American Hog News USDA

[mikey]

Tuesday, March 10, 2009Print This Page
CME: Exports 'Okay but Not Great' or 'Dead'?
US - CME's Daily Livestock Report for 9 March 2009.



A MAJOR discussion topic these days in meat and poultry markets is the status of exports and the discussion is certainly not passing interest — exports are critical to US animal protein sectors. The phenomenal performance of US pork and pork variety meat exports in 2008 — up 57 per cent in volume, up 54 per cent in value and now representing 20 per cent of US production — has been addressed on several occasions in these pages. But 2008 was also a record year for US broiler exports.

The 6.96 billion pounds exported was 17.9 per cent higher than 2007’s total and represented a record 19.1 per cent of net ready-to-cook broiler production. And beef exports, though not record-high due to the continuing recovery from BSE in 2003, were 32 per cent higher than 2007 and represented 7.1 per cent of total production. Clearly, all three of these businesses have much at stake in export markets. Consider what would happen if a significant portion of 2008’s shipments had to be consumed in the US To use a poultry metaphor — Everyone has a lot of eggs in this export basket!

So what is happening this year? That is difficult to tell. Some in the trade report that exports are “dead”, others have told us they are “okay but not great”. No one has provided any glowing descriptions but that is no surprise considering the 2008 yardsticks to which 2009 business will be compared, especially for chicken and pork. And actual data from the Department of Commerce and USDA are delayed six weeks, meaning that we still have no actual data for 2009. The first will be released next Monday.

The only data approaching “real time” that we have is for beef exports. Why the special treatment? Because the industry (both producers and packers) asked for it and got it as part of the Livestock Mandatory Reporting Act of 1999. Chicken was not included in that legislation. Pork was included but pork producers and packers agreed to not pursue weekly export data based on the concern that publication of that information would likely help competitors such as Canada, Denmark and Brazil more than it would help U.S. producers and packers. And don’t scoff at that idea too quickly.

Consider that, in 1999, the US beef sector was producing essentially a unique product for export markets — grain fed beef. Only Canada was a significant competitor. Australia produced a bit but not much until BSE came along in Canada and the US and created a golden opportunity in 2003 and 2004. On the other hand, pork was and is pretty much pork. There is not near as much difference among pork from various suppliers as there was difference between grain fed and grass fed beef. Some now regret that decision by the pork industry and pork producers at their recent annual meeting actually voted to ask USDA to begin mandatory weekly export reporting.

So, only weekly beef export data can give us much of an idea what is going on in US meat and poultry export markets — and it says things are going pretty well (top graph below). Weekly shipments have been hot and cold so far in 2009, but they are 9 per cent higher YTD. The data coming out next Monday is monthly data, so we have provided the 2008 monthly beef export chart to compare to its weekly counterpart. The patterns are clearly similar even though the data cannot be compared precisely — weekly data are in product weight vs. carcass weight for monthly and, of course, months just refuse to operate well on a whole-week basis.

[mikey]

Wednesday, March 11, 2009Print This Page
Know the Rules for Handling Animal Losses
US - A new US Food and Drug Administration (FDA) rule could impact the disposal of dead farm animals.



The rule, scheduled to go into effect in April, would prevent the use of brains and spinal cords of older cattle for animal food. The new rule covers all cows 30 months and older and is aimed at preventing the spread of bovine spongiform encephalopathy, commonly known as mad cow disease.

Many Kentucky farmers and counties depend on professional hauling companies to remove carcasses and deliver them to rendering facilities. Some of these companies may choose to discontinue their enterprise due to this new restriction.

With the decision by at least one hauler to suspend services, at least temporarily, the University of Kentucky Livestock Disease Diagnostic Center has been receiving calls regarding disposal. But that is not a part of the center's mission.

"LDDC is primarily a diagnostic laboratory, not a statewide carcass disposal facility," said Craig Carter, director. "Our mission is disease surveillance and diagnosis."

Kentucky has nearly 3 million cattle, swine and sheep, and death losses are an unfortunate but real part of animal agriculture. Their proper disposal is critical to safeguarding water supplies and reducing the spread of disease. Robert C. Stout, state veterinarian, said his office gets more complaints about animal carcasses than on any other subject.

"The enhanced feed ban rule will have a tremendous impact, not only on animal agriculture but also on public health and the environment," Stout said. "Farmers must have a means of disposing of dead animals that is readily accessible and affordable."

While this new rule could make disposal more challenging and costly, farmers should not forget there are laws in place establishing proper disposal practices.

State law requires farmers to dispose of dead animals through an approved method within 48 hours of death. These methods include incineration, boiling or steaming, burying, removal by a licensed rendering establishment, disposition in a contained landfill or composting. These methods are outlined in the Kentucky Agriculture Water Quality Act under Livestock Best Management Practice No. 15. Improper dumping of an animal carcass in a stream, sinkhole or field is unlawful, said Amanda Gumbert, UK extension water quality liaison.

UK College of Agriculture environmental specialists and engineers can assist farmers with information on developing and implementing agricultural water quality plans, on-farm composting facilities and other aspects of complying with dead animal disposal laws. UK publication, ID-67, On-farm Disposal of Animal Mortalities, is available through the local office of the UK Cooperative Extension Service. This publication is a good starting point for farmers in learning the rules.

[mikey]

Monday, March 16, 2009Print This Page
CME: Corn Costs to Depend on Nitrogen Purchases
US - CME's Daily Livestock Report for 13 March 2009.



Spring is still a week away but it is time to begin the annual process of estimating US farmers’ planting intentions — and again this year, the numbers are very, very important. Perhaps not the estimates but certainly the final ones! On Friday, Informa Economics and Allendale, Inc. both released estimates for 2009 planted acreage. Allendale also included its trendline estimate for corn and soybean yields and its estimates for the total US corn and soybean crops. The numbers from both firms appear below. Both sets of estimates are based on producer surveys.


As you can see, the two firms’ estimates for corn acres are VERY different while their estimates for soybean acres are much closer. Last year’s actual figures were 85.982 million for corn and 75.718 million for corn. In 2007, a record 93.6 million acres were planted to corn and only 64.7 million were planted to soybeans. USDA’s survey-based estimates will be released in the 31 March Prospective Plantings report.

The planting decisions for a good portion of these acres were made last fall when many farmers applied nitrogen fertilizer on acres they were sure to plant to corn. Many acres are rotated between corn and soybeans every year but a growing number of acres are planted to continuous corn with that practice made more practical and profitable by modern corn hybrids with genetically engineered abilities to resist certain pests and tolerate specific herbicides. Planting decisions for those acres are not yet final and will largely hinge on the potential profitability of corn and soybeans.

Relative profits, of course, depend on relative prices and relative costs. Corn costs more to raise than do soybeans, primarily due to the need for more fertilizer. Corn yields, as can be seen from Allendale’s trend yields, are also about 4X those of soybeans. Corn costs this year are going to depend heavily on the timing of nitrogen purchases. A good amount of anhydrous ammonia was purchased last fall at over $1000/ton. That price is significantly lower now so the decision is going to vary greatly form producer to producer. Figure 1 shows the ratio of November soybean futures to December corn futures. This key ratio has moved decidedly in corn’s favor since mid-February. The ratio on Friday was even lower than the same week in 2007 — when those 93.5 million acres were planted to corn. It will take a lower ratio to get that done this year given higher corn costs but these price relationships appear to now favor corn.

[mikey]

Tuesday, March 17, 2009Print This Page
CME: Impact of Recession on Meat Exports Mixed
US - CME's Daily Livestock Report for 16 March 2009.



The impact of the global economic recession on US meat exports so far has been mixed. Beef shipments have slowed down but remain above year ago levels in large part due to access to the Korean market, which was not available last year. Pork exports are down but not as much as previously thought, in part due to strong growth in shipments to Japan and Mexico. And in a sign that the shit to less expensive meat protein is a global phenomena, US broiler exports are booming. Below is a recap of the highlights from the latest export data.

US pork exports in January were 322.7 million pounds, 8.7 per cent lower than a year ago but 33.7 per cent higher than the 2004-08 average. As the chart shows, the decline in shipments was for the most part due to sharp reductions in exports to the Chinese and Russian markets. On the other hand, exports to Mexico continued to post very strong growth and helped offset some of the declines in other markets.


January exports to Japan were 114 million pounds, 20.9 per cent higher than a year ago and 37 per cent higher than the five year average. Exports to Mexico were 79.7 million pounds, 62.8 per cent higher than a year ago and a new all time monthly export volume to this market. The increase in US pork exports to Mexico is even more impressive considering the sharp depreciation in the value of the Peso vs. the US currency. In part, we think the rise in US pork purchases reflects the rise in demand for less expensive meat products but also the decline in domestic pork supplies in the Mexican market. Exports to China, a booming market for US pork in 2008, are now back to long term trend levels. January exports to China/Hong Kong were 24.3 million pounds, 70 per cent lower than a year ago. Exports to Russia have for the most part disappeared. Exports to this market in January were just 6.5 million pounds, a quarter of what they were a year ago and a fraction of the 50+ million shipped to this market back in August.

Beef exports in January fared better than pork but total volume was lower than the levels we saw last summer. Total beef exports for the month were 128.6 million pounds, up 8.2 per cent compared to a year ago. Exports to Mexico at 45.6 million pounds were down 9.9 per cent while shipments to Canada at 20.9 million pounds declined 30 per cent from last year.


As for broiler exports, total shipments in January were reported at 607.8 million pounds, 33.4 per cent higher than a year ago. Broiler exports recovered in January in large part due to strong exports to the Russians.

[mikey]

Wednesday, March 18, 2009Print This Page
Weekly Roberts Report
US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.



LEAN HOGS on the CME closed down on Monday. The APR’09LH contract closed at $62.750/cwt; down $0.450/cwt. The JUNE’09LH contract lost $0.150/cwt to $74.075/cwt. The market couldn’t make up its mind which side it wanted to trade until late in the day when prices went south. USDA on Friday put the Pork Cutout at $59.55/cwt, up $0.85/cwt. The latest CME Lean Hog Index was lowered $0.18/cwt to $61.21/cwt.

[mikey]

Friday, March 20, 2009Print This Page
CME: US Pork Supplies Likely to Contract in Q2
US - CME's Daily Livestock Report for 19 March 2009.



It is broadly expected that US pork supplies will contract significantly in the second quarter. We should get a better idea of how large the decline will be from the USDA quarterly inventory numbers, expected to be released on Friday, 27 March. Based on the December inventory data, implied Q2 hog slaughter is expected to be down as much as 5 per cent, a decline that is in part due to fewer Canadian hogs and feeder pigs entering the US market.

High feed costs in the last few years, a sharp appreciation of the currency (at least until last fall) and COOL legislation, all have negatively impacted hog producers in Canada, leading to a significant net reduction in the breeding herd as well as the number of hogs and pigs entering the US market. For the period 4 January-7 March 2009, US hog producers imported approximately 898,000 Canadian feeder pigs, almost half a million feeders less (-35 per cent) than the same period a year ago.

Imports of slaughter hogs are down even more as US packers have imported around 112,000 head so far this year, down some 460,000 head or 80 per cent compared to year ago levels. In total, imports of Canadian slaughter hogs and feeder pigs during the first nine weeks of the year is down by almost 1 million head, or 48 per cent lower than the same period a year ago. Due to the decline in such imports, we calculate that for the week ending 7 March, Canadian born hogs made up just 5.7 per cent of US total hog slaughter, compared to 8.5 per cent a year ago and 7.3 per cent average of the past five years.

We calculated this number based on entries of slaughter hogs from the previous week as well as a lagged imports of feeder pigs (allowing for the time they spend on feed before coming to market). While the reduction in feeder pigs numbers will likely be captured in the USDA inventory survey, the decline in slaughter hog imports will not. It is a factor that needs to be accounted for when looking at out front projections of hog slaughter based on the USDA survey data.

A much smaller breeding herd in Canada will limit the overall supply of feeder pigs coming into the US during much of 2009. Given the changes made to the COOL final rule, which just came into effect this week, the burden on US packers and producers is less significant than when it was initially put in place and should ease some the pressure on Canadian imports. However, there is lingering uncertainty as to what USDA may do next in terms of further revising COOL rules, especially if packers do not abide by the request from the USDA Secretary to “voluntarily” impose more explicit labels for meat products.

[mikey]

Monday, March 23, 2009Print This Page
Commercial Red Meat Production Lower than 2008
US - Commercial red meat production for the United States totaled 3.83 billion pounds in February, down four per cent from the 3.97 billion pounds produced in February 2008, according to the USDA's National Agricultural Statistics Service (NASS).

 

Pork production totaled 1.82 billion pounds, down 5 per cent from the previous year.

Hog kill totaled 8.91 million head, down 5 per cent from February 2008.

The average live weight was up 1 pound from the previous year, at 272 pounds.

January to February 2009 commercial red meat production was 7.99 billion pounds, down 5 percent from 2008.

February 2008 contained 21 weekdays (including one holiday) and 4 Saturdays.
February 2009 contained 20 weekdays (including one holiday) and 4 Saturdays.

[mikey]

Tuesday, March 24, 2009Print This Page
CME: Good News for US Meat Demand
US - CME's Daily Livestock Report for 23 March 2009.



Virtually every analyst that we know considers meat and poultry demand to be the number one risk factor for 2009 and there was some good news on the meat demand front on Friday.

Professor Glenn Grimes at the University of Missouri released his demand indexes for the December through February quarter and the indexes for both beef and pork were higher than one year ago.

Consumer level beef demand was 3.4 per cent higher than one year ago while pork demand at the same level was up 1.6 per cent. Note that we say “consumer level” since these indexes do not separate retail and foodservice.

They use only the retail price since a) no separate prices are published for the price of meats sold to consumers through foodservice (and separating the meat portion of a dinner bill would be very difficult) and b) if foodservice sales rise, supplies available to retail will fall and drive retail prices upward.

That is, the retail price is an effective shadow price. You can argue with that logic but the truth is that the retail price is all that we have to work with so this is about the best we can do. Fed cattle and live hog demand did not fare nearly so well with cattle demand falling 7.1 per cent short of year-ago levels and hog demand falling 1.5 per cent short.

That finding is no surprise to cattle feeders who have seen prices lower than one year ago in spite of lower slaughter levels. And lower hog slaughter runs have not driven prices up by nearly the expected -3:1 ratio that has characterized recent years’ markets.

Lower pork packer margins were not enough to offset the impact of lower exports while higher beef packer margins in December and January more than offset the positive impact of higher beef exports and better consumer-level beef demand. But consumer demand appears to be holding up. Chicken and turkey indexes will be available this week. Hog prices published by USDA under the mandatory price reporting law have exhibited large spreads between the four pricing method categories.

The graph at left shows weekly averages and the “Other Market Formula” series, which is comprised almost entirely of prices based on CME Lean Hogs futures has been FAR above the Negotiated and Swine/Pork Market Formula prices (ie. the “spot” market) for much of the past 20 months. So have “Other Purchase Arrangement” prices which are, generally, prices tied to production costs or feed prices.

The only trouble with this price, though, is that it has hardly ever been high enough to actually cover producers’ average costs. These contracts paid just over $64/cwt carcass in Jan and Feb. Iowa State University estimates that breakeven costs were $70-$72/cwt carcass in those months.

[mikey]

Wednesday, March 25, 2009Print This Page
Antibiotics Vital to Animal Health and Food Protection
US - The American Farm Bureau Federation is expressing strong opposition to legislation that would remove and restrict important antibiotics for veterinary and farm use.



In a letter to Congress, AFBF President Bob Stallman said the bills (H.R. 1549 and S. 619) would handicap veterinarians and livestock and poultry producers in their efforts to protect the nation’s food supply and maintain the health of their farm animals.

"Farmers and ranchers and the veterinarians they work with use antibiotics carefully, judiciously and according to label instructions, primarily to treat, prevent and control disease in our flocks and herds," Mr Stallman said. "Antibiotics are critically important to the health and welfare of the animals and to the safety of the food produced."

Mr Stallman said more than 40 years of antibiotic use in farm animals proves that such use does not pose a public health threat. In fact, Mr Stallman said that "recent government data shows the potential that it might occur is declining." Bacteria survival through food processing and handling is decreasing, food-borne illness is down, development of antibiotic resistant bacteria in animals is stable and resistant food-borne bacteria in humans are declining.

"In order to raise healthy animals, we need tools to keep them healthy – including medicines that have been approved as safe and effective by the Food and Drug Administration," Mr Stallman said. "Restricting access to these important tools will jeopardize animal health and compromise our ability to contribute to public health through food safety."

Mr Stallman told members of Congress that by opposing the bills, they would "protect the professional judgment of veterinarians and livestock producers in providing safe and healthful meat products" for consumers.

[mikey]

Wednesday, March 25, 2009Print This Page
US Swine Economics Report
US - On 27 March USDA will release the results of their latest survey of the US swine inventory. My estimates are that the breeding herd is 1.9 per cent smaller than a year ago, the market hog inventory is 3.9 per cent smaller, and the total herd is 3.7 per cent smaller than on 1 March 2008, writes Professor Ron Plain in his Swine Economics Report.

 
Ron Plain
Total slaughter of barrows and gilts was down nearly 2 per cent during December-February due to a 65 per cent drop in imports of slaughter hogs from Canada. Slaughter of US raised hogs was a bit higher than expected based on the December inventory report. Any revisions that USDA makes to their December inventory estimates are likely to be small.

In their last inventory report, USDA predicted December-February farrowings would be 3.3 per cent smaller than a year earlier and March-May farrowings would be down 1.6 per cent. I'm predicting winter farrowings actually were down 3.5 per cent and spring farrowings will be down 2.0 per cent. I'm forecasting summer farrowings will be down 1.0 per cent compared to June-August 2008. Declining feed prices in the second half of 2008 halted what had been a rapid reduction in the sow herd. December-February, sow slaughter was 7.4 per cent lower than a year ago.

I'm estimating that pigs per litter were up 2.4 per cent this winter, as it was the two previous quarters. My estimate is the December-February pig crop was 98.9 per cent of a year earlier. Feeder pig imports during December-February were 35 per cent below last winter's level, so the light weight market hog inventory should be down considerably more than the fall pig crop.

My estimates of the 1 March market hog inventory by weight groups are: 180 pounds and heavier 97.6 per cent, 120-179 pounds 95.5 per cent, 60-119 pounds 95.0 per cent, and under 60 pounds 96.4 per cent of a year earlier.

My estimate of hogs in the 60-179 weight groups implies that second quarter daily hog slaughter will be more than 5 per cent below year-ago levels, if the inflow of slaughter hogs from Canada continues to be down. I expect live hog prices to average close to $52/cwt ($68.50/cwt carcass) in the second quarter of 2009.

I expect hog slaughter during the third quarter of 2009 to be 4 per cent lower than the number slaughtered in July-September 2008. If so, look for third quarter 2009 hog prices to average close to $53/cwt on a live basis and $70/cwt on a carcass basis.

[mikey]

Wednesday, March 25, 2009Print This Page
Weekly Roberts Report
US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.



LEAN HOGS on the CME closed down on Monday. The APR’09LH contract closed at $60.65/cwt; off $1.100/cwt and $2.100/cwt lower than a week ago. The JUNE’09LH contract lost $1.150/cwt to $72.625/cwt; $1.450/cwt lower than last Monday’s close. Losses were pared late in the day on sell stops and short covering. USDA’s cold storage report last Friday proved bearish. USDA said that February stocks broke last year’s record of 611.8 mi lbs by 14.71 mi lbs as supply was increased almost 30 mi lbs to a record 626.6 mi lbs. USDA on Friday put the Pork Cutout at $58.73/cwt, down $2.07/cwt. Good news in the DOW did not provide much support for pork prices. The latest CME Lean Hog Index was placed at $58.15/cwt at $0.82/cwt. Pork packer margins were in the black by $2.55/head based on the average buy of $40.62/cwt vs. the average breakeven of $41.59/cwt. Hold off on feed buys for the short term while selling hogs when ready. It won’t pay to put additional weight on at this time.

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday. MAY’09 corn futures closed at $3.954/bu; off 1.0¢/bu but 3.0+¢/bu higher than this time last week. The JULY’09 contract closed at $4.060/bu; down 1.0¢/bu but 4.25¢/bu higher than last Monday. DEC’09 corn futures finished at $4.272/bu; off 0.75¢/bu but up 5.75¢/bu over a week ago. After reaching highs not seen in over 8 weeks farmer selling picked up and knocked the wind out of the price run up. Federal action continues to affect all markets while sending the US stock market soaring. Exports remain lack luster coming in at 29.984 mi bu vs. 47.727 mi bu this time last year. USDA did confirm the sale of 110,000 tones (4.3 mi bu) of ‘08/’09 US corn to South Korea. Some weather concerns were noted regarding delayed planting due to cool, wet weather slowing fieldwork. Farmer-hedge sales pressured futures to below chart support levels as sell-stops under $4.00/bu in May futures were noted. Higher crude oil prices were supportive. Cash corn bids in the US Midwest were steady to firm on Monday. In the US Mid-Atlantic states cash corn prices were 2.0-5.0¢/bu lower than previous bids. Ethanol margins narrowed on rising corn prices. Funds bought over 2,000 contracts as large speculators turned net bullish for the first time in a while. The market is still very jittery. One floor source said it best, “If we get a big jump this week, people are going to take the money while it lasts. It’s very risky at this time.” The time to get your old crop corn sold is NOW as this sales window is not expected to last. It is a very good idea to get the ’09 crop priced to 45 per cent if you haven’t done so already. Feed purchasers should wait at least another week or two to buy.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were up on Monday on a soaring stock market and higher crude oil prices. Questions remain whether or not the rally is sustainable or merely a blip. MAY’09 soybean futures closed at $9.554/bu; up 3.5¢/bu and 44.5¢/bu over this time last week. The JULY’09 contract was up 3.0¢/bu at $9.520/bu and 44.5+¢/bu over last Monday’s close. The NOV’09 contract closed at $8.594/bu; up 2.5¢/bu and 9.0¢/bu higher than last report. Lower-than-expected exports and brisk farmer-hedge-selling pressured prices while continued political turmoil in Argentina provided some support. The market was pressured enough to come off the day’s 5-week high. Soybeans-inspected-for-export were placed at 20.536 mi bu vs. expectations for between 22-27 mi bu. Chinese shipments accounted for 32% of the reported numbers. Cash soybean bids in the US Midwest weakened at river ports while those in the US Mid-Atlantic States were steady to firm ranging from 5.0-11.0¢/bu cents higher. Funds bought nearly 3,000 contracts while large speculators cut net bear positions for the week ended 17 March. If you haven’t done so already it is a good idea to sell all old crop soybeans in the bin and get up to 35 per cent of the ’09 crop priced now. A consensus of sources over the last few days has agreed it is not unreasonable to see loan rate soybeans before this market is done.

WHEAT futures in Chicago (CBOT) closed off on Monday. The MAY’09 contract closed at $5.492 /bu; down 1.0¢/bu but 5.0¢/bu higher than this time last week. JULY’09 wheat futures finished off 0.75¢/bu at $5.616/bu but 6.0¢/bu higher than a week ago. Farmer selling and profit taking on technical buying subdued the market near the close after surging to 5-week highs. Fair export numbers, fears of flooding in the Red River Valley, and a strong performance by the DOW and other outside markets supported wheat prices. USDA placed wheat-inspected-for-export at 22.388 mi bu vs. expectations for between 14-19 mi bu. Large speculators were seen cutting net bear positions for the week ended March 17. Hopefully 25 per cent of the 2009 crop has been sold by now. If not, hold off at this time.

[mikey]

Thursday, March 26, 2009Print This Page
Pork Industry Given a New Chance at Life
US - The country's farmers produce more meat than Americans can eat, but parts of the hog not favored in the US are in demand in Asian markets.



The sharp increase in pork exports in 2008 represents an anomaly, and numbers are expected to drop 14 per cent this year because of the global economic downturn and an increase in pork production by China and other importing countries. However, exports are still expected to be significantly higher than in 2007, according to Readingeagle.com.

Joe Schuele, spokesman for the US Meat Export Federation (USMEF), said the "off-the-charts" pork exports in 2008 were propelled by an unusually high demand from China - the result, he said, of a cyclical decline in China's swine herd, disease issues that hurt pork production and a major Sichuan earthquake.

China's increased production isn't expected to hurt US exports significantly. Last year, China accounted for $334 million of the $4.9 billion in US exports. That compared with $1.54 billion from Japan.

As US farmers have expanded sales into other countries, they have changed how they breed, feed, prepare and package hogs in an effort to keep a hold on the overseas market, Readingeagle.com reports.

More than 20 per cent of the pork now consumed in Japan is from the United States. The Japanese prefer leaner cuts for their processed pork and especially like pork loins and butts.

For table cuts, they want high-quality pork that is deep red and firm, with more marbling.

Mexicans favor legs and picnic shoulders; the Chinese prefer variety meats.

USMEF President Philip Seng said pork exported to Japan and China is often sliced into smaller pieces to make it easier to eat with chopsticks. Pork is also sold as deli meat in Japan because of the large number of convenience stores there.

Many countries pay a premium for parts of the hog that aren't in demand among American consumers.

[mikey]

Thursday, March 26, 2009Print This Page
CME: Smithfield to Purchase Only US-Bred Hogs
US - CME's Daily Livestock Report for 25 March 2009.



Hog futures have been trading sideways for much of this week on uncertainty about future supplies as well as ongoing export demand concerns. The upcoming USDA hogs and pigs inventory report should provide an indication of current and future hog supplies and will be especially useful in gauging farrowings in the past quarter as well as the impact of reduced Canadian shipments on the size of the total inventory.

There has been plenty of talk in recent months of empty sow barns across Iowa and the upcoming inventory numbers should provide some indication of where we stand with regard to the size of the breeding herd.

Sow slaughter has been running significantly below year ago levels (almost –10 per cent since mid January). Prices for 500-500 lb. sows in March are some 80 per cent over year ago. This suggests that producers at this point see little reason to continue to liquidate productive animals, especially given current feed grain prices.

Also important going forward will be the decision by Smithfield Foods to only purchase hogs that are born and raised in the US, effective April 2009. News reports indicate that other large packers may follow suit, restricting or eliminating the purchase of Canadian born animals. In the short term, this will tend to boost demand for slaughter animals at a time when supplies will be the tightest (see below). Attached is a summary of analysts’ estimates from a survey conducted by Dow Jones (per cent of year ago).

[mikey]

Friday, March 27, 2009Print This Page
CME: Exports to Mexico and Canada Lowered
US - CME's Daily Livestock Report for 26 March 2009.



US, Mexican and Canadian officials are finding it ever more difficult to cope with the rising tensions on a number of trade issues. Our neighbors to the north are frustrated by the negative economic impact of the Country of Origin Labeling law (COOL), which came into effect last week. While the final rule seemed to provide more leeway with regard to handling product that was of mixed origin, the matter has been muddled by the implied threat that USDA could at some future point re-open the issue if US packers did not ‘voluntarily’ adopt more explicit labels than those proscribed by the final rule.

Smithfield Foods, the largest US pork packer, announced this week that starting in April 2009, its buyers would stop purchasing hogs of Canadian origin. Other US packers could follow suit, leading to a two tiered market and significant discounts for Canadian product. Canadian authorities are clearly paying attention and the Canadian Agriculture Minister was reported to have said that “Canada's World Trade Organization (WTO) challenge of US COOL, a challenge that was suspended when the COOL interim rule was published, is "idling at the curb, ready to go." (USDA GAIN Report, 3/20).

Mexican officials, on the other hand, already have lodged a complaint with WTO over COOL and their anger boiled over last week as the US shut down a pilot program that allowed long haul Mexican trucks to operate in the US. Mexico immediately announced that it would impose tariffs on about 90 US agricultural and manufactured products. According to news reports, the tariffs would not affect meat products.

It would be hard to overstate the importance of the Canadian and Mexican markets to US meat trade. As the charts to the left show, trade with Mexico and Canada accounted for more than half of all US beef and turkey shipments in 2008. It also accounted for about 23 per cent of the 4.7 billion pounds of pork and 14 per cent of the 7 billion pounds of chicken the US exported last year.

Overall, US red meat and poultry exports to Mexico and Canada accounted for about a quarter of the 14.2 billion pounds exported in 2008. Growth in exports to Mexico and Canada has accounted for about 30 per cent of the overall increase in US red meat and poultry exports since 2000. The US has in the past decade become the biggest meat exporter in the world. It has accomplished this, in part thanks to the openness and tariff free trade in the Canadian and Mexican markets. Let’s hope it continues to stay that way.

[mikey]

Monday, March 30, 2009Print This Page
CME: USDA Quarterly Report Bullish and Bearish
US - CME's Daily Livestock Report for 27 March 2009 comments on the latest USDA Hogs and Pigs Report.



USDA’s quarterly Hogs and Pigs Report, released on Friday, 27 March, was a mixture of potentially bullish and bearish numbers — which will likely be viewed pretty neutral come Monday morning. The report indicated continuing liquidation of the US breeding herd and a commensurately smaller market herd but rising productivity that will offset some of the cutbacks late in 2009 and into 2010. Figure 1 shows the report’s key numbers and well as the averages of pre-report estimates and differences between the two sets of year-on-year numbers.


Some of the highlights of the report are:

6.011 million breeding animals, 3 per cent lower than last year and nearly 1 per cent lower than analysts expected. The USDA number is a bit lower than sow slaughter and gilt retention implied, especially considering that imports of cull Canadian sows and boars have been 10 per cent lower YTD. This number would be considered a bit bullish for the long term.


59.378 million market animals, 2.7 per cent less than one year ago but 0.5 per cent more than were expected. The reduction of market numbers was quite consistent across the four weight classes with the 60-119 pound and 120-179 pound categories both exceeding average estimates by 1.3 per cent. These categories would contain pigs from the farrowings of Sep-Nov 2008 which, you might recall, were 6 per cent lower than those of 2007. The Sep-Nov pig crop was 3.7 per cent lower than one year earlier. Imports of Canadian pigs were over 1 per cent smaller and yet these categories are down only down 2.5 per cent vs. last year. Those smaller reductions in middle- weight inventories may be a bit bearish for April, May and June LH.


Lower farrowing intentions for both March-May (-2.9 per cent) and June- August (-4 per cent) would be bullish for fall hogs except for the next factor.


RAPIDLY INCREASING REPRODUCTIVE EFFICIENCY could be eating up most or all of the reduction in production capacity. Dec-Feb pigs saved per litter were record-high for that quarter (just as has been the case in the three previous quarters) and the 2.6 per cent increase is the largest since 1996 and the fourth largest EVER. It follows year-on-year increases of 2.0, 1.9, 1.7, 2.0, 2.4 and 2.4 per cent the past 6 quarters.
The biggest challenge in using these numbers to predict future supplies will be accounting for changes in the imports of Canadian market hogs and feeder pigs. Feeder pigs imported before 1 March are included in the numbers since they are among the inventories of US feeders. But imports since 1 March that differ from one year ago will impact year-on-year slaughter figures. Market hog import changes will immediately impact slaughter levels. In fact, 1.5 per cent of the 3.1 per cent decline in March slaughter is attributable to reduced number of Canadian market hogs. The remaining 1.6 per cent is due to lower numbers of US hogs. That is a bit large relative to the 2.4 per cent decline in 180-lb. and over pigs but not enough to question the validity of the report. Lower feeder pig imports since 1 March will begin to impact US slaughter about 21 weeks out — 15 July or so. There were about 2 per cent fewer in March but the year-on-year decline will get smaller later in 2009.