American Hog News USDA

[mikey]

Thursday, July 10, 2008Print This Page
Hog Industry Faces Crisis After a Decade
CHICAGO - Hog producers are about to face some of the worst losses after a decade this fall when a plenitude of pigs, fed high-priced feed, enters the market.



According to Reuters, ten years ago prices for hogs dropped sharply, hitting a 50-year low of $10 per 100 lbs, as supplies exceeded the pork industry's capacity to process them. The industry lost millions of dollars then and needed years to recover.

It is unlikely hog prices will drop to $10 this fall, but for big losses to pile up they don't have to.

Prices for corn and soybean meal, key feeds, are so high that if hogs sell from $40 to $45 per 100 lbs this fall, as expected, losses will be huge, because it will cost $55 to $60 per 100 lbs to produce them. On a 260-pound hog, that equates to a loss of about $40 per head.

"The magnitude of producer losses in the fourth quarter, due to high corn, could approach levels of 1998," said Jim Robb, agricultural economist at the Livestock Marketing Information Center. "There is a 50-50 chance we could lose that amount of money."

It is assumed these big losses will force some hog producers out of business and others to reduce production. As a result, economists and Chicago hog traders believe that fewer hogs will mean much higher prices in 2009, reports Reuters.

That is largely why the June 2009 hog contract 2LHM9 at the Chicago Mercantile Exchange has been setting records. On Wednesday, it peaked at 100.25 cents per lb on a carcass basis, the highest ever for any CME hog contract. The 100.25 cents is equivalent to $74 per 100 lbs on a live-hog basis.

"I think hog prices will increase after the first of the year, which they typically do, but it is the costs that are just outrunning cash," said John Lawrence, agricultural economist at Iowa State University.

Because of strong demand for corn, a smaller crop this year, and losses due to flooding, corn prices are expected to stay high for much of 2009.

[mikey]

Tuesday, July 22, 2008Print This Page
Amendment to Block Argentine Meat Moves On
US - A move to close US borders to the threat of foot and mouth disease from meat and livestock imports from Argentina has taken a step closer.





Senator Time JohnsonSouth Dakota Democrat senator Tim Johnson has seen his ammendment to the 2009 Agriculture Appropriations bill, based on his bill, The Foot and Mouth Disease (FMD) Prevention Act of 2008, has passed the Appropriations Committee.

The amendment would prevent the USDA from spending any money to implement the plan in Fiscal Year 2009 to open US borders to import fresh meat and livestock from Argentina.

"Today’s action is a strong step forward for our agricultural community, which would be devastated by the extreme risk Foot and Mouth Disease presents to our livestock herds," said Senator Johnson, a member of the Agriculture Appropriations Subcommittee.

"The USDA’s proposal is shortsighted, and I remain committed to ensuring that no dangerous products from Argentina cross our borders."

The USDA recently announced plans to allow cattle, sheep and pig and certain livestock product imports from a region within Argentina.

Senator Johnson said that although the region itself is believed to be free of the disease, FMD is found in the surrounding regions and countries. The potential risk of airborne transmission and contamination remains high.

Johnson and Senator Mike Enzi, a Republican from Wyoming developed The Foot and Mouth Disease Prevention Act of 2008 following the repeated concerns of their constituents worried about the risks of the proposal. Since its introduction on July 10, thelegislation hass an additional 11 cosponsors from both sides of the political aisle.

The legislation also has the strong support of organizations across the state and nation, including the American Sheep Industry Association, the South Dakota Cattlemen's Association, R-CALF, the South Dakota Stockgrowers Association, the US Cattlemen's Association, the Western Organization of Resource Councils, Dakota Rural Action, the South Dakota Farmers Union, National Association of State Departments of Agriculture and the National Farmers Union.

The majority of veterinarians within the National Assembly of State Animal Health Officials (NASAHO) also oppose the USDA’s plan, including Dr. Sam Holland, South Dakota State Veterinarian and NASAHO President.

"I am pleased that the Appropriations Committee has approved this provision and I hope that the Senate will consider the Ag Appropriations bill sooner rather than later. The United States has been free of Foot and Mouth Disease since 1929, and we should demand the same from our trade partners," Senator Johnson added.

[mikey]

Monday, August 04, 2008Print This Page
Countries of Meat's Origin Soon to be Stated
US - Imagine this - picking up a T-shirt with the label: Product of the United States, China, Indonesia and/or Honduras.



Shoppers could see labels like that in the supermarket meat case, starting this fall.

A law requiring meat to be labeled with the country of origin takes effect Oct. 1, but rules that resulted from a compromise among industry interests might leave consumers scratching their heads, says the Honolulu Advertiser.

The law, altered by the new farm bill, allows special labeling for ground meat and for products of hogs and cattle that were born in Mexico or Canada but fattened and slaughtered in the United States. The U.S. Agriculture Department last week issued rules for interpreting the modified law.

A lot of pork will likely carry the label: "Product of the United States and Canada."

Allowing that label means packers won't have to keep track of whether the hogs they are slaughtering were born in Canada or the United States. Millions of young Canadian pigs are imported for fattening in the Midwest each year, and packers don't want to have to process them separately from U.S.-born swine. The common label means they won't have to.

Labels for ground beef could be even longer. Industry officials say any one package of ground beef often contains meat from a variety of different countries. But under the new rules, packers won't be required to keep track of what beef goes into a particular package.

The rules should certainly make it easier for processors, but is this really helping shoppers? Chris Waldrop of the Consumer Federation of America thinks so.

"It will provide them with information that they haven't had up until now," he said. "It will at least give them a group of countries that the meat could have come from. If they are concerned about any one of those countries, they can shop elsewhere."

Whether this has any real impact on consumer behavior remains to be seen.

[mikey]

Wednesday, August 13, 2008Print This Page
Visit to World's Largest Pig Plant
US - Smithfield's facility at Tar Heel is the world's largest pork processing plant and occupies one million square feet. It employs 5,000 people and produces an average of 8 million pounds of meat daily.



Having seen a small slaughterhouse operation, Andrea Weigl of News & Observer wanted to tour Smithfield Packing's plant south of Fayetteville.

She reports that Smithfield Packing Co. has a huge presence in North Carolina. Of the company's 14,000 US employees, 10,000 work at facilities in Tar Heel, Wilson, Kinston, Elon, Clayton and Clinton.

Last year, Smithfield announced it would phase out gestation crates at its farms by 2017. Smithfield's contract farmers will be expected to do the same.

The 2-by-7-foot crates confine sows during their four-month pregnancies. The sows can stand or lie down but not turn around. Animal activists hailed Smithfield's decision and hoped other companies would follow suit.

The pigs are unloaded from tractor-trailers into a series of concrete corrals that hold at most 15,000 pigs for an average of four hours. It is a sea of pink flesh.

One by one, the pigs are guided into one of four gas chambers where seven pigs are killed at once. Gassing causes less trauma for the animals and creates a better product; less muscle constriction means the meat is more tender, says Dennis Pittman, director of corporate communications.

The pigs' bodies are then hung by their feet onto overhead tracks in a sweltering part of the plant that smells of excrement and blood. Jugular veins are cut, and troughs on the floor collect the drainage. To remove hair, the carcasses are dipped in hot water, beaten by paddles inside a machine and enveloped in flames.

From there the pig carcasses proceed along a massive disassembly line: to the head room, the casing room, the chitterlings room, the marination room.

From a viewing area inside one large processing room, you stand above a maze of conveyor belts along which workers wield knives. A line of pig mid-sections rolls by. The loins veer off down one line, ribs are cut out by another line of workers, bacon and skin veer off to their own conveyor belts.

Cardboard boxes about the size of small jacuzzis are everywhere, being filled with up to 2,000 pounds of meat.

All the workers are encased in plastic smocks that come down to their knees. They wear safety helmets, a hair net that covers part of their face, ear muffs and latex gloves.

No human hands touch the meat. Those wielding knives wear belly guards and steel mesh gloves to protect themselves.

The rooms are filled with the rattle and hum of the conveyor belts and the intermittent beeps of the many forklifts moving those jacuzzi-sized boxes of meat.

On this day, hams were headed to Europe, hot dog casings to Korea, bacon to Wilson to be smoked and cured.

Every part of the animal is used: the blood is sold to cosmetics companies; the pancreas and pituitary glands are sold for medical uses; and the parts of the pig not for human consumption become dog food.

Finding other uses for all parts of the pig lowers the price of bacon and hams, Mr Pittman says.

"We're able to offer a quality product at a reasonable price," he says. "If it were not for agribusiness, as I like to call it, they would not be able to do that," concluding the News & Observer report.

[mikey]

Wednesday, August 13, 2008Print This Page
Pork Producers: Only the Sharp Survive
US - Dr David Meisinger, executive director of the US Pork Center of Excellence, gives his take on the causes of the current extremely tight margins in pork production in the US and elsewhere.

 

Globalization has never been more apparent in the pork industry than it is right now, writes Dr Meisinger on Farms.com.

The price of corn, fueled by its demand for ethanol production and by the Chinese appetite, has had a major impact on feed prices. The global market for all energy sources has been impacted as acres or hectares are used for production of different commodities. The prices for all energy sources have taken a free ride along with corn on world markets. Land prices are also following suit.

This is the first time in my memory that we have seen tight margins, not so much due to falling prices for pigs but because of rapidly escalating production costs.

Fortunately, in spite of record kills by day, week and month, we have not tested the shackle space limit yet so hog prices have not totally wrecked as they did in ’98. And also fortunately (although many in other businesses would not agree) we have a weak dollar, which has bolstered prices through record exports.

Other pork-producing countries that have lived with high feed prices are even worse off than we are. Many of them pay exorbitantly high transportation costs to procure feedstuffs from other places. This has resulted in greater losses and tighter margins, causing producers in these countries to liquidate and/or reduce production and their exports. Pork is the meat of choice in many regions of the world including much of Europe and Asia. Reductions in their own production or their inability to import pork at a reasonable price have pushed many of them right to our door.

While some estimates are that we have lost over two billion dollars in equity in our industry, which could be considered catastrophic, just think about how much worse it could have been if we had a stronger dollar and exports were not as evident; if these negative margins were more localized to our producers; if we were also experiencing a shortage of shackle space; or if we had some national outbreak of a foreign animal disease that shut down our borders. I am not trying to sugar coat a situation that has brought the ruin of many hog operations today, but I am saying that we should count our blessings once in a while.

In previous times with tight margins, pork producers have had to be very diligent in their businesses to capture every cent they could from their operations. Now, with extremely high input costs mostly in terms of feed, energy and transportation costs, producers need to constantly evaluate their businesses and all their business decisions. They need to be especially vigilant.

Tim Belstra of Belstra Milling in Indiana told a group of extension educators last week, that he has had to carefully watch every aspect of the company’s feed and pig production business, because only a couple of wrong decisions can send the operation over the edge. He claimed they were doing well, but only because of an excellent staff and some very good decisions along the way that have kept them sustainable.

These are tough times – sharp decisions by shrewd pork producers are more important than ever.

[mikey]

Saturday, August 16, 2008Print This Page
Market Preview : Demand-Driven Rally Tied to Exports
US - Weekly US Market Preview provided by Steve R. Meyer, Ph.D., Paragon Economics, Inc.



The hog price rally that I wrote about two weeks ago has now carried U.S. farm-level hog prices to near-record highs (see Figure 1). This week will almost surely best last week’s $82.04 national negotiated net price for the high for 2008. Thursday’s price was $84.04. The only prices between these and a clear-cut all-time record are those of the summer of 1990 when live prices reached a level just over $89 on a carcass weight basis.

Figure 1

U.S. NEG'D NET PRICE, WTD. AVERAGE



At a meeting this week, a woman asked a very good question – one you will likely hear fairly often if these prices remain high. She asked: “How can we argue that higher corn prices due to ethanol are causing these higher hog prices?” The answer is: “We can’t.” And, I would add: “We shouldn’t even try!”

I firmly believe that we are headed for higher hog and pork prices in 2009 and beyond because our costs will be higher. Part of that increase is feed costs, but some of it is also higher costs for buildings and capital costs. The latter of those is not due to interest rates, but rather due to the dramatically higher amount of capital that will be required to raise pigs.

Ethanol is primarily responsible for the higher feed costs we see today and will continue to see in the future. Prices must rise to cover those costs. They simply have to.

But this price rally is not being driven by costs. Cost-driven price rallies are caused by lower production. Slaughter is still running 6% higher than last year with year-to-date slaughter still 10% higher than in 2007 (Figure 2).

Figure 2
HOG SLAUGHTER: YR/YR CHANGE



This rally is being driven by demand, pure and simple. Further, it is being driven by export demand. University of Missouri professor Glenn Grimes’ index of domestic consumer-level demand was down again in June, falling to -2.3% from the 2007 level. (You might recall that May’s index was down 1.9%). This only leaves exports and by-products as possible sources of strength for live hog demand; by-product values are highly dependent on export trade.

We will get a more quantified read on this situation when June export data and July retail price data are released on Aug. 13 and 14, respectively. But I think wholesale pork prices clearly tell the story. Notice in Figure 3 that prices for the more “American” wholesale cuts (loins, butts, spareribs and bellies) have moved sideways or downward since hitting their seasonal peaks in mid-May.

Figure 3
PORK WHOLESALE CUT VALUES



On the other hand, the more “export-oriented” cuts, at least for this time of year, have kept rising steadily since that time. In fact, prices of these export cuts began a steady climb at the beginning of this year and the climb shows little sign of slowing. I do not recall ever seeing the prices of all of the major wholesale pork cuts falling within this tight of a price range. One of the benefits of trade is the ability to sell less-preferred cuts in markets that value them more. The beauty of the deal is that, in doing so, we offer consumers in those markets something they want and need. If not, they would not be buying.

 

RFS Waiver Request Nixed
Those are the good news items for this week and they are indeed good. The bad news item is yesterday’s announcement by the Environmental Protection Agency (EPA) that it has denied Texas Governor Rick Parry’s petition for a partial waiver of the renewable fuel standard (RFS) mandate for biofuels. In making the announcement, EPA Administrator Stephen Johnson said that the evidence did not support the claim that the RFS would cause “severe harm” to the economy or the environment. He did point out that EPA concluded that biofuels had been a cause of higher corn prices, but he also concluded that the RFS mandate, specifically, had not been a factor in those higher prices.

Technically, he is correct. The RFS has not actually caused fuel blenders to use more ethanol than they would otherwise have used. In economic-speak, “the constraint has not been binding.” Ethanol output has stayed ahead of the mandated level – sort of. This year’s production may actually be just short of the mandated 9-billion-gallon level, but blenders can apparently use credits (called RINs) they have received for above-mandate blending in past years to satisfy the shortfall this year. We may hear more about these RINs in the future.

Regardless, the RFS has contributed to the growth of the ethanol industry and, therefore, higher corn prices by guaranteeing a government-enforced growing market for ethanol. The RFS says that blenders will be required to use (translated: BUY) 10.5 billion gallons of ethanol in 2009, 12 billion in 2010, and then 0.6 billion gallons more each year until 2015, when the requirement levels out at 15 billion gallons.

What would pork producers and packers do if the government said that retailers and restaurants would be required by law to use 5% more pork each year for the next six years? Do you think that might spur a building boom for hog farms and processing plants? A guaranteed growing market is the stuff of business managers’ dreams. But government fiat does not necessarily make good economic sense. Let’s hope those dreams do not turn to nightmares.



NORTH AMERICAN PORK INDUSTRY DATA




COMLETING MEATS
PRODUCTION AND PRICE SUMMARY



 

[mikey]

Wednesday, August 20, 2008Print This Page
Cargill Reports Q4 and Fiscal 2008 Earnings
US – Cargill reported earnings from continuing operations of $744 million in the 2008 fourth quarter ended May 31, up 18 percent from $628 million in the same period a year ago. A $310 million gain on the sale of discontinued operations brought fourth-quarter net earnings to $1.05 billion.



For the full fiscal year, Cargill earned $3.64 billion from continuing operations, a 55 per cent increase from $2.34 billion a year ago. The $310 million gain on the sale of discontinued operations in the fourth quarter brought fiscal 2008 net earnings to $3.95 billion.

Revenues for the full year rose 36 per cent to $120.4 billion. Cash flow from operations increased 77 per cent to $7 billion.

"Cargill posted a record financial performance in a year of exceptionally strong commodity demand, market turbulence and price risk," said Greg Page, Cargill chairman and chief executive officer. "By bringing to bear our business diversity, the full capacity of our global assets, strong risk management and a significant increase in capital deployed, we operated successfully in the most volatile agricultural and energy markets in decades. Despite tight stocks of many agricultural commodities, we maintained reliable supply chains for our customers and created value-adding solutions."


--------------------------------------------------------------------------------
*
'Earnings in agriculture services, food ingredients and applications, and risk management and financial were below the year-ago levels for the three segments' 
 
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Mr Page said Cargill's investment in the fertilizer industry also contributed significantly to company results. Since 2006, global demand for crop nutrients has surged in response to the world’s increased need for higher crop yields to meet rising demand for food and agricultural commodities.

Among Cargill's five business segments, fourth-quarter earnings were led by the origination and processing segment and the industrial segment, both of which were up substantially from the same period a year ago. Earnings in agriculture services, food ingredients and applications, and risk management and financial were below the year-ago levels for the three segments.

For the full year, earnings were led by origination and processing, which increased results substantially from last year's level. The industrial segment, which includes Cargill's investment in the fertilizer business, also posted exceptionally strong earnings. Both the agriculture services and the food ingredients and applications segments were well ahead of last year. Earnings in risk management and financial declined moderately from last year's high, though outstanding performances in several areas reflected the segment's diversification.

Mr Page underscored the importance of Cargill's attention to maintaining a strong balance sheet. "Over the past two years, it has required on average an additional $15.5 billion in total assets to run the company. Given the persistent turbulence in credit markets, Cargill's adherence to disciplined financial management was a significant element of our performance."

In assessing economic forces at work in the world, Mr Page noted that growth in gross domestic product among the world's developing economies has averaged more than 6 per cent a year since 2000. Although this expansion is projected by the International Monetary Fund and others to slow somewhat in 2008 and 2009, it has given millions of people the means to improve their diets, which has lifted demand for grains and oilseeds. Underpinned by high oil prices and government mandates and subsidies, global production of biofuels also has boosted demand. Yet world grain stocks sit at 35-year lows, drawn down by weather-affected crops and slower growth in average crop yields worldwide. The tight dynamic sent prices and price volatility in fiscal 2008 to new highs and elevated energy prices increased the cost of producing and transporting agricultural commodities.

Mr Page said the world has the means to give agriculture the chance to catch up with demand. "If markets are allowed to work, today's prices can spark a supply response from farmers. A rekindling of public and private investment in agriculture and in rural infrastructure will drive productivity gains."

Cargill continues to invest in global food and agriculture, including in developing countries worldwide where more than half of its 160,000 employees live and work. "Cargill people play valuable roles in helping improve the quality of local agriculture, in providing farmers with access to world markets, and in managing basic and value-adding food-processing facilities," said Mr Page. "This generates income and investment flows in rural communities and, of key significance today, allows food commodities to move from places of surplus to places of need."

Mr Page emphasized the importance of innovation in food, agriculture and risk management. "We are finding new ways to connect with customers, non-governmental organizations and academic institutions so that together we can nourish new ideas and possibilities in the complexity that is today's global economy."

In its report on Cargill's financial results, The StarPhoenix based in Saskatoon, Canada, says that in fiscal year 2008, Cargill spent $2.5 billion on acquisition and capital expenditures, which included buying a grain export terminal and elevator network in Canada, buying a Hungarian grain company and acquiring two poultry processors.

[mikey]

Wednesday, August 20, 2008Print This Page
First Fresh US Pork Traced Back to Farm
US - Nature's Premium Brand, a leader in premium, all-natural fresh pork, is the first North American pork company to track DNA for reliable and accurate traceability back to the farm where the animals were raised. Nature's Premium will use IdentiGEN's DNA TraceBack(R) system, a USDA Process Verified, DNA-based traceback system, for indisputable product verification.


 

Nature's Premium Brand pork packages will carry IdentiGEN's DNA TraceBack seal at the meat case to guarantee to consumers that each cut came from the unique Nature's Premium production and processing system. Retailers carrying Nature's Premium pork with DNA TraceBack include Kowalski's Markets of Minneapolis, Minn.; Sendik's Food Markets of Milwaukee, Wisc.; New Leaf Community Markets of Santa Cruz, Calif.; Dave's Marketplace stores of Rhode Island; Donelan's Supermarkets of Boston, and Bogopa, a food distributor serving several international foods markets in greater New York. Nature's Premium Pork is also available through select foodservice distributors nationwide.

The Nature's Premium breed-specific Duroc pigs are raised by family farmers in the Midwest on a strict vegetarian diet with no animal byproducts. Animals are never administered antibiotics or growth promotants. The company's participating farms offer exceptional animal healthcare, sanitation and humane treatment. Its ultra-modern processing facility is unique in the industry for its small size, eco-friendliness and dedication to safe processes.

"Simply put, this program equates to trust," said Nature's Premium Brand founder and CEO John D. Stewart. "We take samples of the actual DNA of every animal in the program to assure that we are delivering the premium quality assurances customers expect."

Nature's Premium began conducting internal trials of the DNA TraceBack system with IdentiGEN's U.S. lab in Lawrence, Kan., in May. The Nature's Premium / DNA TraceBack partnership means that grocery retailers can offer Nature's Premium Brand pork with confidence, knowing that, in the event of a question about the safety or integrity of the product, its source can be definitively verified, Stewart added.

Boyd Oase, Meat and Seafood Director of Kowalski's Markets, said, "From a food-safety standpoint, DNA TraceBack is extremely valuable to my department. And for my customers, it provides 100 percent reassurance that Nature's Premium Pork is a safe, wholesome, all-natural product."

"DNA is a uniquely accurate, permanent and tamper-proof identification tool," said IdentiGEN CEO and President Donald R. Marvin. "Because it uses nature's bar-code -- the unique DNA of every animal -- DNA TraceBack is the ultimate proof of product integrity."

IdentiGEN's DNA TraceBack system is an approved USDA Process Verified Program (PVP). PVP designation signifies that the USDA has verified the IdentiGEN system as a consistently reliable program in which meat processors, meat producers, retailers and consumers can have confidence. There are currently 36 approved USDA Process Verified Programs.

[mikey]

Wednesday, August 20, 2008Print This Page
U.S. and Canadian Hog Inventory Up 3 Percent
US - This publication is a result of a joint effort by Statistics Canada and NASS to release the total hogs, breeding, market hogs, sows farrowed, and pig crop for both countries within one publication. This information was requested by the U.S. hog industry to provide producers additional information about potential hog supplies. U.S. inventory numbers were previously released on June 27, 2008.

 

U.S. and Canadian inventory of all hogs and pigs for June 2008 was 80.6 million head. This was up 3 percent from June 2007 and up 5 percent from June 2006. The breeding inventory, at 7.56 million head, was down 2 percent from a year ago and down 1 percent from last quarter. Market hog inventory, at 73.1 million head, was up 3 percent from last year and up less than 1 percent from last quarter. The pig crop, at 36.9 million head, was up 3 percent from 2007 and up 7 percent from 2006. Sows farrowed during this period totaled 3.89 million head, up 1 percent from last year.

U.S. inventory of all hogs and pigs on June 1, 2008 was 67.7 million head. This was up 6 percent from June 1, 2007, and up 1 percent from March 1, 2008. The breeding inventory, at 6.07 million head, was down 1 percent from last year, and down 1 percent from the previous quarter. Market hog inventory, at 61.6 million head, was up 7 percent from last year, and up 1 percent from last quarter. The pig crop, at 29.0 million head, was up 4 percent from 2007 and up 9 percent from 2006. Sows farrowed during this period totaled 3.09 million head, up 2 percent from last year.

Canadian inventory of all hogs and pigs on July 1, 2008 was 13.0 million head. This was down 12 percent from July 1, 2007 and down 14 percent from July 1, 2006. The breeding inventory, at 1.49 million head, was down 5 percent from last year and down 1 percent from last quarter. Market hog inventory, at 11.5 million head, was down 12 percent from last year but virtually unchanged from last quarter. The pig crop, at 7.88 million head, was down less than 1 percent from 2007 but up slightly from 2006. Sows farrowed during this period totaled 801,700 head, down 1 percent from last year.

[mikey]

Friday, August 29, 2008Print This Page
CME: Sharp Decline in Pork and Hog Markets
US - CME's Daily Livestock Report for 28th August 2008.



Pork and hog markets have declined sharply in recent days on speculation that pork exports are slowing down and could decline even more significantly if Russia decides to curtail purchases of US pork. Hog futures continued to move lower on Thursday and Q4 hog futures have lost almost 500 points in the past two days. Cash hog prices also have posted dramatic declines, which should be even more worrying than speculation of what may or may not happen with Russian shipments. The IA/MN lean hog carcass (USDA wt. avg.) closed on Thursday afternoon at $70.73/cwt, $18 or 20% lower than the high of August 8.

The recent speculation about export markets and the sharp reaction of futures to it highlighted a point that has become ever more prominent in recent years, namely the increasing reliance of the US pork industry on exports to clean up growing pork supplies. There are clearly rewards in becoming a top supplier in the global marketplace. US producers reaped significant profits for an extended period of time between 2003 and 2007 in large part due to this expansion. While the rise in feed costs eroded many of those profits, there is little question that US producers would be in very dire straits this summer had it not been for strong exports. The risk, however, is one that other large world exporters know too well. Export markets tend to be fickle due to animal disease risk and political power plays. Producers no longer can manage their margins by managing their supplies. They are now also dependent on forces that shape global trade flows.

The attached charts seek to show the significant shift in US pork exports during the past five years. To be consistent, we compared pork export data for the first half of 2008 with the same time period in 2003. Five year ago, US pork exports accounted for about 9% of overall US pork production and pork exports to Russia and China/Hong Kong accounted for about 0.5% of US pork production. In the first half of this year, exports to these two markets now account for almost 7.5% of TOTAL US PORK PRODUCTION and 34% of the 2.5 billion pounds of pork exported during this period. Overall pork exports in 2008 have accounted for 21.5% of all pork produced in the US. The increasing reliance on exports has increased the potential for profit but also the risk associated with it. Over time, we suspect this will lead to further consolidation and integration of the US pork industry in order to derive even greater efficiencies but also better manage the increased risks.

 

[mikey]

Friday, August 29, 2008Print This Page
Learning About Animal Welfare Online
US - TheHumaneTouch.org Web site is American Humane Certified's(TM) latest tool for consumers to learn more about the humane treatment of farm animals used to produce food. The animal welfare organisation says that the site is a resource for consumers, producers, retailers and the food service industry to learn more about animal welfare standards.



American Humane Certified is a voluntary, fee-based service available to agricultural producers of protein products. The program provides independent, third-party audited verification that the care and handling of animals of enrolled farms meet the strict animal welfare standards set forth by American Humane Certified. Producers who meet the standards may use the American Humane Certified label on their products.

The American Humane Certified farm animal program is the nation's original independent certification and labeling program for humanely raised food.

All producers certified by American Humane meet basic criteria that requires animals have clean and sufficient food and water; have a humane environment under conditions and care that limit stress; are able to express normal behaviors and live in an appropriate and comfortable environment that includes sufficient space, shelter, a resting area and company of their own kind; and have a healthy life, benefiting from prevention of disease and injury and rapid diagnosis and treatment.

A 2007 survey for American Humane Certified, conducted by the independent Public Opinion Strategies organization, found that 58 percent of consumers said they would spend an additional 10 percent or more for products (meat, poultry, eggs or dairy) labeled as "humanely raised." This same group of consumers ranked the humane label as most important, even over organic or natural labels.

Consistent with the program's mission, the new website addresses the program's goal to be good for animals, good for people and good for businesses that raise and sell food products. The site features information for consumers, grocers and producers, as well as providing a secure Certified producer's section with auditing and management tools. Users can learn about American Humane Certified producers, their unique operations and their dedication to animal welfare. In addition, users can find where to purchase products certified by American Humane as well as upcoming trade and consumer events that will feature the program.


 

[mikey]

Thursday, August 28, 2008Print This Page
CME: Pork and Poultry Exports to Russia
US - CME's Daily Livestock Report for 27th August 2008.



A big chill permeated livestock markets on Wednesday following rumors that Russia was preparing to reduce the number of permits for pork and poultry products from the US. While Russian authorities and representatives from the US poultry industry had been discussing possible cuts in imports of US poultry products, the reductions now appear to be on a fast track following the rising tensions over the war in Georgia and the Russian recognition of two Georgian breakaway provinces as independent states.

The fact that the cut in permits would involve not just poultry but also pork seemed to catch the market by surprise. Most hog futures declined the permissible 300 point daily limit and cattle futures also were down sharply on concern than lower prices for competing meats would pressure beef prices going forward.

It is yet too early to know what impact a reduction in Russian purchases of US pork and poultry products will have on markets in 2009. We don’t know how big the cuts will be and when will they go into effect. There is no question, however, that Russia has become a key market for US meat products in recent years. As the chart to the left shows, monthly exports of pork products to Russia have increased from less than 5 million pounds a month in 2005 to around 40 million pounds in the first half of 2008. The fact that Russia is a large buyer of pork trimmings as well as pork variety meats has been a boon for pork packers, especially in recent months when the price of pork trimmings hit all time record levels. Indeed, lean trim prices were trading over the price of ham in some cases. Even more problematic for the meat complex, however, is the outlook for US poultry exports to Russia.

There is a fear that a significant decline in poultry exports to that country would depress prices for dark meats at a time when the industry is already pressured by high feed costs and negative margins. Limited access to the Russian poultry market would certainly require even more significant cutbacks in poultry production. In the short term, however, poultry prices would suffer and in the process pressuring prices for beef and pork. USDA currently expects US pork exports in 2008 to reach 5.406 billion pounds, or 23% of overall US pork production. If the Russian action is swift and dramatic, and it can be, it would remove about 80-100 million from projected Q4 exports. This would be the equivalent of half a million more hogs coming to market than previously expected. It’s a big number considering we are looking at new all time record slaughter this fall.

[mikey]

Thursday, August 28, 2008Print This Page
MRI Device Tested to Measure Body Fat in Piglets
US - A new magnetic resonance imaging (MRI)-based device - more advanced than the technology used today for body composition tests - can accurately and precisely measure total body fat in piglets using the principles of quantitative magnetic resonance (QMR), according to Agricultural Research Service (ARS) scientists who evaluated the new technology.



The new device, called EchoMRI, was tested by ARS researchers to measure not only total body fat, but lean tissue mass, free water mass and total body water in piglets. The research was done under a grant from the National Institutes of Health, which wants to know if the new technology could have future applications for human pediatric use.



A new device can more accurately and precisely measure total body fat, lean tissue mass, free water mass and total body water in piglets and may have future applications for human pediatric use.Standard MRI systems are commonly used to scan and visualize tissue in humans. However, when used for body composition analysis, imaging systems are subject to substantial error rates caused by the interpretation of visual images using software that relies on population averages.

EchoMRI uses a new type of QMR methodology to obtain body composition results. Its measurement principle depends on the density of hydrogen nuclei and the physical state of the tissue.

ARS animal scientist Alva Mitchell at the Animal Biosciences and Biotechnology Laboratory in Beltsville, Md., tested the device, developed by Echo Medical Systems, to determine EchoMRI's precision and accuracy in piglets as compared to dual x-ray (DXA) technology and chemical analysis.

Twenty-five piglets, each weighing between 3.5 pounds and 8 pounds, were screened live, anesthetized, and post-mortem, using a prototype EchoMRI device for infants. The piglets were also scanned using DXA and then subjected to chemical analysis.

After DXA scans, EchoMRI screenings, and chemical analyses were completed, EchoMRI was found to be a precise and accurate method suitable for measuring piglet whole body composition, total body fat, lean tissue mass, free water mass, and total body water. While these studies were conducted on piglets, EchoMRI may be transferable to market-weight pigs.

EchoMRI allows for measurements to be conducted in only a few minutes without anesthesia or sedation, is radiation-free, and does not require the subject to remain completely motionless. This facilitates convenient, low-stress repeated tracking of small changes in body composition and can be advantageous to researchers to optimize feed utilization. It could also help researchers identify high-value hogs for breeding.


 

[mikey]

Friday, September 12, 2008Print This Page
CME: July Pork Exports HUGE!
US - CME's Daily Livestock Report for 11th September 2008.



USDA’s Foreign Agricultural Service released meat export data for July today and it showed a continuation of both remarkable pork exports and a recovery of beef exports. It is important to note that these data are for July, not August — when we believe exports really became interesting. We noted last week the growth of beef exports to Korea and exports are about the only explanation for August’s pork and hog price run-up. But those data will not be released until mid-October.

Meanwhile, July was another HUGE month for pork exports — up 86.7% from July 2007. What is unbelievable is that the July year-on-year increase is the smallest since March, following 93.7% in April, 96.% May and 111.7% in June. That final number is larger than was widely quoted because it is based on product weight data from FAS, not carcass weight data from ERS. China-Hong Kong led the growth parade once again at +185.3% from last year. China-Hong Kong was also the largest customer for U.S. pork in July — the fourth time this year that Japan has been number two after never having been before. Year-todate pork exports now stand at +70% (please refer to the graph below). Japan is still the largest customer for 2008 but look at the total YTD growth for China-Hong Kong: +425%. Shipments to Mexico in July were just over double those of July 2007 to push YTD shipments up to +39%. Shipments to Russia are up 144% for the year putting Russia in a dead heat with Canada for our fourth largest export customer.


Similar growth of pork variety meat exports has helped hog values by pushing total by-product values to nearly $25/head. As can be seen in the chart below, China-Hong Kong is the leader of that growth as well and has drawn virtually even with Mexico, which was once by far the largest customer for U.S. pork variety meats. Sales to Russia and Korea have grown significantly this year as well.


Figures 1 and 2 show YTD results for the value of pork and pork variety meat exports. They reflect this year’s major volume growth but also indicate that the growth has not been accomplished through price reductions. The value of exports has grown almost as much as has the quantity meaning that prices have fallen only slightly. The value of pork variety meat exports has actually grown more than the quantity indicating higher prices. Both results speak clearly of very strong export demand.

U.S. beef exports grew to 61,869 metric tons in July, 15.9% higher than last year. That growth rate is about half the rate of the January through June rates mainly because this years’ data are being compared to a very good month in July 2007. Japan led the growth in both unit and percentage (+82.6%) terms in July. Shipments to Canada, Mexico, Taiwan and Vietnam grew from last year as well with the last of those being 5 times as large as last year — but still small, accounting for only about 4.5% of total exports. July exports to Korea were 86% lower than in last July but here is another case where one needs to be careful about percentages. July of 2007 was the peak for shipments to Korea after the initial agreements regarding BSE protection mechanisms. In fact, nearly half of our 2007 exports to Korea occurred in July.

 

[mikey]

Monday, September 15, 2008Print This Page
Lessons that Record-High Hog Prices Teach
US - The week of Aug. 16 saw hog prices set a record high at just over $90.43. It eclipsed a 17-year mark set after the pork industry’s dramatic consolidation and restructuring of the 1980s and the launch of the “Other White Meat” campaign, writes Troy Marshall.



The pork industry’s last 17 years are similar to what we’ve seen in the packing and feeding industries – concentration and increased economies of scale, along with new technology and improved genetics, which led to higher levels of efficiency. That efficiency and its resulting cost reductions enabled producers to both accept lower margins and maintain margin levels despite overall inflationary pressures and increasing supplies.

This new record-price level for hogs in 2008 is unique in that it was set without a reduction in supply (pork production is up nearly 9% on the year). The driver in hog prices has been demand, not domestically but via exports, the same as in the beef industry.

Two weeks ago, a near-record drop in hog prices was seen, the result of slumping exports and not really reflective of either domestic demand or supplies, reports BEEF Magazine. Thus, the hog market is once again validating the theory that domestic supply and demand are now secondary items in predicting price levels for our products. The two primary factors needed to determine long-term pricing levels are now global and political in nature. Export demand, market access and global supplies, coupled with political initiatives (e.g., ethanol), have become the drivers.

Understanding the ramifications of Russia's recent aggression toward Georgia and its likely impact on market access, discerning the differences in farm policy, changing attitudes toward free trade and energy policy depending on whether Obama or McCain is coupled with a strengthened Democratic majority in Congress, are the factors that will have the most impact on livestock prices and profitability.

Even key metrics regarding consumers are shifting. A decade ago, the main concerns in the US were eating quality, consistency, uniformity and relative price relationships between competing meats or alternative sources of protein. It’s not that issues such as aggregate domestic supply and demand figures are irrelevant; it’s that success in addressing these issues has moved them well down the priority list.

The branded revolution, along with industry initiatives, has removed some of these concerns about US products. It has, thus, allowed consumers to begin to differentiate products on other issues, such as whether the product is locally grown, natural, organic, humanely treated, traceable or perceived to be environmentally and nutritionally positive. It's been found that consumers will afford what it is that they want, and the real driver is in the country's ability to identify and respond to those consumer desires