American Hog News USDA

[mikey]

CME: November Hog-Corn Ration Up from October
US - First a couple of ‘housekeeping” items of sort — Iowa State University’s Center for Agricultural and Rural Development (CARD) has decided to cease regular publication of Iowa Ag Review, a great source of rigorous yet layman-friendly economic analysis that we have plugged on several occasions in DLR, report Steve Meyer and Len Steiner.



But do not despair, CARD will be replacing the Review with CARD Policy Briefs “when a topic or issue seems ripe for analysis or when CARD research needs to reach a broader audience.” CARD will distribute Policy Briefs through its website and is compiling a contact list with which it can alert interested readers that a new Brief has been released. If you want to be included in that list, send your e-mail address to card-pub@iastate.edu. We’re glad that CARD’s excellent work will still be available and urge you to take a look at it.

We mentioned on Tuesday that, while prices of corn and soybean meal may be lower than the extraordinary levels of last summer, the ratios of livestock prices to feed prices still remain below their long-term levels. The charts below show monthly observations of these ratios for fed cattle and hogs through November. The ratios for both species did, in fact, improve in November but the gains were quite modest relative to the levels needed to suggest profitability. November’s Hog-Corn ration was 11.0, up from 10. per cent in October and a dismal 9.6 one year ago. The Steer & Heifer-Corn ration in November was 23. per cent, just 0.1 higher than in October but over 2 points higher than last year’s 21.3. So, things are a bit better but this is akin to now hitting your finger with a smaller hammer — it might hurt less but it still hurts, especially when the soreness caused long-term finger-smashing is considered! It is clear that these indicators of profitability remain near their lowest levels ever. The length of time at these levels is especially apparent for hogs, where the ratio has been below the historical “profitable” level of 18 or 20 since October 2006 when corn prices first began rising above historic norms. The cattle ratio has been below 30 — which is marginally acceptable for feeders — since late 2006 as well.


Do these ratios mean as much as they once did? Probably not, because there are not near as many farmer-feeders who are deciding whether to sell cash corn or “walk it off the farm” after feeding it to livestock. While variable costs do, in most cases, represent a lower proportion of total costs than they did when facilities were not as sophisticated and expensive as they are today, one must remember that variable costs are still the sole source of cost variation and are thus still the determinant of whether to continue operations or shut down. And feed and corn are still the largest components of variable costs. Have DDGs made a difference? At some times of the year, yes. But DDGs are still by and large priced off of corn and soybean meal values — so the ratios shown below still approximate profits, no matter the feed source.

[mikey]

Climate Legislation Threatens Pork Production
US - Climate-change legislation would lead to huge cuts in pork production and higher grain prices, according to some witnesses at hearings held last week by the House Agriculture Subcommittee on Conservation, Credit, Energy, and Research.



Citing the National Pork Producers' Council, Pork Magazine reports that hog slaughter by 2050 would be 23 per cent lower compared with baseline levels, while fed beef slaughter would fall by almost 10 per cent, as predicted USDA economist Joseph Glauber. Milk production would fall by about 17 per cent compared with baseline levels. The reductions would come as a result of crop lands being converted to woodlands, which the legislation promotes as a way to help cut greenhouse gases.

Dr Glauber said consumer prices could be mitigated, in part, if foreign producers increase their production of livestock beyond baseline levels in response to higher prices. Iowa State University economist Dermot Hayes testified that as many as 50 million crop acres could be converted to woodlands under the climate-change legislation. Those acres would be on top of the 30 million acres now in the Conservation Reserve Program and 40 million corn acres now being used by the ethanol industry.

With that many acres coming out of crop production, said Dr Hayes, by 2030 corn prices would be about 28 per cent higher than the baseline level and soybeans would be 20 per cent higher. The National Pork Producers Council opposes Senate and House climate-change bills because they would raise energy prices and production costs.

[mikey]

Saturday, February 13, 2010Print This Page
2009 Pork Exports Down Compared to 2008
US - As was expected, the value of 2009 US pork exports was down sharply compared to 2008, write Ron Plain and Glenn Grimes in this week's review of the US hog industry.

 
Ron Plain
Both the quantity of pork exported and the price per pound were lower in 2009. The total value of fresh, chilled and frozen pork exported by the US last year was $3.18 billion, down 16 per cent from 2008’s level. Despite the big decline, the value of pork exports in 2009 was the second highest ever. Since hog slaughter totaled 113.6 million head last year, pork exports equaled $28 per pig slaughtered. Increased pork exports is one of the keys to profitability in 2010. The agricultural trade data for 2009 was supposed to come out earlier this week but was delayed because of the weather. I will have additional information in next week’s report.

Packer margins tightened this week as the pork cutout value declined while hog prices were rising. USDA’s Thursday afternoon calculated cutout value was $68.31/cwt, down 84 cents from the previous Thursday, but up $9.77 compared to the same day last year. Loins, bellies, hams and boston butts were all lower this week than last.

Hog prices ended the week higher. The national weighted average carcass price for negotiated hogs Friday morning was $63.39/cwt, $1.71 higher than the previous Friday, and $4.78/cwt higher than a year ago. Regional average prices on Friday morning were: eastern corn belt $62.82, western corn belt $64.82, and Iowa-Minnesota $64.92/cwt. The top hog price Friday at Sioux Falls was $50/cwt, up $1.50 for the week. Zumbrota, MN had a top of $46 on Friday and Peoria topped at $43/cwt. The interior Missouri top Friday was $46.75/cwt, $2.25 higher than the previous Friday.

This week’s hog slaughter is estimated to be 2.161 million head, down 3.1 per cent compared to the same week last year. Hog slaughter has been below year-earlier for each of the last 6 weeks. During this period, hog slaughter was down 5.4 per cent compared to last year. USDA will probably revise their estimate of the December market hog inventory downward when the March Hogs and Pigs Report is issued. Since 1 December, slaughter of US raised barrows and gilts has been more than 2 per cent lower than expected.

The average carcass weight of barrows and gilts slaughtered the week ending 30 January was 200 pounds, down 1 pound from the week before and down 2 pounds from the same week last year. Iowa-Minnesota live weights last week averaged 268.9 pounds, down 0.1 pounds compared to a year earlier.

The February lean hog futures contract ended the week at $67.45/cwt, up 75 cents from last Friday. Today the April contract settled at $68.20, up $1.48 for the week. May closed the week at $74.95/cwt, June ended at $78.05/cwt and July settled at $77.17/cwt.

Corn futures ended the week roughly 10 cents higher than last Friday.

[mikey]

CME: December Pork Exports Lower Than November
US - Steve Meyer and Len Steiner report that the US meat trade statistics for December were released on Friday and have provided some of the report's highlights.



Keep in mind that this is based on shipped weight data, rather than the carcass weight statistics which will be released on Monday. Also, find the weekly price/supply data at the bottom of the page.

Pork: Total US pork exports in December were reported to be 124,056 MT, 5.5 per cent lower than the previous month but 14.3 per cent higher than year ago levels. Total shipments of fresh/frozen pork were up 2.7 per cent compared to a year ago, with exports to Japan up 3.8 per cent, exports to Mexico up 3.4 per cent and exports to Canada up 2.7 per cent. Exports of fresh/frozen US pork to China continued to remain weak, down 64 per cent from a year ago but the decline was more than offset by a 73 per cent increase in US exports to Hong Kong. Altogether US shipments of fresh/frozen pork to China/Hong Kong were up 25 per cent compared to year ago levels. So fresh/frozen exports were modestly higher than a year ago but that does not explain the double digit increase. To explain that, one has to look at shipments of prepared or preserved pork, which in December reached 21,198 MT, 151 per cent higher than the previous year. The bulk of this increase was due to a sharp increase in US shipments of prepared/ preserved exports to Mexico, which in December reached 9,658 MT, an almost five fold increase compared to year ago levels.


Beef: US beef exports in December continued to advance higher, in large part due to higher exports to Asian markets. US total beef exports in December were 55,044 MT, 23.1 per cent higher than a year ago. Mexico remains the top market for US beef, and at 16,183 MT it accounted for about a third of all US beef exports. However, exports to Mexico in December also rose 1.4 per cent from a year ago, while shipments to Canada, the second largest US beef market were 9,559 MT, down 1.1 per cent compared to the previous year. US beef shipments to South Korea, on the other hand, surged higher and at 7,085 MT they were 122 per cent higher than a year ago. Exports to Japan were up 22 per cent, while shipments to Vietnam, Taiwan and Hong Kong were up 60.7 per cent, 28.8 per cent and 135.6 per cent, respectively. As Asian economies recover from the sharp contraction they experienced in 2009, they should continue to contributed to the growth in US beef exports. The value of the US dollar remains key, especially the cross currency rates with the Australian dollar and Brazilian real.

Broilers: US broiler exports rose modestly in December but keep in mind that this was before Russia decided to ban all US broiler products. Total US exports of fresh/frozen broiler products were 243,347 MT, up 5.5 per cent compared to a year ago.

[nemo]

off topic...

welcome back, long time no post....

[mikey]

, February 18, 2010Print This Page
US and Canadian Hog Inventory Down Two Per Cent
US - This publication is a result of a joint effort by Statistics Canada and the USDA's National Agricultural Statistics Service (NASS) to release the total inventories of hogs, breeding, market hogs, sows farrowed, and pig crop for both countries within one publication.

 

US and Canadian inventory of all hogs and pigs for December 2009 was 77.4 million head. This was down 2 per cent from December 2008 and down 6 per cent from December 2007. The breeding inventory, at 7.19 million head, was down 4 per cent from a year ago and down 1 per cent from last quarter. Market hog inventory, at 70.3 million head, was down 2 per cent from both last year and last quarter. The pig crop, at 36.0 million head, was down 1 per cent from 2008 and down 4 per cent from 2007. Sows farrowed during this period totaled 3.70 million head, down 3 per cent from last year and down 8 per cent from 2007.

US inventory of all hogs and pigs on 1 December 2009 was 65.8 million head. This was down 2 per cent from 1 December 2008 and down 2 per cent from 1 September 2009. The breeding inventory, at 5.85 million head, was down 3 per cent from last year and down slightly from the previous quarter. Market hog inventory, at 60.0 million head, was down 2 per cent from last year and down 2 per cent from last quarter. The pig crop, at 28.8 million head, was up slightly from 2008 but down 2 per cent from 2007. Sows farrowed during this period totaled 2.97 million head, down 2 per cent from last year and down 6 per cent from 2007.

Canadian inventory of all hogs and pigs on 1 January 2010 was 11.6 million head. This was down 5 per cent from 1 January 2009 and down 16 per cent from 1 January 2008. The breeding inventory, at 1.34 million head, was down 4 per cent from last year and down 1 per cent from last quarter. Market hog inventory, at 10.3 million head, was down 5 per cent from last year and down 2 per cent from last quarter. The pig crop, at 7.2 million head, was down 7 per cent from 2009 and down 12 per cent from 2008. Sows farrowed during this period totaled 724,600 head, down 8 per cent from last year and down 13 per cent from 2008.

Special Note
The market hog weight groups have changed for both the US and Canada. For the US, the market weight group under 60 pounds has been changed to under 50 pounds, and the market weight group 60-119 pounds has been changed to 50-119 pounds. The 120-179 pounds and 180 pounds and over weight groups remain the same. Similar changes have been made to Canadian market hog weight groups. These changes will allow for a more uniform analysis of the North American hog inventory. Estimates have been made for these new weight groups dating back to the beginning of 2008.

[mikey]

CME: Slaughter Closer to Predicted Levels
US - One call that analysts must make from time to time is whether a particular USDA report is, in fact, accurate and, if not, how inaccurate might it be and how might the inaccuracy impact supplies, demands and thus prices, write Steve Meyer and Len Steiner in their Daily Livestock Report for Friday, 19 February.



That statement is meant in no way to put down the people at USDA that work very hard to get these reports right. There are myriad things that can happen to make even their best efforts look bad. Virtually all reports are based on statistical samples that can, in some cases, yield results that are not completely indicative of the population as a whole. In addition, many USDA reports are a snapshot in time from which we imply subsequent product flows and there are many, many conditions that can impact the relationship between a stock variable and a flow variable. The current situation with hog slaughter and the December Hogs and Pigs Report is a great example.

The chart below is Steve Meyer’s effort to use the Hogs and Pigs inventory report to forecast weekly slaughter. It simply uses last year’s slaughter level, the predicted year-on-year percentage changes for market pig inventories, farrowings (a “farrowing” is a litter being born), farrowing intentions and litter size and adjustments for changes in known supply factors such as pig and market hog imports from Canada and pig performance. The best example of the last factor is the adjustments needed in late 2007 and 2008 to account for improved pig survival and performance due to the control of porcine circovirus associated disease (PCVAD). The chart does not include any adjustment for pig performance but the PCVAD adjustment represents the kind of industry knowledge factor that can be very important from time to time.


The most important performance variable relating pig stocks to slaughter is, of course, the growth rate of pigs or, more specifically, the actual growth rate relative to some long-term norm used to make a forecast. Any factor that causes pigs to grow faster or slower will impact the number of animals reaching market during a given time frame to some degree. We say “to some degree” because much of the modern US pig production sector is time dimensioned: The slowest-growing pigs in a given farrowing group must be gone after 25 or 26 weeks because there is another group of pigs that must be moved into that particular finishing barn. So, while weight determines the marketing date for some pigs, many pigs move on a schedule and not necessarily a weight thus making average carcass weights an important factor in judging whether actual slaughter compares well with the slaughter levels predicted by a given report. Last summer’s very high slaughter weights reflected excellent performance due to cool temperatures and time-dimensioned marketings — when “shipping day” came, the pigs were heavy. Market weights were sharply lower in December reflecting, we think, poor performance due to lower-than-expected corn quality and, in some instances, out-of-feed events due to weather-related feed transport challenges. Those lower weights were a surprise to some produces who were, as a matter of normal operations, selling hogs on a schedule. Weights returned to year-earlier levels in January but slaughter was far below the predicted levels. Was that due to slower growing pigs being held longer in order to achieve desired market weights? Or was it due to the nearly constant transportation challenges encountered this winter? Or was it due to an “overcount” of pigs in the December Hogs and Pigs report, meaning that the Predicted ‘10 line in the chart above is wrong?

Answering those questions demands a large dose of judgment, to say the least. The December Hogs and Pigs report indicated that, from 1 December through 13 February, US hog slaughter “should” have been 2 per cent lower than last year. Actual slaughter has been 4.3 per cent lower. Those numbers for December alone are: -2.2 per cent predicted vs. –2.8 per cent actual. For 1 January through 13 February they are –1.8 per cent predicted vs. –5.5 per cent actual. So, the lion’s share of the deviation has been since 1 January — but so have the lion’s share of the transportation issues and the impact, if any, of producers delaying marketings in order to get pigs to more desired weights.

Both of those arguments imply that the pigs will show up eventually and actual slaughter has indeed been closer to predicted levels in recent weeks. But “the pigs are coming eventually” implies that actual slaughter will at some point have to catch up to predicted levels UNLESS the corn quality issue has a lasting impact on growth rates — which it might. The mold and toxin problems encountered in the eastern Cornbelt will probably get worse as time passes and, more important, temperatures rise. And those fears are not confined to the east since a good portion of corn in the western Cornbelt went into bins with moisture levels on the high side of the comfort range. The condition of that corn can be maintained but doing so will, in many cases, take good management. And low test weight-starch density-nutrient content corn will not get any better with time.

Thus, the economist’s pat answer of “IT DEPEND!” applies to this issue in spades. Making the call boils down to getting the best information possible, learning the specifics of industry operations and decision-making, doing good analysis and applying good judgment. Nothing is easy.

[mikey]

Efforts Continue to Restore Market Access for Pork
US - Efforts to resume US pork exports to Russia got a boost last week from face-to-face discussions in Moscow between US industry representatives and Russia’s top veterinary officials.

 

With only a handful of US facilities still eligible to export pork to Russia, US pork exports have been effectively shut down for several weeks. Formal negotiations are continuing between the governments of the United States and Russia, but the Moscow meeting provided an opportunity for the pork industry to voice its position on a number of key issues.

USMEF Senior Vice President Thad Lively headed the US industry delegation, which included representatives of 13 US companies. The Russian team was headed by Dr Nikolay Vlasov, Russia’s chief veterinary officer.

Mr Lively reports that US and Russian officials are very close to finalising an agreement on a new pork health certificate, which would remove one of the obstacles that has interrupted pork trade. The governments have also reached agreement on a new system, to be managed by USDA’s Agricultural Marketing Service, for approving US pork processing plants for export to Russia. Lively is also optimistic about gaining reinstatement for US plants that were delisted because of their failure to pass an audit conducted by Russia in late 2008.

Some US pork plants have also been delisted due to documentation errors discovered upon arrival of products shipped to Russia. Mr Lively said recommendations for addressing documentation errors will be developed in coming weeks, and a proposal based on those recommendations will be presented to Russian officials.

Despite recent speculation that the US beef industry may lose access to Russia, Mr Lively said no trade interruptions have surfaced to date with regard to beef exports.

[mikey]

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



LEAN HOGS on the CME finished up on Monday. APR’10LH futures finished at $70.300/cwt; up $0.650/cwt and $1.525/cwt higher than two weeks ago. The MAY’10LH contract closed up $0.800/cwt at $76.900/cwt and $2.200/cwt over last report. June finished a one-month high. Consumers continue to drive strong retail pork demand as the US economy continues to struggle and people continue in their unemployment. Fund buying was somewhat supportive. USDA on Friday put the average pork price at $70.92/cwt; up $1.46/cwt and $1.80/cwt over last report. The latest CME lean hog index was placed at $67.16/lb; up $0.03/lb and $1.20/lb over week before last. According to HedgersEdge.com, the average pork plant margin was lowered $1.70/hd from last report to a positive $3.20/hd. This was based on the average buy of $49.40/cwt vs. the average breakeven price of $50.61/cwt. It would be a good idea to check on buying feed at this time as corn and soybeans are seen preening for a spring-time run up.

CORN futures on the Chicago Board of Trade (CBOT) ended up on Monday. The MAY’10 contract closed at $3.826; up 11.0¢/bu and 15.25¢/bu higher than last report. DEC’10 corn futures closed up 9.25¢/bu at $4.080/bu and 1.75¢/bu higher than two weeks ago. Pushing through highs, technical momentum and trader’s expectations for good demand were supportive. Weather forecasts for heavy rains hurting the South American crop and the potential for heavy flooding after winter snows in the US corn-belt provided additional support in Chicago. Several floor traders said today that they think this corn market might be finished with the downtrend and may be turning for the spring run-up. Funds were optimistic also buying 20,000 lots taking them to near even in short vs. long positions. USDA put corn-inspected-for-export at 43.189 mi bu, exceeding export expectations of 27-31 mi bu. Cash corn was steady in both the US Midwest and the Mid-Atlantic states. It might be wise to hold off on any more 2010 corn crop sales at this time.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The MAR’10 soybean contract closed at $9.614/bu; up 16.5¢/bu; and 3.25¢/bu higher than last report. NOV’10 futures were up 9.75¢/bu at $9.356/bu and 24.25¢/bu higher than week before last. Short covering on profit taking and fundamental worries over harvest delays in South America supported prices. Flooding expected from a record snow pack in the US Midwest also drove traders to buy soybean futures. Exports were neutral as USDA put soybeans-inspected-for-export at 34.990 mi bu vs. expectations for 30-35 mi bu. Outside market weakness in crude oil and gold limited gains. Funds bought 6,000 contracts cutting net short positions to 17,988 lots, down 252 contracts. Cash beans in the US Midwest were steady to firm on slow farmer selling. It would be a good idea to hold off on any more sales at this time.

WHEAT futures in Chicago (CBOT) finished up on Monday. MAR’10 futures closed at $5.012/bu; up 11.5¢/bu and 17.25¢/bu over last report. The JULY’10 wheat contract closed at $5.276/bu; up 11.0¢/bu and 16.25¢/bu higher than two weeks ago. Higher corn and soybean markets, as well as technical buying on short covering were supportive. However, several floor sources today told me they didn’t think that the gains could be sustained amid continued burdensome global stocks and massive short positions held by speculative funds. Funds were net short 65,303 lots as of Feb. 16; down from a record 74,767 contracts. Exports were neutral with USDA placing wheat-inspected-for-export at 17.708 mi bu vs. expectation for 14-18 mi bu. It definitely would be a good idea to get another 10 per cent of the 2010 crop sold at this time bringing the total amount sold to 60 per cent.

[mikey]

Market Preview: Good News for Pork
US - Weekly US Market Preview provided by Steve R. Meyer, Ph.D., Paragon Economics, Inc.



USDA’s Cold Storage report, released last week, continues to indicate that supplies are at least “current” at present. The cold storage data appear in Table 1.

 
Total meat and poultry in freezers amounted to 1.86 billion pounds on 31 January. That was 3.5 per cent higher than one month earlier, but 17.1 per cent lower than one year ago. All four of the major species contributed to the decline with turkey leading the way in both pounds (169 million) and percentage (-37.5 per cent). Pork was second in both categories, trimming total freezer stocks by 111.3 million pounds and 18.3 per cent vs. one year ago. Chicken stocks continued to fall as well, declining 10 per cent or 69.1 million pounds from 31 January 2009.

USDA estimates that there were 495.6 million pounds of pork in freezers on 31 January. That is 5.2 per cent more pork than one month earlier and it represents the first month-to-month increase in pork inventories since last April. That is a very unusual circumstance, since pork stocks usually begin growing in September and swell in the fall of the year when hog numbers are high. The counter-seasonal decline in stocks last fall leaves supplies quite current as we go into spring and expected lower slaughter runs. That factor should be supportive of pork and hog prices.

Freezer inventories of every pork cut except ribs and butts were lower than one year ago. Ham inventories were down 15.4 per cent (13.5 million pounds), while belly stocks were 22.5 per cent (15.58 million pounds) lower. As with most months, the “other” and “unclassified” categories accounted for some of the largest actual inventory numbers but, again, both declined sharply (by 22.9 and 26.8 per cent, respectively) relative to last year.

Chicken companies continued to keep freezer stocks low relative to historic levels and they were roughly steady relative to 31 December. One concerning number is leg quarters stocks that grew by roughly 27 million pounds (23.2 per cent) during January as the United States and Russia wrangled over Russia’s decision to block imports of US chicken due to our use of chlorinated water in processing. While stocks grew during the month, leg quarter prices have been remarkably steady indicating, in my opinion, that the “market” expects a solution to be reached.


Finally, last week marked the first week since Christmas that actual federally inspected (FI) hog slaughter was as large as what I had forecasted, based on the December Hogs and Pigs Report. The 2.163 million head was 0.7 per cent lower than last year and equal to the prior week. Slaughter for the eight weeks ending last Friday numbered 17.213 million head, 4.5 per cent lower than last year and 2.7 per cent lower than the level suggested by the December report. Note in Figure 2, though, that actual slaughter has been inching closer and closer to both expected and year-ago levels for the past few weeks.


Some of the pigs that have not shown up at market may still be on farms, but it appears that the December inventory numbers were high – at least for market inventories. The question now is whether it was just high in the categories for pigs weighing 60-lb. and more, or if the error extends to lighter categories and farrowing intentions. All eyes will now turn to the March Hogs & Pigs Report set to be released on 26 March. The survey for that report hits the field this week.

Canadian Hog Count Snafu
It doesn’t help much to check your work when you make the same mistake – twice! Such was the case with my statement last week regarding hog number declines in Ontario and Quebec. In fact, it was Ontario – as expected – that saw the largest year-on-year total inventory decline (7.6 per cent) among Canada’s major pork-producing provinces. Quebec’s herd fell by only 2.6 per cent. As with the all-Canada numbers, though, the sow herd reductions (-3.3 per cent in Ontario, -0.9 per cent in Quebec) were much smaller than the total inventory reductions in both provinces.

 



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

[mikey]

Weekly Outlook: Pork Profits Claw Back Equity
US - Return to profitability is the theme for the pork industry in 2010, writes Chris Hurt, extension economist at Purdue University.

 Chris Hurt
Extension Economist
Purdue University
 

The large losses began in the fall of 2007, so it has been nine quarters of losses, with some very large losses. Those losses were a result of soaring feed prices in 2007 and 2008, recession in late 2008 and 2009, and a dose of H1N1 that sickened pork demand.

But, let’s look forward where the sun is shining. The pork industry will benefit this year from reductions in supply, from improvements in demand, and from some moderation in feed costs. The industry has reduced the breeding herd by six per cent over the past two years. So far in 2010, pork production in the US has been down by seven per cent, with about a six per cent reduction in slaughter and about one per cent lower weights. Lower market weights are probably related to the cold winter in which animals did not grow as quickly. Looking forward, pork production for the year is expected to be down by two per cent.

Stronger demand is expected to come from higher exports, from a recovering US economy, and from the passing of H1N1 from front page news. USDA expects exports to increase by eight per cent this year. This means an additional one per cent of US production will go into foreign markets and not be available at home. Most importantly, per capita domestic supplies of pork are anticipated to be down by four to five per cent this year given smaller production, more exports, and some population increase.

Another contributor to higher hog prices in 2010 will be more moderate retail margins. When retail margins are high, a smaller portion of the retail pork price tends to get back to producers. As an example, last summer and early fall the retail margin was about $1.85 per retail pound, but this dropped to about $1.60 per pound by this winter. This meant that the producer’s share of the retail sales went from about 23 per cent to nearly 30 per cent more recently. More modest retail margins will likely continue to contribute to higher farm level prices for much of this year.

Prospects for feed costs have moderated as well after the 12 January USDA crop updates. Estimated cost of production for farrow-to-finish production was $54 per live hundredweight in 2008 and $50 in 2009. For 2010, those costs are expected to be about $47 to $48.

Hog prices have already responded to the much improved outlook, with more to come. Live hog prices began the year in the mid-$40s and reached the very low-$50s by late February. The early spring rally should be ready to take-off, hopefully with no failed launches as occurred last year when H1N1 hit the news on 24 April. Live hog prices are expected to move into the higher $50’s in the late spring and early summer. Second quarter prices are expected to average in the mid-$50 and third quarter prices about $1 lower. The last quarter of 2010 and winter of 2011 may see prices drop back seasonally to the $47 to $49 range.

Live hog prices are expected to average about $51 for 2010 with costs around $47 per live hundredweight. If so, this means a profitable year of about $10 per head, with the best of those profits coming this spring and summer. This compares with estimated losses of $17 and $23 per head for 2008 and 2009.

If this positive outlook does develop, pork producers will be able to recover some of the equity erosion that has occurred in the past two years. However, $40 of losses ($17 and $23 per head in 2008 and 2009) over the past two years will not be recovered with $10 per head of profits in 2010.

The bottom line message to the industry is that feed costs are much higher and more volatile in these early years of the biofuels era. In response, the industry had to adjust to lower production, and most of that has been done. But the industry should not interpret the outlook for a little black ink in 2010 to be a signal to race back toward expansion. As an example, a US drought in 2010 would quickly send feed costs back above breakeven levels.

[mikey]

Market Preview: Congrats Dale! Then Down to Business
US - US - Weekly US Market Preview provided by Steve R. Meyer, Ph.D., Paragon Economics, Inc.



Before I get to this week’s topic, I must take a moment to congratulate National Hog Farmer and Weekly Preview Editor Dale Miller for his receiving the Pork Checkoff’s 2010 Distinguished Service Award. The award is given annually to recognize the lifelong contribution of an outstanding leader to the pork industry. The ceremony and presentation Saturday night at the National Pork Forum in Kansas City highlighted Dale’s many contributions that include playing a vital role in technology dissemination and adoption.

But the real focal point of Saturday’s ceremony was the value that Dale puts on people and I can vouch for that. I’ve known Dale since the early 1980s, when we were both much younger men chasing purebred Chester Whites around show rings in various parts of the country. I could see that this guy looked at the pig business in a much broader context than did I and I’ve since learned a lot from him through both personal contact and his prolific writing.

Congratulations, Dale! We appreciate what you have done and what you are still going to do and I am personally very proud to work with you and to call you a friend.

Contract Provisions Not Optional
If you are a hog contractor – that is, a person or company that owns pigs that are raised on contract by a grower – you need to make sure that any contract arrangements you have entered into or altered since last June 2008, contain specific information required by the 2008 Farm Bill.

While we are normally accorded “rules” by USDA or some other agency that tell us just how we are to meet the requirements of a given law, USDA’s Grain Inspection Packers and Stockyards Administration (GIPSA) has begun fining producers for violating these provisions even though rules have not been published. Hardly seems fair, but that is what they are doing!

First, contracts completed before 18 June 2008 (note that is not last year, but the year before) are apparently being grand-fathered in. The new requirements apply to contracts completed or altered since that date.

The three requirements are:

Grower’s right to cancel. The contract must contain a provision that serves as sort of a “lemon law” or “buyer’s remorse” clause in that it allows the grower to cancel a production contract by mailing a cancellation notice to the contractor no later than three business days after the contract was executed or any cancellation date stated in the contract, whichever is later. The contract must disclose this right, how the grower can cancel, and the deadline for doing so. Des Moines attorney Eldon McAfee says the three days apparently begins when the grower signs. McAfee also recommends that the contract specify that certified mail be used to send the contract cancellation.


Grower’s right to “opt out” of mandatory arbitration. This provision only applies to a contract that requires arbitration to settle disputes. If a contract has such a requirement, the contract must clearly disclose that the producer may opt out of this feature. Arbitration may still be used if a dispute arises, but it will not be mandatory if the producer has opted out. This law clearly states that this requirement only applies to contracts entered into, amended, altered, modified, renewed, or extended after 18 June 2008. So, it does not just apply to “new” contracts!


Potential for requiring additional capital investments. This provision also applies to contracts entered into, amended, altered, modified, renewed, or extended after 18 June 2008, and it simply says that the contract must disclose on the first page that additional large capital investments may be required of the grower. It must use the heading: “Additional Capital Investments Disclosure Statement.” This does not put any limits on these investments, but GIPSA is writing rules that will define when an additional capital investment requirement constitutes a violation of the Packers and Stockyards Act. So there is more to come on this topic.

If you have entered into, amended, altered, modified, renewed, or extended a production contract since 18 June 2008, you need to review those contracts and make sure they meet these specifications. By all means, work with your attorney. My economists’ union card certainly doesn’t qualify me to give legal advice!
If pork producers are wondering what happened to engender these requirements, they need only look to the broiler industry. Virtually all of the legislative and regulatory moves are due to past disputes over broiler contracts and some very clear abuses on the part of chicken-producing companies. And, the pork industry isn’t completely fault-free either. It’s a bummer, but when you involve a few thousand people, there are bound to be a few scoundrels among them. But this industry has done a pretty good job of managing these relationships for everyone’s long-term mutual gain. We are simply collateral damage.

[mikey]

CME: Pork Supplies Lowered in March Update
US - USDA released on Wednesday, 10 March, its latest grain and meat supply forecasts for 2010, write Steve Meyer and Len Steiner.

Judging by the reaction of the CME futures, markets generally found few surprises in the latest release, with corn prices extending some of the recent losses while soybean futures starting to gain some traction following a downward revision in ending stocks. Cattle futures were generally lower but that is not entirely unexpected given the rapid climb we have seen in recent weeks while pork futures are looking for a bit more stability given the volatility of the first two months of the year. Below is a very brief recap of the latest USDA supply and demand report:

Corn: The report failed to provide any significant surprises even after USDA went back and resurveyed areas with a significant number of un-harvested acres in December. The only adjustment was a 0.2 per cent reduction in final yields, leading to a 20 million bushel decline in overall output. The decline was minor and was more than offset by reductions on the demand side of the equation. Corn exports have been running behind forecasts for some time and USDA adjusted them down by a whopping 100 million bushels (5 per cent). This left ending stocks at almost 1.8 billion bushels, 80 million bushels above the previous month’s forecast. Currently the stocks to use ratio is almost unchanged (13.8 per cent) from the previous year’s level.

Beef: USDA made some downward adjustments to its forecasts for beef supplies available in the US domestic market for 2010. Total US beef production was estimated at 25.747 billion pounds, slightly lower than the February forecast and down 1.2 per cent from 2009 levels. Beef exports were left unchanged at 2.040 billion pounds, which represents a 9 per cent increase from 2009 levels while beef imports (little surprise here) were adjusted lower by 75 million pounds. Beef imports are currently forecast to be 2.7 billion pounds in 2009, only 2.7 per cent higher than in 2009. If current trends continue, it is likely that import forecasts will be adjusted lower yet again in the coming months. Overall per capita US beef disappearance (we don't know if all that beef actually is consumed) is expected to decline 2.3 per cent in 2010 and it is now down some 8.6 per cent compared to 2007 levels.

Pork: Pork supplies were also adjusted lower in the March update, in part reflecting current slaughter levels as well as lighter weight hogs coming to market. Total production for 2010 is currently forecast to be 22.450 billion pounds, 90 million pounds smaller than the February forecast and 2.4 per cent lower than 2009. Pork exports were left unchanged and at 4.5 billion pounds they are forecast to be 9.1 per cent lower than in 2009. The combination of lower output levels and higher exports is expected to cause US per capita pork disappearance to fall by 5.8 per cent

[mikey]

Direction Set to Lead World-class Food Industry
US - "Leading a world-class food industry - Responsible. Sustainable. Professional. Profitable." This is the new vision for the National Pork Board that was introduced to Pork Act Delegates at the National Pork Industry Forum held on 4-6 March in Kansas City, Missouri.



"This new plan for the future of our pork industry was built by pork producers, for pork producers," said Tim Bierman, a Larrabee, Iowa, pork producer and president of the National Pork Board. "Work on this plan began last year during some of the darkest days for US pork producers since 1998, but the producer task force remained committed to building a plan that could help ensure a successful future."

Part of what it means to be a world-class pork industry includes:

Being socially responsible in the production of food that feeds the world;
Adopting production practices consistent with the pork industry's ethical principles that can be sustained long term;
Demonstrating the industry's We Care philosophy by acting in a professional and competent manner at every level of the industry, from top meat-company executives to workers in the hog barns across America;
Providing top-quality food products for consumers at a reasonable price that enables all industry participants to be profitable on a consistent basis.
"These points describe core industry values that all members of our industry should strive to implement on a daily basis," said Mr Bierman.

Pork Act Delegates also received a preview of new efforts aimed to reposition pork with today's consumers.

"Since 1987, The Other White Meat® campaign has been effective in changing consumers' perception of pork as a leaner choice," said Mr Bierman. "During 2010, the Pork Board will be testing potential new brand positions for pork that may be more effective in reaching today's consumers."

To assist the National Pork Board in evaluating their brand position, Schafer Condon Carter, an agency with meat and commodity experience, has been hired following a competitive review of brand agencies.

In other business, the Pork Act Delegates voted on candidates for the National Pork Board to be forwarded for approval to the Secretary of Agriculture. In July, five Pork Board members will be appointed by the Secretary of Agriculture from the list of eight nominees elected by the delegates to serve 3-year terms. The delegates ranked the candidates in the following order:

Julie Maschhoff, Carlyle, Illinois
Everett Forkner, Richards, Missouri
Henry Moore, Clinton, North Carolina
Derrick Sleezer, Cherokee, Iowa
Craig Mensink, Preston, Minnesota
Wathina Luthi, Gage, Oklahoma
Gregg Hora, Fort Dodge, Iowa
Steve Wuergler, Drain, Oregan
Jim Fisher, a pork producer from Middletown, Missouri, and Karen Balfe, a pork producer from Waseca, Minnesota, were elected to the Pork Board Nominating Committee

[mikey]

CME: January Pork Exports Down in Several Markets
US - For all the talk of strong meat export growth in 2010, the export data released by USDA on Thursday showed a slow January start for pork and chicken, according to Steve Meyer and Len Steiner.



In part the lower numbers were driven by several trade disruptions, especially in our trading relationship with China and Russia. The two remain significant trading partners and will be crucial in order to hit the export targets for 2010. Below is a brief recap of January export data. Please keep in mind that the numbers are shipped weight and the year over year comparisons may be slightly different from the carcass weight data that will be published later by ERS.

January pork exports declined in a number of markets (see graph below). The one bright spot in January was Mexico, which continued to purchase record amounts of US pork and is currently well established as the top US pork export market. Total US pork shipments in January were 13.2 per cent lower than the previous month and 4.2 per cent lower than in January 2009. Indeed, pork exports would have been even lower had it not been for continued growth in the prepared/ processed pork segment. Exports of fresh/frozen pork, which make up the bulk of US pork exports, were reported to be 91,928 MT, down 13.1 per cent compared to the previous year. Fresh/frozen pork exports to China and Russia were almost non existent. Shipments to Japan, which used to be the top market for US pork also were down 26 per cent compared to last January. As for Mexico, pork exports remain very strong, in large part due to the growth in exports of processed/prepared pork products. Exports of fresh/frozen pork to Mexico in January were 27,698 MT, up just 1.3 per cent compared to a year ago. However, exports of prepared or preserved pork to the Mexican market were 9,706 MT, an almost three fold increase compared to a year ago.

Beef exports continued to trend higher in January and at 51,031 MT they were 16.1 per cent higher than a year ago. The increase in US beef exports came despite lower shipments to Mexico, which remains the top market for US beef exports. Exports to Mexico were 13,523 MT, 7.9 per cent lower than a year ago. Exports to Canada remain very strong and at 9,997 MT they were up 23.3 per cent compared to year ago levels. As for the Japanese and South Korean market, they are still much smaller than in 2003, before the BSE outbreak in the US. Beef exports to S. Korea in January were 6,272 MT, 9.7 per cent lower than a year ago. However, Asian markets remain very important to the growth of US beef exports. At this time, US beef exports to Taiwan, Vietnam and Hong Kong are almost as large as the Japan and S. Korean market combined. A weak US dollar also is encouraging beef purchases from markets that traditionally source beef from Brazil, such as Egypt.


US exports of fresh/frozen chicken were predictably lower in January. Limited market access to China and Russia negatively impacted the overall volume. Total chicken exports for the month were 203,610, 25.4 per cent lower than a year ago. Chicken exports to Russia were down 63.8 per cent while chicken exports to China were down 57.3 per cent. These two markets accounted for 35 per cent of all US chicken exports in 2009. Exports to Mexico, the second largest market, were up 17.1 per cent.