production declines in Europe on bitter cold temperatures are price supportive. Exports were somewhat supportive with USDA placing wheat-inspected-for-export at 18.655 mi bu vs. estimates for 15-19 mi bu. Wheat producers should not feel pressured to price the 2012 wheat crop at this time.

[Mustang Sally Farm]

Thursday, February 02, 2012
US Companies Hit Back at Cruelty Allegations
US - US pig meat processor Seaboard Foodsha hit back at allegations contained a Humane Society of the United States video alleging abuse of animals.


The Humane Society of the United States released undercover videos taken at Oklahoma pig breeding facilities owned by two leading US pork producers and filed legal complaints with the US Securities and Exchange and Federal Trade Commission alleging false and misleading statements about animal care by one of the producers.

The videos, shot in late 2011, were taken at two Goodwell, Oklahoma, pig breeding facilities—one owned by Seaboard Foods and the other by Prestage Farms — and HSUS claims they show animals suffering inside cramped gestation crates and, in some cases, at the hands of abusive employees.

The society also claims there are pictures of lame pigs, pigs with gross abscesses, torn ears and noses, and ripped genitals and piglets sickened by "greasy pig" disease that were not seen by veterinarians.

A statement from Seaboard Foods says: "We’ve reviewed documented employee actions alleging abuse and listened to the recent discussions questioning US industry practices of sow gestation, swine tail cutting (or docking) and swine castration, and strongly dispute any allegations of abuse.

"We are pleased that our employees are following proper industry-supported protocols and procedures. In direct response to the recently released video by the Humane Society of the United States (HSUS), Dr Temple Grandin, Ph.D., who also is quoted in the video, stated that 'there was no bad behavior by people' in the operations depicted at Seaboard Foods.

"We are committed to the proper and humane treatment of animals, and we believe animals can and should be raised, transported and processed using procedures that are safe and free from cruelty and neglect. We are proud of our employees for exemplifying best practices in their day to day work and truly being leaders within the industry.

"Our farm managers and farm sites are PQA Plus certified with specific requirements for proper animal care. Moreover, our guidelines and protocols are audited independently by Farm Animal Care Training and Auditing, LLC, (FACTA), a company led by Chief Executive and Scientific Officer John McGlone, Ph.D. and professor at the Pork Industry Institute at Texas Tech University, who is supported by a group of credentialed auditors and educators.

"It is important to recognise animal welfare programmes, including housing for gestating sows, must be based on sound science while also seeking a balance with societal concerns. Seaboard Foods’ integrated system uses both stalls and group pens to house gestating sows. Animal welfare experts and professional groups have found no one method for housing gestating sows that is clearly better than the other when managed properly.

"As part of our ongoing evaluation of best practices, we are conducting research to determine the best management practices for alternative sow housing practices in our system. Furthermore, swine tail docking and castration are essential industry practices for the health and well-being of food animals as stated by the American Veterinary Medical Association.

"Seaboard Foods employees uphold best industry practices and our company will continue to act in ways that provide the most humane treatment for our animals. All decisions stem from this commitment."

[Mustang Sally Farm]

Wednesday, February 01, 2012
Pork Commentary: Iowa Pork Congress Report
US - The North American Swine Industry is mostly situated where grain and soybeans are grown. The high price of these crop commodities has increased farm land values in North America in there grain and oilseed growing areas, writes Jim Long.
 

Jim Long is President &
CEO of Genesus Genetics.
It’s been estimated that in 2011 US prime farmland has increased in value 25 – 30%. E.g. Iowa $6,500 an acre.

The USDA estimated that 236 million acres of the following crops were harvested in 2011. This included 92.3 million acres of corn, 75.2 million acres of soybeans, all wheat 56.4 million acres, and cotton 13.7 million acres. Let’s assume an average appreciation in the last year of $1000 per acre for the 236 million acres. This is our estimate, but we believe it is reasonable. Some land increased over $1000 per acre in market value and some less. If we use the $1000 per acre figure, it would calculate to a $236 billion dollar appreciation in US farm land value in one year! It is not cash but it is creating wealth, equity, and borrowing power.

As we said earlier, the USA and the Canadian Swine Industry is situated primarily where there grain and oil seeds are grown (Canada has about 60 million acres of crops if we use $500 per acre gain, this year $30 billion wealth appreciation in farmland).

We believe the wealth creation in farmland value is a factor buffering the low margins that the swine industry has been experiencing. It’s one of the reasons that despite hog to corn ratios below 15 to 1 for several months that we have not seen breeding herd liquidation. On the flip side the land value increase is not as prevalent for the poultry and cattle industries. Poultry is mostly raised by integrators who own little farmland. Chickens are also mostly in less prime crop areas. The huge losses of up to $100 million per week in the chicken industry have not been softened by farmland appreciation. Huge cattle feedlots have a similar scenario, being primarily outside the prime growing area.

Bottom Line: Increased US land value in cropland of over $200 billion in the last year is helping underpin the US swine industry. Going forward we expect this wealth creation to stimulate some sow expansion. Land values increasing will at some point top out and probably retreat. We were farming in the early 80s when farmland prices exploded higher they then retracted. Many farmers were hurt. The most dangerous words in the English language continue to be 'This time it will be different!'

Markets
We have had our holiday season; holidays never seem to be good for hog prices as packers with fewer days to work have less pressure to bid. At the end of last week 53 – 54% National Daily Base Lean Hogs were 82.57 cents per pound. At current feed prices no one can make money at that price.

Going forward we expect Cash Hog prices to get stronger as hog marketing’s decline seasonally. Summer month futures are in the mid 90’s and we expect they will recover to a $1.00 plus lean per pound. We believe this because of several factors: A real good chance of less beef and poultry tonnage in the coming months, as total US per capita meat supply decline. Continued strong if not record pork exports. While at the same time not a significant change in hog supply relative to the various demand factors. We believe 2012 hog prices will be strong – the wild card is what will feed prices do?

"As soon as there is life there is danger." - Ralph Waldo Emerson.


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Monday, February 06, 2012
Hog Prices End the Week on a Steady Note
US - Iowa State University calculations estimate the average cost of production in 2011 for farrow to finish operations at a record 65 cents per pound of live weight, writes Ron Plain.
 
Ron Plain
That is 8 cents higher than the previous record set in 2008. The average profit last year as calculated by Shane Ellis, ISU ag economist, was $4.92 per head. The typical hog producer lost money in 2008 and 2009 and made money in 2010 and 2011. Over the last 10 years, on average the first three and last three months of the year were unprofitable; while the middle six months, April through September, were usually profitable.

Today’s corn futures close implies a 2012 average corn price around $6.25/bu which should yield a cost of production close to 67 cents per live pound. Today’s lean hog futures close implies an average live hog price of 67.5 cents per pound. That’s positive, but not by much.

Hog prices ended the week steady to $1 lower than the previous Friday. The national average negotiated carcass price for direct delivered hogs on the morning report today was $81.50/cwt, down 80 cents from last Friday. The western corn belt averaged $85.14 this morning and Iowa-Minnesota had a morning average of $86.23/cwt. The eastern corn belt averaged $80.81/cwt this morning. The west-east price spread of $4.33 is unusually large. Friday’s top live hog price at Peoria was $59/cwt. Zumbrota, had a top of $60/cwt. The top for interior Missouri live hogs was $60.75/cwt, down 75 cents from the previous Friday.

USDA’s Thursday afternoon calculated pork cutout value was $84.95/cwt, up $1.66 from the previous Thursday. Loins, bellies and hams were higher; butts were lower. The Iowa-Minnesota average hog price this morning was 101.5 per cent of the pork cutout value. A carcass hog price at 92 per cent of cutout is normal.

Hog slaughter totaled 2.137 million head this week, down 1.4 per cent from the week before, but up 3.8 per cent compared to the same week last year which was light because of heavy snow in the midwest. Barrow and gilt carcass weights for the week ending January 21 averaged 206 pounds, the same as both the week before and a year ago. Iowa-Minnesota live weights for barrows and gilts last week averaged 275.5 pounds, up 0.2 pounds from the previous week and up 2.3 pound compared to a year earlier.

Today’s close for the February lean hog futures contract, $87.52/cwt, was up 85 cents from the previous Friday. The April lean hog futures contract settled at $88.92/cwt, up $1.55 for the week. May hogs settled at $97.25/cwt. June hogs ended the week at $98.10/cwt.

The March corn futures contract ended the week at $6.445/bu, up 3 cents for the week. May corn settled at $6.5075/bu.

The March soybean meal futures contract ended the week at $328.60 per ton. May meal settled at $330.20.

[Mustang Sally Farm]

Friday, February 10, 2012
US Pork Export Forecast is Unchanged
US - Pork production is raised as firstquarter slaughter and first-half carcass weights are expected to be higher than forecast last month.


The pork export forecast is unchanged from last month, according to the World Agricultural Supply and Demand Estimates.

The 2012 forecast of total red meat and poultry production is lowered from last month as reduced broiler meat production is expected to more than offset higher forecast beef, pork, and turkey production.

Beef and pork trade estimates for 2011 are unchanged but poultry exports are raised due to stronger-than-expected shipments in November.

[Mustang Sally Farm]

Tuesday, February 14, 2012
New Pork Export Records Set in 2011
US - Perhaps the worst-kept secret in recent memory – US pork and pork variety meat exports set new records in 2011. New records were actually reached in November, but it’s the magnitude of the record that is impressive and deserving of further attention, writes Steve Meyer in his "Market Preview" featured in National Hog Farmer magazine.


Figure 1 shows annual exports of pork muscle cuts to the top seven destinations in 2011, plus all "other" countries. Japan and Mexico are still the clear leaders among our markets for pork muscle cuts, taking 477,678 metric tons (526,401 tons) and 379,091 metric tons (417,758 tons) of pork, respectively, for 2011. Those figures were 18.5 per cent higher and 1.3 per cent lower, respectively, than were 2010 shipments to these two markets.


Shipments to Japan were driven by a record-strong yen that made US product more affordable to Japanese processors and consumers as well as the increased needs for product that resulted from the earthquake and tsunami last spring.

Shipments to Mexico were hindered during the second half of the year by a lower-valued peso that increased the cost of US pork to Mexican processors and consumers. The peso was roughly 16 per cent less valuable relative to the US dollar at the end of 2011 than it was the week of 29 April 2011. It has regained about 7 per cent of that value since the beginning of the year.

While business with our historically largest markets was mixed, the key driver of the record year was another surge in shipments to China/Hong Kong. Pork muscle cut exports grew 134 per cent over their 2010 level to finish the year at 262,753 metric tons (289,554 tons). That figure is just short of the 269,835 metric tons (297,358 tons) that China/Hong Kong purchased in 2008.

The question of whether China/Hong Kong is a dependable market remains, however. While the 2011 surge was not driven by a once-in-a-lifetime occurrence like the Olympic games, it was pushed by an unprecedented surge in Chinese food prices in general and pork prices in particular. Those prices were fueled by continuing disease problems in China’s hog sector as well as further increases in consumer buying power. Neither situation is likely to change soon and certainly will not disappear as quickly as did the Olympics. I think this increase may have some staying power, though I would be surprised by a complete repeat of these purchase levels in 2012.

This export surge was not "bought" with lower prices, either. The total value of pork muscle cut exports in 2011 reached $5.321 billion, 30.4 per cent higher than in 2010 and 30.1 per cent higher than the previous record set in 2008. Japan is the clear leader in export value at over $1.9 billion. Mexico ($815 million) and Canada ($712 million) rank second and third.

The average value of a ton of US pork muscle cuts hit a record $3,034.03 last year, easily surpassing the previous record of $2,841.26 set in 2010. Last year’s average value was over 16 per cent higher than the average value in 2008 when the last tonnage record was set. Higher volume and higher prices mean higher demand!

For pork variety meats, the race for the top has only two contenders: China/Hong Kong and Mexico (Figure 2). The two leaders accounted for over 75 per cent of our tonnage and 74 per cent of our value last year. China/Hong Kong was the largest market for our variety meats for the second year in a row with shipments growing by 25.5 per cent last year to exceed over 205,000 metric tons (225,910 tons). The value of shipments sent to China increased by 48 per cent. Like muscle cut exports, variety meat shipments to Mexico fell slightly (2.1 per cent) in 2011, but the value of products sent south increased by 7.7 per cent.


I have long been on record as saying that the variety meat sector is where China will have its greatest impact on the US hog market. Consider that, even with this record, we shipped only 0.35 lb. of variety meats to China for each of its 1.3 billion people. I know Chinese cuisine doesn’t include much meat, but that is a very small amount. While the amount may not grow much, its value could increase dramatically over the next few years.

The bottom line is that muscle meat and variety meat exports accounted for $53.70 of value for every hog slaughtered in the US last year. Throw in hog sausage casings and that value rises to $55.10/head, nearly $14/head more than the comparable figure in 2008.

Can this continue?
It darn sure better continue since our industry is geared to serve export markets. When stated on a carcass weight basis, we shipped 22.7 per cent of all carcass weight pork production overseas last year. US Meat Export Federation (USMEF) estimates that when you include variety meats and casings, that number rises to 27.5 per cent of total muscle cuts, variety meats and casings. Absorbing those quantities or even a significant fraction of them in the US market would drive prices significantly lower. We must continue our market access and foreign marketing efforts and do everything necessary to prevent export disruptions.

 



As published in National Hog Farmer's Weekly Preview.

[Mustang Sally Farm]

Monday, February 13, 2012
Overview of This Week’s Pig Industry News
ANALYSIS – US domestic pork consumption will drive 2012 growth in the industry, according to the latest forecast from a market analyst. He put pig meat output up 1.5 per cent this year, and sees higher profitability than 2011, with China as the key export market. Also in the news, writes senior editor, Jackie Linden, are allegations of welfare abuses in the US and the UK and China is to improve food safety by focussing on small and medium-sized pig slaughterhouses.

Speaking at the Allendale Ag Leaders Outlook Conference last month, Rich Nelson, Allendale director of research, said that the key driver for the 2012 US meat industry is the US consumer.

Expectations for meat indicate pork will see a 1.5 per cent increase, he said. Based on USDA expectations, beef will drop by 6 per cent. Again noting USDA numbers, chicken, pork's main competitor, will be down four per cent this year.

Total meat consumption will be down three per cent as a result of these drops in production, in 2012, the US will offer its own consumers the lowest amount of meat since 1984. Mr Nelson says this will create a US meat deficit.

In terms of the potential for US pork exports, China is a key market, he said. Traditional customers like Japan and South Korea will grow, but while China has, in the past, supplied most of their own pork, its five per cent growth expected over the next four years could require more pork than they can produce.

Five years ago, 65 per cent of US exports went to three countries - Japan, Mexico and Canada. And today, 58 per cent of US exports go to China, Japan and South Korea.

Following two years of profit in the US pig industry and another good year forecast, Mr Nelson said: “Expansion is the driver to watch.

“For 2012, we'll have more pork produced,” he said.

If a recent USDA survey was correct, expectations call for a moderate increase the first half of the year, and the second half of the year shows almost the same type of numbers.

He added that a 1.5 per cent increase in production is outlined for 2012 but much of this increase will be pulled for export. Brazil, a serious pork producer and a serious competitor to the US, is expected to see a 2.1 per cent increase in production, while EU output is expected to be down.

China has vowed to eliminate sub-standard pork processing in the country within the next few months as part of a campaign to ensure food is safe, officials have said.

“Some small and medium-sized slaughterhouses and processors that have the proper authorisation now fail to meet the standards for meat processing, and that has raised great potential risks for the country's meat supply,” announced Jiang Zengwei, deputy minister of commerce, last week. The main goals are to prevent water-injected meat and meat from sick animals or other substandard products from reaching the market, he said.

In the UK over the weekend, an animal welfare group has released video footage and photographs that appear to show animal abuse at a farm in Norfolk. The group, Animal Equality, embraces veganism and used undercover methods to obtain their evidence. However, if their evidence is substantiated, criminal proceedings may follow. Industry bodies and farmers must be seen to condemn cruelty by animal welfarists and the general public.

The Humane Society of the United States (HSUS) has turned its attention to a US pork company over welfare issues. HSUS is alleging false and misleading statements being made by Seaboard Foods, the nation's third-largest pork producer and a supplier to Walmart, in response to a recent undercover investigation video of one of the company's Oklahoma pig breeding facilities.


Jackie Linden, Senior Editor

[Mustang Sally Farm]

Tuesday, February 14, 2012
Will McDonald's Phase Out of Stalls Have a Global Impact?
ANALYSIS - Fast food chain McDonald's is to require its US pig meat suppliers to phase out gestation stalls and adopt more welfare friendly methods of production, writes editor in Chief, Chris Harris.

Gestation stalls were removed from pig production systems in the UK a decade ago and by the end of this year European legislation will see them phased out across the EU.

The move in Europe has caused some concern among pig producers, many of whom, despite having had a decade to prepare for the new regulations, are ill-prepared.

Recently Spanish pig farmers expressed their fears over the move and estimated that it would cost them about €250-€300 per animal producing a total investment of more than €700 million to make the changes.

The move by McDonalds in the US has produced some positive responses from the industry and animal welfare groups and activists.

"McDonald's believes gestation stalls are not a sustainable production system for the future," said Dan Gorsky, senior vice president of McDonald's North America Supply Chain Management.

"There are alternatives that we think are better for the welfare of sows.

"McDonald's wants to see the end of sow confinement in gestation stalls in our supply chain. We are beginning an assessment with our US suppliers to determine how to build on the work already underway to reach that goal. In May, after receiving our suppliers' plans, we'll share results from the assessment and our next steps."

Animal welfare expert and renowned scientist Dr Temple Grandin said: "Moving from gestation stalls to better alternatives will improve the welfare of sows and I'm pleased to see McDonald's working with its suppliers toward that end.

"It takes a thorough plan to address the training of animal handlers, proper feeding systems, and the significant financial investment and logistics involved with such a big change. I'm optimistic about this announcement."

The move has also been backed by the Humane Society of the US.

"The HSUS has been a long-time advocate for ending the use of gestation crates, and McDonald's announcement is important and promising," said Wayne Pacelle, The HSUS' president and CEO.

"All animals deserve humane treatment, including farm animals, and it's just wrong to immobilise animals for their whole lives in crates barely larger than their bodies."

The American Humane Association also commended McDonald's proactive position to require their pork supply chain to be gestation crate-free.

"This leadership on the part of McDonald's will not only advance the welfare of millions of animals but will most likely encourage others food service providers and retailers to follow suit," said American Humane Association President & CEO Dr Robin Ganzert.

McDonald's said that already a number of its suppliers including Cargill and Smithfield Foods had been making significant progress in adopting commercially viable alternatives.

However, there has been a more muted response from the US pig producers.

A statement from the National Pork Board said that the move had been for commercial interests and that there are several systems including the use of gestation stall that have welfare friendly aspects.

"The National Pork Board recognises that food companies, including McDonald's, make decisions in the best interests of their businesses," the National Pork Board said.

"At the same time, the National Pork Board maintains the position, supported by the American Veterinary Medicine Association and the American Association of Swine Veterinarians, that there are numerous ways, including sow gestation stalls, to provide proper care for sows.

"Each housing system, including gestation stalls, open pens, free-access stalls and pastures, has welfare advantages and disadvantages that must be considered by an individual farmer.

"Regardless of the type of system used, what really matters is the individual care given to each pig - a mainstay of our industry's Pork Quality Assurance Plus programme.

"The National Pork Board looks forward to sharing the results of peer-reviewed research it has conducted in the areas of animal care and food safety as McDonald's begins implementing its decision."

McDonald's can expect resistance from some parts of the pig production sector and there could be a struggle because of the large investment phasing out of gestation stall will entail.

If other leading end users in the food service and retail sectors follow suit, then welfare conditions and production practices in the US will be forced to change, but at a cost to the industry, because the cost of new systems is unlikely to be allowed to be passed on to the consumer.

The move in the US following the developments and experiences in Europe also beg the question what will happen in other countries around the world.

Welfare issues are already high one the agenda in Australia and New Zealand.

In New Zealand, sow stalls will be banned by the end of 2015 despite the $20 million cost to pig farmers to change their housing and in Australia, In November 2010, Australian Pork Ltd delegates voted overwhelmingly to pursue the voluntary phase-out of gestation stalls by 2017.

However, there is, at present, no similar pressure to change systems in the world's largest pig producing country - China.

As McDonald's also has a significant presence in China and other Asian countries, the question is raised whether there will be a similar insistence on changes to production methods in these countries as well in the future.


Chris Harris, Editor-in-Chief