American Hog News USDA

[Mustang Sally Farm]

Wednesday, February 15, 2012
CME: McDonald’s Causes Stir over Sow Stall Plans
US - Monday’s announcement by McDonald’s Corporation that it would ask its suppliers to outline their plans for to phase out the use of sow gestation stalls was all the buzz in the agricultural media yesterday, write Steve Meyer and Len Steiner.


The move by the nation’s larges quick serve restaurant operator is certainly the most dramatic move against a pork industry production practice — and perhaps any on-farm livestock production practice — to date . But many questions remain regarding the decision’s impact.

Gestation stalls are individual enclosures usually measuring 2 feet by 7 feet in which sows are housed during the breeding and gestation (pregnancy) phases of their reproductive cycles. The stalls allow a limited amount of mobility from front to back but do not allow the animal to turn around or to have direct contact with animals except the ones to either side. Automated feed systems drop specified amounts of feed to the animals at prescribed times. Each stall has access to fresh water from either a trough at the front or a nipple type waterer which the animal bites to release water into its mouth. Sows spend 15 of a roughly 18-week reproductive cycle in gestation stalls. The other 3 weeks of the reproductive cycle are spent in a farrowing stall, an individual enclosure about the same size as the gestation stall but designed to allow piglets to move under the stall’s sides to get away from the sow when she lays down, preventing crushing. Each farrowing stall has an area for piglets that is about 1 foot by 7 feet on each side of the sow. The area has supplemental heat to keep pigs warm since newborn pigs cannot regulate their body temperatures well at all.

The McDonald’s announcement deals only with gestation stalls. There is little opposition to farrowing stalls of which we are aware. While confining a sow for three weeks may not be ideal in some people’s minds, the welfare of a 3-pound baby pig that is suffocated by a 500-pound sow is not particularly high, making this piece of equipment far more acceptable, we think, even to animal welfarists. The use of gestation stalls began in earnest in the 1980s.

They were one of three sow confinement practices that really began in Europe and then spread to the U.S. The first two, girth tethers and neck tethers, were less expensive than were stalls but were almost completely abandoned in the U.S. in the ‘90s due to both practicality (sows sometimes slipped out of their tether harnesses, some harnesses caused skin lesions, etc.) and welfare concerns.

The two primary benefits of gestation stalls are:

They remove the social stress of group-housed sows. Pigs are social animals and will always establish a hierarchy or pecking order. That process is not pretty in group-housed sows as there is often serious fighting when groups are formed and intermittent fighting at all times as the “order” is enforced. That fighting and stress leads to injuries such as cuts, scratches, torn ears and, in some cases, broken bones. These are prevented by stalls.

They allow sows to be managed as individuals. Thin sows can be given more feed without that extra feed being stolen by a larger boss sow. Heavy sows can be fed less to maintain body condition more conducive to productivity and longevity. Health challenges are easier to observe and treat.

It is no coincidence that the litters/sow portion (red bars) in the sow productivity chart above were positive and significantly so as more and more U.S. sows were moved stalls beginning in the 1990s. Stalls were not the only factor in this improvement as artificial insemination, more accurate pregnancy detection and other practices all played a role. But indoor-housed, stalled sows were a major driver.

All systems have trade-offs. The obvious negative one for sow stalls is that sows are denied many of their natural behaviors. As we noted above, some of those behaviors can be destructive. But they are natural and that seems to be the primary concern of groups like the Humane Society of the United States. It now seems to be the primary concern of McDonald’s as well.

Can pork producers meet these demands? Yes. Will there be a cost? Yes. There are two viable alternatives to stalls: smallgroups of, generally, 6-12 sows and large groups of as many as 100 sows. Both allow sows slightly more individual space and the freedom to turn around and interact with other animals. Small-group systems usually use a feed delivery system that meters feed to individual feeding stations at a rate that the sow can eat it immediately thus providing no loss to a weaker, more timid sow and no gain to a boss sow. Large-group systems usually use electronic feeding stations which read ear tags and allow sows only so much feed during a specific time period thus regulating body condition. Productivity levels close to those of stall systems can be achieved.

The tradeoffs are more sow injuries, higher feed costs (mobility takes energy), higher labor costs, and very likely more injuries to workers. Those will not be free and, in the long run, consumers pay all costs. That last one always seems hard to remember.

[Mustang Sally Farm]

Thursday, February 16, 2012
2011 Pork Imports & Exports Take Opposite Turns
US - US pork exports were record high in 2011, driven by strong shipments to Asia. Imports, on the other hand, were lower than the previous year, and the decline is expected to continue in 2012.


In 2011, China was the third largest buyer of pork. Shipments to China pushed the US 2011 export total into never before seen territory. 2012 exports are forecast to be about the same as last year. Total exports for 2011 were 23 per cent above totals in 2010. The ten largest foreign destinations for US pork last year in descending order were Japan, Mexico, China, Canada, South Korea, Russia, Australia, Hong Kong, Philippines and Honduras.

As usual, Japan occupied the number one spot as buyer of US pork in 2011. According to Japanese data, total imports of pork increased by 5 per cent. While purchases from the US's major competitors - Canada and Denmark - dropped, imports from the US rose.

Mexico too held it's usual spot as the number two US pork buyer. However, compared to 2010, the country's purchases of US were relatively flat in 2011.

US imports in 2011 were 7 per cent lower than a year earlier, and are expected to continue to decline by roughly 2 per cent in 2012. Lower exchange rate values throughout 2011 made pork from Canada less competitively priced than in the past. According to the USDA's Livestock, Dairy and Poultry Outlook, total 2012 imports are expected to be almost 2 percent lower than last year.

USDA expects 2012 pork imports and exports to remain unchanged in February.

[Mustang Sally Farm]

Monday, February 20, 2012
Positives Seen in Chinese Leaders’ Visit to Iowa
IOWA, US - When leaders of the world's largest agricultural products importer and the largest agricultural products exporter meet in constructive dialogue, only good outcomes are to be expected.
 

That's the assessment of US Meat Export Federation (USMEF) President and CEO Philip Seng after his participation in this week’s US/China High-Level Agricultural Symposium in Des Moines, Iowa. It was part of a five-day US tour by Chinese Vice President President Xi Jinping, who is positioned to be the next leader of China.

The symposium was built around the themes of food safety, food security and sustainability. At the conclusion, Chinese and US representatives signed a five-year cooperative agreement that focuses on those three food-related areas in addition to biotechnology and transparency.

"So often, meetings of this nature are conducted to resolve disputes," said Mr Seng. "The tone of this meeting was forward-looking and underscores a spirit of cooperation. The atmosphere was favorable to the desired outcome of partnership and collaboration."

Mr Seng noted that while there are trade issues yet to be resolved between the United States and China, this meeting appeared to be a different approach than the US has taken with other trading partners.

"This was a constructive exchange that other countries may be viewing with circumspection and, possibly, a tinge of envy," said Mr Seng.

According to the US Department of Agriculture (USDA), China became the top market for US agricultural goods last year, purchasing $20 billion worth of US agricultural exports. Those exports supported more than 160,000 American jobs last year across a variety of business sectors, according to the USDA.

In 2011, the China/Hong Kong region was the No. 3 market for US pork exports, purchasing 483,323 metric tons (more than 1 billion pounds) valued at $910 million, increases of 64 per cent in volume and 96 per cent in value over the prior year.

China is not currently open to US beef exports, but analysts estimate that in the first full year of exports, China likely would purchase at least $200 million of American beef.

"China has 23 per cent of the world’s population but only 9 per cent of the arable land," said Mr Seng. "It will always need to import food, and American agriculture is positioned to truly establish a relationship based on trust, transparency and mutual benefit between the two countries."

[Mustang Sally Farm]

Tuesday, February 28, 2012
Pork Commentary: USDA Crop Protection Good News
US - The USDA last week released a 2012/2013 crop year projection for a record 14.27 billion bushels of corn. The USDA is predicting farmers will receive $5.00 per bushel in the 2012/2013 crop year, writes Jim Long.

Jim Long is President &
CEO of Genesus Genetics.
The USDA is aggressive in projecting 94 million corn acres to be planted and a yield of 164 bushels per acre. The 14.27 billion bushels projected is 1.2 billion bushels more than the previous record in 2009.

Demand for corn will be 13.47 billion bushels with feed usage and exports up while corn for ethanol is expected to decline.

Our observations from travelling in other countries are that corn – wheat, etc... plantings and yields will push higher as historically high grain – oilseed prices stimulate production.

If the USDA is correct at $5.00 a bushel 2012/2013 it’s about $1.00 a bushel lower than in 2011. A $1.00 per bushel decline will drop the cost of production $10.00 per hog. That is definitely increasing hog margin potential.

We have been at this game long enough to know that crop projections in February are far from crop in the bin. Weather is the most obvious wildcard between now and November. We believe the USDA is correct on the aggressive nature of planting intentions. High grain prices and strong capital position of farmers will lead farmers to plant not only more acres but have the financial wherewithal to push for higher yields. The old saying "surest cure for high prices is high prices" is coming into play.

Corn Ethanol
The USDA is projecting less corn for ethanol in the coming crop year. It is interesting that reports show a loss of 25 cents per gallon for corn ethanol currently. The major subsidies that back stopped ethanol ended January 1st. What does all of it mean? We don’t know but it appears the Golden Age of the Corn Ethanol industry is over, doubt if new corn ethanol plants will be built, while some small ones might not survive without getting free money from US taxpayers.

Hog Markets
Summer lean hog futures reached over $1.00 a pound last week. These are record highs for this market year. The market is bullish. US feeder pig prices continue to be strong with 40 pound feeders reaching $95.00 (average $85.46).

The latest USA – Canada combined swine industry inventory was released last week.

United States – Canada
1,000 head
  2007 2008 2009 2010 2011
Kept for breeding 7745 7457 7182 7090 7115
Market 74242 71872 69540 69730 70836
Pig Crop 37644 36521 35455 35619 36437

Production of swine is increasing with the breeding herd holding steady from a year ago but productivity gains are increasing total production. In 2007 there were 74.242 million market hogs in inventory, this year there is 70.836 million or over 3 million fewer hogs.

From 2007 to 2012 the USA – Canada people population has increased a combined 14 million people. Assuming 45 pounds of pork per capita consumption and cowboy math of 4 people consume on average the equivalent of one market hog per year. Our back of envelope calculation tells us the 14 million increase of people since 2007 requires 3.5 million hogs per year to meet their pork needs. That is an increase of demand for sure!

As we go forward maintenance and/or increase of pork consumption while the people population grows continually increases the need for more pork production.

The world population works in much the same manner. With an estimated 7 billion people currently the world’s growth is at 1.14 per cent per year or about 80 million more people a year. Many will eat pork especially if they have money. More people – more customers. The global demand for food and pork is growing.

Europe
One of North America’s biggest competitors in the world pork export markets is Europe. The end of year inventories from several European countries is now coming in. The results are striking, high feed prices leading to significant financial losses has lead to major liquidation.

By Country - % year over year decline
  SOWS TOTAL PIGS
CZECH REPUBLIC -19% -19.4%
DENMARK -3.79% 0.4%
GERMANY -1.8% 1.9%
SPAIN -0.2% -0.3%
FRANCE -2.5% 0.2%
ITALY -8.0% 0.3%
NETHERLANDS -0.7% -0.8%
POLAND -15.3% -11.6%
SLOVAKIA -4.7% -15.6%


Europe Total (not all countries reporting)
TOTAL SOWS -4.7%
TOTAL PIGS -2.4%

The end result looks like the European swine inventory will be lower by about 3 million head, when the dust settles and all countries report. This will be supportive for European hog prices and for North American producers the lower volume of European pork production means less pork on global markets. The scenario is price supportive.


Author: Jim Long, President & CEO, Genesus Genetics 

[Mustang Sally Farm]

Friday, March 02, 2012
CME: Hog Futures Higher Despite Weak Prices
US - Lean hog futures closed higher on Thursday despite data showing weaker wholesale meat prices and negative meat margins for packers, write Steve Meyer and Len Steiner.


The pork cutout on Thursday was quoted at $84.86/cwt, $5.53/cwt or 6% lower than a year ago. Lean hog values (IA/MN) closed last night at $87.39/ cwt, $6.33/cwt or 8% above year ago levels. The pork meat margin has been negative in the first few weeks of this year (bottom chart) yet packers have been aggressively chasing hogs. The fact that wholesale pork prices are having trouble keeping pace with the price of hogs should eventually limit the upside in hog values. High pork by-product values and a weaker US dollar tend to benefit packers and they do not show up in the meat margin calculations. It is also possible that packers are willing to give up some short term profits in order to keep market share and be able to fill orders. In the long term, negative meat margins are not sustainable and the market will have to correct. At this time, futures have been buoyed by the fact that packers continue to bid up hog values even with weaker wholesale prices and the expectation is for hogs to continue to climb into the spring and summer as supplies seasonally decline.

Looking at wholesale prices in more detail, we see a number of areas that should be cause for concern. In our view the dismal performance of ham values so far this year has been one of the primary contributors to the weakness in overall cutout values. The ham primal cutout closed last night at $65.41/ cwt. (remember this is the primal value not specific ham cuts) was down $9.6/cwt or 13% from a year ago. The decline in the ham component of the cutout accounted for almost half of the overall drop in cutout values compared to a year ago. The decline in picnics has had a similar impact. The picnic primal has been steadily declining so far this year and the latest close pegged it at $53.87/cwt, $16/cwt or 23% lower than a year ago and accounting for almost $2/cwt of the decline in the cutout. Also negative in the last week has been the sudden reversal in the value of pork bellies. The belly primal value was trending higher in January and by mid February was as high as $125/ cwt. Since then, the belly cutout has lost about $13/cwt and it currently is down 12% from year ago levels. Ham values could get some residual support from last minute purchases ahead of Easter. However, we think that the peak for Easter purchases is already behind us. Belly demand should continue to improve on seasonal demand and also preparations for summer business. At current levels bellies look attractive once again for freezer inventories.

Going forward, it will be important to keep an eye on wholesale meat values in general and specific items, such as hams, bellies and picnics. In recent months, Steiner has worked with the National Pork Board to create a dashboard tracking prices of pork cuts.

[Mustang Sally Farm]

Monday, March 05, 2012
Large Herds Account for 87 Per Cent of Inventory
US - Hog operations with 2,000 or more head account for 87 per cent of the inventory, according to the USDA's Farms, Land in Farms, and Livestock Operations 2011.


The number of operations with hogs totaled 69,100 for 2011, unchanged from 2010.

[Mustang Sally Farm]

Wednesday, March 07, 2012
CME: Hog Producers Looking at Profitable Year
US - The profit pictures for the cattle feeding and farrow-to-finish pig production sectors for this year could hardly be more different, write Steve Meyer and Len Steiner.


Cattle feeders — at least when one considers full yardage and feed markup costs — are looking at severe losses this year while hog producers are looking at their third profitable year in a row. The chart below shows projected breakeven costs through July courtesy of the Livestock Marketing Information Center. As we mentioned, these estimates include full yardage and feed markup costs and thus over-state the cash cost situation of yardowned cattle. But they are still an accurate portrayal of long-run costs and they imply some serious deficits for cattle this summer, especially with the $4-$5 selloff we have seen in recent sessions.

The column chart below paints a very different picture for hog producers. Continued strength in Lean Hogs futures and moderating costs have left expected returns near $20 per head this summer. We say “moderating” costs because they are not expected to be significantly lower for the year than they were in 2011. Our estimates, using closing corn and soybean meal futures prices for Tuesday, are for Iowa farrow-to-finish operations to see breakeven costs of $86.06/cwt carcass in 2012. That is just $0.57/cwt lower than last year. Similar costs and, at least according to Lean Hogs futures prices, slightly higher hog prices should provide profits roughly $2.40 per head higher than in 2011. Our current estimate is for average profits of $7.35/head this year.

Why the difference in performance — especially given record -high fed cattle prices? The answer is found in the intermediary feeder cattle market. Cattle feeders buy virtually all of the animals they feed where farrow-to-finish producers simply transfer pigs internally. The need to buy feeder animals leads to behavior that frequently torpedoes cattle feeding profits as yards chase feeder cattle to the point of bidding away all profits. That is true in spades this year as feeder cattle supplies are very tight. Oklahoma City 600-700 pound feeder steers topped $170/cwt the week of February 24 and remained at $169.61 last week. 400-500 steer calves have eclipsed the $200/cwt. mark the past two weeks in OKC.

Of course, not every hog is produced in a farrow-to-finish enterprise. A substantial number of pigs are traded each week as either weaned pigs (10-14 pounds, roughly 21 days old) or feeder pigs (40-50 pounds, roughly 8 weeks olds), moving from specialized farrowing operations to feeding operations. USDA’s Agricultural Marketing Service reported prices for 5.1 million weaned pigs and 1.2 million feeder pigs last year but more (number unknown) were traded through private treaty and not reported to USDA. A good portion of these pigs are formula priced on spot markets or on deferred Lean Hogs futures with current or deferred corn and soybean meal prices frequently factored in as well. But the spot-traded pigs are subject to the same forces as feeder cattle. Weaned pig prices have been near record high in recent weeks, driven by expected summer profits and, to some degree, death losses related to porcine reproductive and respiratory syndrome (PRRS). These losses have been large this year but whether they are greater than in years past remains to be seen.

ERRATA — Our comment in yesterday’s DLR regarding the capacity impacts of a potential closing of Tyson’s Denison, Iowa beef plant was in error. We misread Tyson’s statement which said “ . . . the Dakota City plant . . . will be able to increase the number of cattle it harvests for processing. However, the change is not expected to increase Tyson’s overall beef slaughter capacity.” The Dakota City plant has, for many years, processed more carcasses than it has produced. Many of those extra carcasses have come from the Denison plant which has very limited, if any, capabilities for carcass fabrication. So, according to the Tyson statement, “The Dakota City plant will no longer need a supplemental supply of beef carcasses from the company's satellite beef plant in Denison. This means that the Denison facility. . . may close sometime in 2013.” Tyson’s statement says its total capacity “is not expected to increase” but the company never says its capacity will actually decrease. The statement regarding carcass shipments seems to indicate that the two changes will more or less offset each other. If that is the case, overall industry capacity will remain the same, maintaining the current over-capacity in the beef processing sector even if the Denison plant is closed in 2013.

[Mustang Sally Farm]

Thursday, March 08, 2012
Downward Profitability Expected in Medium Term
US - As producers increase the sow herd in response to better returns, profitability will again turn downward in the medium term, according to the Food and Agricultural Policy Research Institute.


Despite strong growth in hog prices in 2011, farrow-finish returns suffered due to much higher feed expenses.

Profitability prospects for 2012 and 2013 are bright, as hog prices should remain strong and feed prices fall.

The pork industry began 2012 with a slightly larger sow herd than the year before, after three consecutive years of contraction.

Sow inventories are expected to continue to grow modestly into 2014, though producers are likely to expand cautiously due to recent volatility in feed prices.

Even though the US sow herd is now 20 per cent smaller than 20 years ago, pork production in 2012 is expected 35 per cent above the 1992 level. Productivity growth will continue in the next decade.

US residents on average consumed 12 per cent less pork in 2011 than in 2003.

However, pork exports tripled from 2003-2011, allowing the industry to grow during that period.

Pork exports are expected to grow at a slower rate, so more of the increase in pork production will be available for the domestic market.

[Mustang Sally Farm]

Friday, March 09, 2012
Pig Model May Help Treat Eye Disease
US - A newly developed, genetically modified pig may hold the keys to the development of improved treatments and possibly even a cure for retinitis pigmentosa (RP), the most common inherited retinal disease in the United States.


The pig model was developed by researchers in the University of Louisville Department of Ophthalmology & Visual Sciences and at the National Swine Resource and Research Center at the University of Missouri, according to ScienceCodex.

"We have previously relied mostly on rodent models to study the development and progression of this disease, and although very important insights have been obtained, rodent eyes are much smaller than human eyes and they lack some important retinal structures, so the development of a large animal model of RP is an important step forward in the research of this blinding disease," said Henry J. Kaplan, MD, Evans Professor and chair of the Department of Ophthalmology & Visual Sciences at the University of Louisville, and senior investigator on this study. "This new tool, developed in the miniature swine, should allow important progress in the development of novel treatments for this disease."

The researchers used miniature pigs, which weigh about 150 pounds at maturity, because they are much more manageable than the larger, domestic pig.

The results of the study were published in the January 2012 issue of the journal Investigative Ophthalmology & Visual Science. The research was funded by The National Institutes of Health and the National Eye Institute, Research to Prevent Blindness, Discovery Eye Foundation, the National Institute of Food and Agriculture, the Edward N. and Della L. Thorne Memorial Foundation, the Kentucky Research Challenge Trust Fund, the Kentucky Science and Engineering Foundation, the Moran Eye Center Tiger Team Translational Medicine Award and the University of Louisville Clinical and Translational Science Grant Program.

"Pigs have become an important tool in helping researchers understand many human diseases," said Randall S. Prather, PhD, distinguished professor of reproductive biotechnology in the University of Missouri College of Agriculture, Food and Natural Resources, and investigator on the study. "Additionally, the miniature swine are much easier to handle than their larger kin and don't present researchers with as many challenges. It's important that we look for these new avenues for research as we continue our search for cures to some of the world's most prevalent diseases."

Researchers used an abnormal gene, RHO P23H, the most common cause of autosomal dominant RP, in which affected individuals have a 50/50 chance of passing the disease on to their children. They inserted the mutant gene into the nucleus of miniature pig embryos, which were then transferred into surrogate mothers for gestation. The offspring expressed the mutant gene that causes RP and their eyes showed classic features of the eye disease. This animal model will now be used to screen the efficacy of various novel therapies for this disease, including stem cell transplantation, drug therapy, gene therapy and the retinal prosthesis.

"We now have a model of RP that mimics human disease in a large animal," Mr Kaplan said. "These pigs will be on the front line of the development of new therapies for this devastating disease."

Retinitis pigmentosa affects about one in 4000 Americans and can cause retinal degeneration, which leads to night blindness, loss of peripheral vision, and ultimately total vision loss.

[Mustang Sally Farm]

Monday, March 12, 2012
Hog Prices End the Week Mostly Higher
US - USDA says that 69,100 farms raised hogs last year, the same number as in 2010, writes Ron Plain.
 
Ron Plain
Of these farms, 60,940 owned the hogs they were raising, leaving 8,160 contract operations that were raising someone else’s hogs. There were 3,300 hog farms that had more than 5,000 head in inventory and they raised 62.1 per cent of the nation’s hogs.

USDA’s Foreign Agriculture Service has proposed adding pork and distillers’ grains to the list of commodities that must report weekly export sales activity to the government. If implemented, this means we will have information on pork exports available from FAS about a month sooner than the Census Bureau trade data. Last year, the US exported roughly 2 million tons of pork and 8 million tons of DDGS.

USDA’s March production forecasts made no change in predicted 2012 pork production, but lowered beef production by 80 million pounds. USDA raised their broiler production estimate by 200 million pounds and raised their turkey forecast by 60 million pounds.

Hog prices ended this week mostly higher than the previous Friday. The national average negotiated carcass price for direct delivered hogs on the morning report today was $84.61/cwt, up $2.66 from last Friday. The western corn belt averaged $83.49 this morning and the eastern corn belt had a morning average of $84.85/cwt. There was no morning price report from Iowa-Minnesota due to light volume. Friday’s top live hog price at Peoria was $60.50/cwt. Zumbtota had a top at $60/cwt. The top for interior Missouri live hogs was also $60.75/cwt, down 75 from the previous Friday.

USDA’s Thursday afternoon calculated pork cutout value was $83.99/cwt, down 87 cents from the previous Thursday. Loins, butts and hams were lower, and bellies steady. For the first time in four weeks, the western corn belt average hog carcass price is above the pork cutout value.

Hog slaughter totaled 2.132 million head this week, down 0.8 per cent from the week before and down 0.7 per cent compared to the same week last year. Barrow and gilt carcass weights for the week ending February 25 averaged 206 pounds, unchanged from both the week before and from a year ago. Iowa-Minnesota live weights for barrows and gilts last week averaged 276.1 pounds, up 0.2 pound from the previous week, up 3.5 pounds compared to a year earlier, and above year-ago for the 15th consecutive week.

Futures contracts for both hogs and cattle ended the week lower. Today’s close for the April lean hog futures contract, $87.82/cwt, was down $2.60 from the previous Friday. The May lean hog futures contract settled at $95.70/cwt, down $2.85 for the week. June hogs settled at $95.32/cwt. July hogs ended the week at $95.40/cwt and August closed at $96.47/cwt.

[Mustang Sally Farm]

Tuesday, March 13, 2012
CME: Pork Exports Remained Steady in January
US - US pork exports began 2012 right where they left of 2011 — on the positive side of the ledger — while beef exports fell slightly in quantity versus January 2011 but grew in value and broiler exports increased over 9% versus year-ago levels.


All-in-all, not a bad start to the year, especially amid concerns that a stronger dollar might negatively impact U.S. meat and poultry exports. The charts at right show exports to key markets for each species on a carcass/ready-to-cook weight basis. Some highlights of the data released by USDA’s Foreign Ag Service (product weight and value) and Economic Research Service (carcass weight data) are:

Pork exports remained stellar in January, posting their second highest monthly volume ever (second only to November 2011) and their third highest value on record. Carcass weight equivalent exports jumped 36% versus one year ago with shipments to China/ Hong Kong leading the year-on-year growth at +156%. The 96.318 million pounds, carcass weight, shipped to this market was 9.6% lower than in December and continues the downward trend from the near-record monthly high reached in November so there is still some concern about how far monthly sales to China/Hong Kong may fall before stabilizing.

China was not the only growth area for pork — shipments to Japan were +19% vs. January 2011. Canada was +51%, Korea was +31% and Mexico was +16%.

On a product-weight basis, shipments of pork, pork variety meats and sausage casings were 28% larger than one year ago. The value of those shipments was up 43% from last year and accounted for nearly $60 for each hog slaughtered in January.

Beef exports were 4.4% lower than in January 2011 on a carcass weight equivalent basis. That is the first year-on-year decline for monthly beef exports since September 2009. Slightly tighter supplies and cutout values that were over 10% higher than last year were the primary reasons for the decline.

The year-on-year decline for beef exports cannot be blamed on any one market. As can be seen in the chart, there is no clear cut leader among markets for U.S. beef as four different countries were the largest destination for beef exports at some point in 2011. Mexico was our largest customer in January but shipments there were actually 2% smaller than last year. Canada was the #2 market and the 32.1 million pounds, carcass equivalent, sent there in January was a slight increase on 2011. Shipments to Japan were 3.5% higher. And in the “numbers can be deceiving” category: Beef exports to Russia were 87% larger but Russia only accounted for 3.6% of total U.S. beef exports in January.

On a product weight basis, beef and beef variety meat exports were virtually even with 2011 while the value of those shipments grew by 14% according to the U.S. Meat Export Federation.

“Other” countries remain a critical part of chicken exports, accounting for 40% of the total. Among these, Taiwan was our second largest customer in January while Cuba was #3. The United Arab Emirates and Vietnam also ranked in the top 10 while all of the second 10 U.S. markets are included in the “Other” category.

[Mustang Sally Farm]

Wednesday, March 14, 2012
Pork Exports Maintain Hot Pace
US - US red meat exports have a tough act to follow after a record-setting year in 2011, but the early indications for 2012 are good.
 

January pork exports jumped 28 per cent in volume and 43 per cent in value while beef exports were even in volume but rose 14 per cent in value, according to statistics released by the USDA and compiled by the US Meat Export Federation (USMEF).

“There is a challenge to follow a very successful year like 2011 and sustain the momentum,” said Philip Seng, USMEF president and CEO. “The good news is that there are opportunities to expand the presence of US red meat by exploring new market niches as well as increasing access with several key trading partners.”

Several key measurements also showed continued growth: export value per head and per centage of total production exported. For pork, January’s export value equated to $59.44 per head of commercial slaughter compared to $43.59 a year ago, and 29.6 per cent of total production (including variety meat) was exported in January versus 24.2 per cent last year. For just muscle cuts, 25 per cent of production was exported this January compared to 20 per cent last year.

Beef exports equated to $197.95 per head of fed slaughter in value compared to $170.10 last year. The per centage of production exported – 12.3 per cent for beef and variety meats and 9 per cent for just muscle cuts – remained the same.

Pork exports up to key targets
Sales jumped in double or triple figures with the top key pork trading partners, surging 21 per cent and 27 per cent respectively in volume and value to Mexico; 88 per cent and 158 per cent to China; and 17 per cent and 28 per cent to Japan.

For the month, the US exported 211,457 metric tons of pork valued at $566.9 million, increases of 28 per cent in volume and 43 per cent in value. While it’s early in the year, it is encouraging that these increases are coming on the heels of a year that saw 2011 pork exports top 2.25 million metric tons valued at more than $6.1 billion.

“In some markets, such as Japan, we are reaching into new secondary markets and niches like the sozai (deli) segment,” said Mr Seng. “In others, like South Korea, we’re focused on sustaining the progress we made last year and preparing for the imminent implementation of the Korea-US FTA. Korea has made significant progress in rebuilding their hog inventories so we expect total imports to decrease this year but the US will also gain a competitive edge against other suppliers through the FTA.”

Top pork export markets in January were:

Mexico: 60,737 metric tons (up 21 per cent) valued at $110.3 million (up 27 per cent)
Japan: 41,697 metric tons (up 17 per cent) valued at $170.8 million (up 28 per cent)
China: 36,175 metric tons (up 88 per cent) valued at $75.1 million (up 158 per cent)
Canada: 19,167 metric tons (up 47 per cent) valued at $65.7 million (up 52 per cent)
South Korea: 18,173 metric tons (up 38 per cent) valued at $51.5 million (up 61 per cent)

[Mustang Sally Farm]

Thursday, March 15, 2012
CME: Pork Cutout Price Varying as Expected
US - The pork cutout value continues to muddle along in a sideways pattern—that is perfectly normal for this time of year, write Steve Meyer and Len Steiner.


Has the broiler cutout — and especially boneless, skinless chicken breast meat — FINALLY shaken off the doldrums of the past two years? Like a doctor celebrating progress by a seriously injured or ill patient, we aren’t ready to declare the malady over just yet but last week’s nice gains for both of these key prices suggest that the broiler sector may finally be returning to some semblance of health. As can be seen below, our computed broiler cutout value jumped sharply last week, gaining $4.43/cwt. to reach $95.97. The increase was supported by all chicken cuts but the big contributors were Bnls/ Sknls breasts at +$6.24/cwt., tenders at +$9.05/cwt. and wings at +$3.57/cwt. from the week before. Breasts are still only 1% higher than one year ago but tenders are up 15.9% and wings are more than double the prices of mid-March 2011.

The $95.97 estimated cutout value (which, for our newer readers, is the weighted average price of all of the parts of a chicken) is at its highest level since 2004 when chicken prices went to all-time highs and the cutout topped out at $109 and change. It also marks the second week this year in which the cutout value has exceeded the 2010 high which marked the largest price response to output cuts which were driven by the corn and soybean meal price surge of 2007- 2008. Many — including us — are saying “Well it’s about time!” to this increase in chicken values after a 7% output reduction in Q4-2011 and YTD production that is 6.1% below year-ago levels. Let’s just hope it continues and that chicken companies don’t get too bullish and begin another breeder flock expansion. Our sources indicate that higher output is already on the way in the form of more and more heavy birds destined for boning. Several chicken companies are looking for new barns to accommodate the longer growing periods these birds require.

Meanwhile, the Choice-grade beef cutout reversed course in its assault on the magical $200/cwt. level last week, falling nearly $2 to $196.65. That reduction, of course, was from a new weekly record high or $198.51 the week of March 2. The Choice cutout normally continues to rise through April and into May as slaughter numbers fall. The average increase over the period 2006-2010 was about $10/cwt. The rally last year was closer to $20. A repeat of that would put the Choice cutout well above our expectations of $215 to $217 for the seasonal peak.

The Select grade cutout has rallied at an even faster clip to push the Choice-Select spread to its lowest level in almost a year. No surprise there as the spread usually bottoms in late-February or earlyMarch as the portion of cattle that grade Choice increases. Over 65% of the cattle that were graded in each of the past three weeks achieved the Choice grade. Those weeks mark the first time that level has been surpassed since — the week of March 12 last year. We expect the percentages to begin to fall soon but they may be a bit sticky since slower chain speeds have backed some cattle up in feedyards, giving them a few more days to marble and meet Choice specifications. Finally, amid all of this positive, the pork cutout value continues to muddle along in a sideways pattern—that is PERFECTLY NORMAL FOR THIS TIME OF YEAR. Easter ham demand is pretty much over and no other cut has any seasonal strength until hog numbers fall and grills fire up demand for ribs and chops. So don’t expect much for this value soon — but summer is coming!

[Mustang Sally Farm]

Wednesday, March 21, 2012
Weekly Roberts Market Report
US - The threat of cold weather harming the US corn crop is now considered nil by many meteorologists, writes Michael T. Roberts.

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

LEAN HOGS on the CME finished up on Monday. The APR’12LH contract closed at $86.025/cwt; up $0.150/cwt. MAY’12LH futures closed at $94.450/cwt; up $0.050/cwt. AUG’12LH futures finished $0.055/cwt higher at $94.850/cwt. According to pit reports speculative buyers are being drawn to the discount to the CME’s lean hog index. Cash hogs are firm even though packers are losing money. USDA late Monday put the average wholesale pork price at $82.29/cwt; down $0.41/cwt. According to HedgersEdge.com, the average packer margin was lowered $2.25/hd to a negative $12.00/head based on the average buy of $63.68/cwt vs. the breakeven of $59.32/cwt. Late Monday the CME lean hog index was estimated at $87.98; down 0.18.

CORN futures on the Chicago Board fo Trade (CBOT) closed down on Monday. The JULY’12 contract closed at $6.634/bu; down 9.5¢/bu. The DEC’12 contract closed at $5.702/bu; off 4.0¢/bu. Futures were pressured by profit-taking and prospects for an early start to US corn plantings. The potential for a record large crop may be in the making. The threat of cold weather harming the US corn crop now is considered nill by many meteorologists. Exports were weak and considered bearish for market news. USDA put corn-inspected-for-export at 23.195 mi bu vs. trade estimates for 30-35 mi bu. Backing off bullish buying last week funds sold an estimated 10,000 lots on Monday. Hopefully some of the 2012 and 2013 crop have been sold at these prices. Corn prices will most likely be pressured lower unless drought of other natural disasters set up a lower supply situation.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The MAY’12 contract closed at $13.664¢/bu; off 7.5¢/bu. NOV’12 futures closed at $13.254/bu; down 2.75¢/bu. Soybeans reversed to close lower on profit-taking. Concerns about a crop shortfall in South America started the market out well on the opening bell. In Argentina grain truckers called an indefinite strike on Monday to demand higher pay rates on soybean hauling. This kept South America beans off the world market. However, US exports were considered weak as USDA put soybeans-inspected-for-export at 23.732 mi bu vs. trade estimates for 30-35 mi bu. Soybeans are over bought at this time with the November 2012 contract posting a 75.62 Relative Strength Index (RSI). A contract is considered over-bought with an RSI greater than 70 and over-sold with and RSI lower than 35. Over-bought contracts indicate mounting pressure to sell. Unseasonably warm weather seen as boosting the US crop prospects also weighed on the market. Funds sold an estimated 3,000 contracts which was more than offset by large speculators buying over 17,000 lots. Now would be a very, very good time to get up to 40 per cent of the 2012 crop priced.

WHEAT futures in Chicago (CBOT) closed lower on Monday. The MAY’2012 contract closed at $6.552/bu; down 29.75¢/bu. JULY’12 wheat futures finished at $6.610/bu; down 16.25¢/bu. Wheat futures were pressured by profit taking and outlook for good crop weather in the US winter wheat growing areas. Pakistan will export a million tonnes of wheat to Iran in a barter deal. Western sanctions over Tehran’s nuclear program squeeze its ability to pay for food imports. Still, US exports are not expected to gain much of the global market share as Russia announced Monday it would not limit exports again this year. USDA put wheat-inspected-for-export at 20.982 mi bu vs. trade estimates for 25-30 mi bu. After increasing net-short positions in CBOT week last week funds sold an estimated 3,000 lots on Monday. It would be worth considering pricing more of the 2012 wheat crop at this time.

[Mustang Sally Farm]

Friday, March 23, 2012
CME: Lean Hog Futures Higher on Thursday
US - Lean hog futures were modestly higher on Thursday despite lower wholesale prices, write Steve Meyer and Len Steiner.


Market participants appeared cautious ahead of the report and did not want to be caught leaning the wrong way. The report will offer little comfort for bulls as pork supplies in cold storage were larger than expected and notably higher than a year ago. Particularly worrying was the sharp increase in the supply of pork trimmings.

While higher export numbers have been skewing the cold storage numbers for some time, the sharp rise in pork trim stocks coupled with a significant decline in trim values indicates that product is backing up in freezers. USDA reported hat the total supply of pork in cold storage was 624.7 million pounds, 8.8% higher than a year ago. While ham stocks have declined, largely because end users have limited their inventory builds going into Easter (another sign of soft demand), inventories of just about everything else is higher than last year.

Pork trim stocks were 64.9 million pounds, 22.1% higher than a year ago. The price of 72CL trim last night closed at 61 cents a pound, some 31 cents or 34% lower than the same time a year ago. The trim value is important as it affects most primal cutouts (you generate trim from just about everything). Pork belly stocks were 61.7 million pounds, 21.3% higher than a year ago. Pork belly prices last night closed at 105 cents per pound, about 35 cents or 25% lower than a year ago. In all, a report that seemed to confirm all the bearishness that we have seen in the wholesale market.

Beef cold storage stocks were pegged at 466.1 million pounds, 1.4% higher than a year ago but about 4% lower than January levels. Seasonally boneless beef stocks decline so the month to month change was not a surprise. Boneless beef inventories are about 4.2% higher than last year, in part reflecting higher imports.

Chicken stocks remain below last year’s levels as the industry has reduced slaughter and seems to have cleaned up much of the backlog that build up last summer. Breast meat stocks in cold storage were down 16.9% from last year and 6% lower than the five year average.

Turkey cold storage inventories are increasing at a faster pace than normal, currently up 21.1% compared to a year ago but down 4% vs. the 2007-11 average.


USDA has completed the Pork Mandatory Pork Reporting rule and the proposed rule will be published today in the Federal Register. After the rule is published, there will be a 60 days for a comment period after which the rule goes into effect. It will take time for the rule to be implemented, however, so do not expect to see the mandatory price data once the final rule is published. For the first six months USDA will publish both the voluntary price report and the mandatory price report concurrently. The rule is expected to provide for more transparent wholesale prices for pork cuts. As many of you know, pork pricing reporting has been very thin in recent years, making it particularly difficult to assess pork and hog values.