Tuesday, May 03, 2011
Pork Commentary: Tough Week for Hog Producers
CANADA - This week's North American Pork Commentary from Jim Long.
Jim Long on ThePigSite

Jim Long is President &
CEO of Genesus Genetics.
This past week saw May corn close at $7.54 a bushel, meanwhile in the last 10 days, lean hogs dropped from $1.02 lean per pound to a 95.225 cents close Friday (29 April), wiping a potential $15.00 per head off margins. That is a nasty move down. Average US 53 to 54 per cent lean hogs were $95.15 while USDA carcass cut-outs were $93.31 per pound. Packers are working for nothing or less. It will be really hard to push lean hogs higher without carcass cut outs moving up. Packers will work for nothing – they are almost like us farmers – but we doubt they will bid for any length of time for live hogs at a price higher than carcass cut-outs.

A while ago, US packers were making over $30 per head. Now they could be losing money it is the old supply and demand. When packers were making $30 per head, there was around 2.3 million hogs per week. Now, it is two million per week. With fewer hogs to chase, packers are bidding up.

One factor which could be helping packer margins is on export sales, which we understand are not in the USDA cut-out calculation. With about 25 per cent of US pork being exported, we expect export margins are better than domestic and this is helping fuel packer demand and allowing them to better their financial picture.

Corn planting is slow with wet weather delaying planting pushing corn prices higher $4.00 a bushel higher than a year ago. With a hog-to-corn ratio at 12.5 to 1, there is little profit potential for producers who buy feed. For producers who grow their feed, it has never been much better.

Last week, Cargill announced it had purchased Smithfield Foods Dalhart Texas empty swine operation for $32 million. The site, we understand, has a capacity for 35,000 plus sows. We find this interesting as it is the first major move for an increased breeding herd in the US in the last three years. Cargill as one of the world's largest privately owned companies is showing in our mind a very positive faith in the future of the US pork industry. Cargill is everywhere in the world and has shown they are adept at investing anywhere. The decision for Cargill to invest in Dalhart and America makes us believe as a very smart company they see a future in the US swine industry, and as one of major global grain traders a strong future for competitive meat protein production despite high grain prices.

Canada swine inventory
Statistics Canada has released its 1 April swine inventory report.

Canada inventory on 1 April (thousands of head)
Year Breeding herd Boars >6 months All other hogs
2005 1,628 36.3 13,442
2010 1,313 19.9 10,336
2011 1,308 16.9 10,501

As the table illustrates, the Canadian Breeding Herd and market hog numbers are basically the same as a year ago. We are treading water after the obvious huge drop in production capacity approaching 20 per cent in the last five years. You can also see the evolution of AI in production with half the boars in inventory compared to 2005. We see little in Canada to encourage expansion in the breeding herd with high feed prices and the Canadian dollar five per cent higher than the US dollar. It takes capital and courage to expand and we see little of that in Canada currently.

Currently, Eastern Canada (Ontario – Quebec) has 740,000 breeding animals (2005: 898,000) while Western Canada (Manitoba, Saskatchewan, Alberta) have 567,000 breeding animals (2005: 737,000). At one time, there was a belief the west would surpass the east in swine production due to the abundant grain and land available. It has not happened and it appears probably never will.

Great Britain
Last week, we read a report on the British pork industry by the British Pig Executive that the average producer of finishing pigs is losing around UK£18 (US$29.96) per pig sent to market. Little recovery in profits are expected soon with cost of production estimated at UK£1.60 (US$2.66) per kilogram carcass weight. That is a break-even of about US$1.20 lean per pound. Great Britain's sow herd slaughter is running 15 per cent higher than a year ago. High feed prices will continue to challenge global hog producers and we expect will continue to cut global pork supply.

US – Canada
US–Canada are essentially connected in a Continental market. Last week, the combined US–Canada first quarter combined inventory report was released.

First quarter inventory (thousands of head)
  2010 2011 2011
as % of 2010
Kept for breeding 7,074 7,096 100
Market 68,144 68,678 101
Pig crop 34,841 35,119 101

In total, 27,000 more breeding animals and about 500,000 more market hogs year-over-year or about 20,000 more market hogs a week. There is next to no change. Nothing in these statistics indicate expansion just productivity gains. With an ever increasing continental population and strong pork export demand, we expect to see lean hog prices to be around $1.00 lean a pound through the summer of 2011 and have strong prices through the summer 2012.


Author: Jim Long, President & CEO, Genesus Genetics 

Tuesday, May 03, 2011
US and Canadian Hog Inventory Up One 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 March 2011 was 75.8 million head. This was up 1 per cent from March 2010, but down 2 per cent from March 2009. The breeding inventory, at 7.10 million head, was up slightly from last year and last quarter. Market hog inventory, at 68.7 million head, was up 1 per cent from last year but down 1 per cent from last quarter. The pig crop, at 35.1 million head, was up 1 per cent from 2010 but down 3 per cent from 2009. Sows farrowed during this period totaled 3.56 million head, down 1 per cent from last year and down 5 per cent from 2009.

United States inventory of all hogs and pigs on 1 March 2011 was 64.0 million head. This was up 1 per cent from 1 March 2010 but down 3 per cent from 1 March 2009. The breeding inventory, at 5.79 million head, was up slightly from last year and last quarter. Market hog inventory, at 58.2 million head, was up 1 per cent from last year, but down 1 per cent from last quarter. The pig crop, at 28.0 million head, was up 1 per cent from 2010 but down 2 per cent from 2009. Sows farrowed during this period totaled 2.86 million head, down 1 per cent from 2010 and down 5 per cent from 2009.

Canadian inventory of all hogs and pigs on April 1, 2011 was 11.8 million head. This was up 1 per cent from 1 April 2010 but down 1 per cent from 1 April 2009. The breeding inventory, at 1.31 million head, was down slightly from last year and last quarter. Market hog inventory, at 10.5 million head, was up 2 per cent from last year but down 1 per cent from last quarter. The pig crop, at 7.1 million head, was down 2 per cent from 2010 and down 5 per cent from 2009. Sows farrowed during this period totaled 708,000 head, down 2 per cent from last year and down 6 per cent from 2009.

Tuesday, May 03, 2011
Corn And Soybean Prices Continue Erratic Pattern
US - As expected, corn and soybean prices continue to move erratically in a very wide range. Just in the past week, both May 2011 corn and soybean futures had a $0.56 trading range, writes Darrel Good, Agricultural Economist at the University of Illinois.


As the markets make the transition from old crop to new crop dominance, a lot of factors are influencing price expectations.

For soybeans, the Census Bureau soybean crush report released on April 28 revealed that the March 2011 crush was about 10 percent smaller than that of March 2010. Through the first 7 months of the 2010-11 marketing year, the crush was 7.4 percent smaller than the crush during the same period last year. For the year, the USDA has projected a decline of 5.8 percent. Last year, the crush was unusually large in the first half of the year and declined rapidly from April through August. The seasonal decline may be less pronounced this year. Still, the crush for the year may fall marginally short of the current USDA projection of 1.65 billion bushels.

The pace of soybean exports and export sales has declined sharply and export inspections during the weeks ended April 21 and 28 fell below the weekly rate needed to meet the USDA projection of 1.58 billion bushels for the year. Reports of on-going measures in China to cool economic expansion, along with large South American supplies, suggest a continued slow rate of exports.

Expectations about the 2011 U.S. soybean crop have centered on some planting delays for corn and the implication for soybean acreage. With corn planting likely to continue through May, if needed, there is no strong indication yet that planted acreage of soybeans will deviate substantially from March intentions.

For corn, weekly export inspections remain well below the pace needed to reach the USDA projection of 1.95 billion bushels for the year ending on August 31, 2011. Inspections need to average 42.9 million bushels per week to reach that projection. For the 5 weeks ended April 28, weekly inspections averaged 38 million bushels.

The weekly estimates of domestic ethanol production have also been erratic. Based on weekly estimates through April 22, it appears that total ethanol production in March and the first three weeks of April was nearly 6 percent larger than in the same period last year. This compares to the 4 percent increase that is needed from March through August for corn used for ethanol and by-product production to reach the USDA projection of 5 billion bushels.

Little is known about the rate of domestic corn feeding. Declining hog and cattle prices raise some concern about feed demand. However, the feedlot inventory of cattle on April 1, 2011 was 5 percent larger than the inventory of a year earlier. In addition, the rapid switch to wheat feeding that was being discussed a few weeks ago has likely been put on hold as wheat prices have increased relative to corn prices. The June 1 Grain Stocks report, to be released on June 30, will reveal the rate of feed and residual use of corn during the third quarter of the marketing year.

The most discussed item last week was the delay in corn planting and expectations about planting progress over the next two weeks. For much of the corn belt, optimal corn planting dates are believed to be in late April into very early May. Research reveals that corn yields tend to decline as planting moves beyond the optimum window. The declines also tend to accelerate as planting gets later and later. The declines in yield, however, are relative to potential yield. Yield can still be relatively high with late planted corn if the growing season weather is very favorable, but late planted corn would still be expected to have yields below that of corn planted in a timely fashion.

Some corn is planted late every year. For 2011, the questions center on what portion of the crop will be planted late and the degree of lateness. It now appears that areas in the western corn belt will make substantial planting progress in early May. The focus will be on the wet areas in the southern and eastern corn belt and the cool areas of the northern belt.

Most of the intended corn crop will likely get planted, so the most important factor will become summer weather. In 2009, extremely favorable summer weather extended the growing season and more than compensated for planting delays. An examination of weather records, however, reveal that the uniformly favorable conditions of 2009 have been rare.

Uncertainty about consumption and production prospects, along with volatile currency and energy prices, suggest a continued wide trading range for both corn and soybeans.

Ruminant Mineral
Management Thoughts
Presented at OSU Workshop

By Rory Lewandowski
Extension Educator, AG/NR
Athens County And Buckeye Hills EERA
Ohio State University Newsletter March 2011 

At our recent Athens Beef School, Francis Fluharty gave an in-depth presentation on management approaches to mineral supplementation. Francis is an OSU ruminant nutritionist and researcher located at OARDC in Wooster. Even though his presentation was geared towards beef cattle, the principles he covered apply to all ruminant livestock, sheep and goats included. Important points that I took away from the presentation include mineral absorption, effects of mineral deficiencies, and some common mismanagement errors associated with mineral feeding. Let's look at each of these in a little more detail.

There are several important factors that affect mineral absorption. One of the most important is the source of the mineral. Oxide forms of minerals tend to be the cheapest minerals on the market. Francis said that with the exception of magnesium oxide, there is no other mineral that should ever be fed in the oxide form because of the low absorption of oxide minerals. Organic mineral forms, sometimes called chelated minerals have the highest absorption followed by sulfate (SO4) or carbonate (CO3) forms. Another factor that affects mineral absorption is interactions with other minerals. For example, high potassium reduces magnesium absorption, high levels of zinc reduce copper absorption and low copper levels reduce iron absorption. Grinding can help to increase mineral absorption. Finally, age and nutritional status of the animal will influence absorption. Young animals absorb minerals better than adults.

What happens if we do not provide minerals for our animals and/or minerals are deficient in the diet? Well, probably nothing as drastic as death of the animal. Hopefully it doesn't take something so drastic to get the attention of a livestock owner, but what is known is that sub clinical trace mineral deficiencies occur more frequently than what is actually recognized by livestock owners. A mineral deficiency or inadequate intake of minerals can result in such things as: reduced forage intake, lower reproductive efficiency, poor disease immunity, slower daily gains, and poorer feed conversion. Unless you are keeping records and tracking trends, none of these production factors may be obvious, and yet each one affects the profitability of your operation.

Francis went over some common mismanagement approaches to mineral feeding that I thought offered some excellent insight. He asked a series of questions that all began with: "Have you ever..." and included:

• "Cut" mineral with salt?

• Switched to a cheaper mineral because cattle (or read sheep or goats) "rushed" high-priced mineral?

• Claimed deer don't need minerals (as a rationale for why farm livestock doesn't need minerals).

• Blamed a bull for not breeding your cows (buck not servicing does properly)?

• Switched to salt blocks because they last longer?

• Wondered why feedlots don't have mineral deficiencies?

Francis spent some time describing the management error in each of these approaches and a thorough summary of all his comments is beyond the scope of this article, so I will highlight a couple of key points that struck me that are centered around the salt and amount of mineral consumed issues.

Anyone who has ever played around with adding salt to a mineral mix knows that the amount of salt has a significant impact on mineral intake. Francis said that salt is the only mineral that cattle (again think also sheep and goats) will try to control their intake of. The reason for adding salt, or switching to a cheaper mineral or switching to salt blocks is because the livestock owner thinks that his animals are over consuming minerals and increasing production costs excessively. Adding salt will decrease consumption. Francis said this is a management error. First and foremost, the goal of providing minerals is to get animals to consume the mineral. Consumption is a good thing. Second, Francis said that mineral consumption can vary not only daily but also seasonally. He advised regularly monitoring and recording mineral consumption plus recording the total number of animals over a year period of time before making statements about over consumption.

There are a couple of reasons for this monitoring and record keeping. If animals are being switched to a higher quality, more available or more readily absorbed mineral following a low quality mineral program, or possibly no mineral program, then the livestock owner must recognize that it can take up to nine months for an animal to "catch up" from the deficiency created by that type of former mineral program. Secondly, take into account the fact that when a high quality mineral is offered, not only the adult, but also the young animals are consuming. Francis said that he had consulted with many cattlemen who complained about over consumption of mineral because they only figured in the number of adult cows when they did their calculations. Young stock (calves, kids, lambs) must be taken into account based on their percentage of the adult's weight. Multiply that additional weight by the expected mineral intake. You may very well find that there is not an over consumption issue.

Francis concluded his presentation by reminding livestock owners that often mineral deficiencies go undetected, resulting in decreased livestock performance. Mineral requirements change with the stage of production and environmental conditions. Minerals have complex interactions and mineral antagonisms exist, so that an unbalanced mineral program may also result in mineral deficiency. Finally, Francis said to remember that a mineral program is just one part of an overall farm management program.
 

Tuesday, April 26, 2011
Pork Commentary: Lean Hog Prices Push Closer to $1.00
CANADA - This week's North American Pork Commentary from Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
Cash lean hogs continued to push higher last week with 53 – 54 per cent lean hogs averaging 95.76 lb US at the end of the week up from 82.70 US a year ago or about $27.00 per head. It is certainly better, but when you consider Omaha corn a bushel was $3.45 a year ago and now it’s around $7.50 a bushel it is not so special. The $4.00 per bushel year over year increase is about $32.00 per head jump (eight bushels per head) in cost of production. That is a $27.00 increase in hogs per head versus a $32.00 per head increase in feed costs. That means we are spinning our wheels especially if you are buying feed. Producers that grow their own crops have on the other hand very good cash flow. The traditional model of grow your feed, feed your hogs, and put manure on your fields probably has never been better.

Last week the very top price lean hogs brought $105.79 lean per pound according to the USDA Prices are certainly appreciating.


The latest weekly US sow marketing’s indicate 55,657 an indication of breeding herd stability in our mind. We have never had breeding herd expansion when the hog to corn ratio has been below 15, currently it is 12, a year ago it was 22. The US breeding herd did not expand last year with a 22 hog to corn ratio, we don’t expect expansion at 12.


In the Swine Genetic business it is in Genesus’ best interest to sell breeding stock. Consequently, we are always looking to see who will be stocking empty sow units or new sow units. From our vantage point we observe numerous sow units sitting empty in different parts of Canada – USA. They have been sitting empty for months. Many of them deteriorating from inactivity. It is hard to get capital as bankers and investors are cautious. Many empty units are entangled with debt and credit issues; compounding this is many empty sow units have more debt than anyone will pay in the current market conditions. As far as new sow units being built there are probably less being built than in the last twenty years. What this means in our equation is that nothing is happening to significantly increase pig production in USA – Canada. Lean hog prices will stay strong through the summer of 2012.


There is much wringing of hands due to the delay of corn planting because of wet weather. We aren’t crop experts but we expect the record 43 per cent corn crop planted in a week (1992) could be surpassed with the equipment and intensity there is today. $7.00 plus corn has crop farmers ready to roll like never before. Thankfully the Government is not in charge of organizing the corn planting.
Global Swine Markets
High feed prices will restrict expansion of Global Swine production over the coming months. As we reported last week in the Genesus Global Market Report on a US dollar equivalency live weight per pound. The US was 67 cents, Mexico 73 cents, Brazil 68 cents, Russia $1.31, China $1.02, Spain 82 cents. Canada at 61 cents per pound has the lowest hog prices in the world.

The point is, Global Swine prices are historically high. This reflects on supply and demand. Nothing we see in our Global travels tells us there is any significant expansion underway. High feed prices are keeping everything in check.

Corn Ethanol
Last week we received the following email from a hog producer – corn grower in Iowa where they have more hogs and grow more corn than any other state. It is a perspective that we don’t really agree with but we believe it was well thought out and written. Our society is based on diversity of thought – we respect such.

Have enjoyed your commentary on the hog markets for the past 10 years or so. Have met you at the Swine Shows and am a weekly reader of your column. We are a fifth generation North Iowa forever raising pigs family farm. We used your Genetics when we farrowed right up until we stopped but we still iso wean over 20,000 head of hogs.

I wanted to share a survey taken by the Iowa Pork Producers last fall that I thought was interesting. Around 500 producers took time to fill this out. Here are some results I wanted you to see from grassroots hog production in the state of Iowa if that means anything anymore.

500 producers returned the survey
66 per cent of them attend the Pork congress
73 per cent are owner operators
94 per cent PQA/TQA
BIOFUELS

How should the federal ethanol standard be handled in the future

26.6 per cent keep it the same

47.2 per cent increase the blending amount

11.8 per cent reduce it

14.4 per cent no opinion


Support of blenders and import credit - Tax

53.2 per cent keep it the same

7.7 per cent increase both

24.3 per cent reduce both

14.8 per cent no opinion

74.6 per cent own no shares in biofuel plants and 50 per cent of the corn they raise is fed to hogs
As you can see your comments about the evils of ethanol is preaching to a different crowd of pork producers here in Iowa. A rising tide floats all ships and ethanol has done that for farmers. You need to weigh the tax credits of bio-fuels against huge tax credits for big oil. How about military spending to guard the oil as well as lives lost and damage to environment? Haven’t read much on ethanol spills tanking a Gulf of Mexico or earthquakes putting radiation in the air lately. New jobs plus new refining and tax revenues find it hard to be against ethanol in the country. Farmland is up in value and taxes are up to educate our children in schools. Machinery dealers are sold out. The tide is up!

And the argument for rising food costs is bogus considering the small amount of every dollar we receive at the farm gate. Also remember that DDGS go back in our rations. We are finding that family livestock farmers feeding their own corn generally like ethanol for what it’s done. We get our check from the market and not an LDP. Generally those that don’t like ethanol are the ones who thought they were going to be the biggest in the pork industry without planning that we are now in a Global market.

As a pork producer of 40 years there are better rabbits to chase than ethanol that will make more impact for hog producers in the days ahead.


Author: Jim Long, President & CEO, Genesus Genetics

Thursday, April 28, 2011
CME: Slow Start to Corn Planting Season
US - With news of the slow start to the corn planting season percolating in the markets, the question many are asking is: What does this mean to me and my business? The quick answer predictably is: it depends, write Steve Meyer and Len Steiner.


For corn producers, wet field conditions and the inability to plant the crop in time may mean money left on the table, long nights of worry and extreme toil, racing against time. Studies have shown that corn planted after 15 May may suffer yield loss although much depends on weather during the rest of the growing season. If you are a livestock producer, the slow start to the season adds another element of risk to an already volatile marketplace. Indeed, that volatility may become even more stomach churning as the exchange is contemplating increasing the trading limit for corn from 30 to 50 cents. Supplies of old corn are quickly dwindling and chances are we will start the new marketing year in September with some of the emptiest bins on record. As we have said before, this market has no room for error and we will need above trend yields to start to repair the corn supply situation.


The late start increases the chances that yields may not hit required levels, thus assuring high corn prices in 2011-12. Cattle, hog and poultry producers will likely refrain from any supply increases until they have a better sense of what the crop will be like. The late planting could further delay livestock and poultry expansion. For retailers and foodservice operators, delays in corn plantings imply that wholesale price pressures may persist well into 2012, thus affecting their margins, their customer counts and their plans for future growth.


Advances in technology have made it possible for large farmers to accelerate plantings if weather permits. USDA reported that in week#16 (ending 24 April), just 9 per cent of the corn crop had been planted, compared to 46 per cent a year ago. We had a similar situation in 2008, when in week #16 (ending 20 April) just 4 per cent of the crop had been planted and in week #17 (ending 27 April), 10 per cent of the crop was in the ground. However, by 18 May 2008, 73 per cent of the crop was planted and final yields that year were about the same as the USDA initial trend estimate indicated. See attached table for the relationship between planting dates and final yields. Note that we are using the USDA weekly number identification to make year to year comparisons. One thing that is different this year is that we expect a big increase in corn acres from areas that do not always plant corn. Extreme moisture conditions could cause those ‘intended’ marginal acres to not materialize thus affecting final production prospects. We can still make up the lost ground but risks of a poor crop are increasing with each passing day, especially with forecasts for more precipitation in the next 10 days.

Feed Outlook - April 2011
The recent grains stocks report confirms that supplies are tight, according to Tom Capehart and Edward Allen in the latest report from the USDA Economic Research Service.
 

Summary
The Grain Stocks report issued by USDA’s National Agricultural Statistics Service (NASS) at the end of March shows relatively tight March 1 stocks for each of the feed grains. US corn feed and residual use is lowered 50 million bushels due to the recent run-up in corn prices and increased prospects for wheat feeding this summer. Corn used to producer ethanol is increased by 50 million bushels this month as ethanol production continues at near-record levels. The midpoints of the forecasts of the marketing year average prices received by farmers for corn, sorghum and oats are unchanged this month but the price ranges were narrowed. World coarse grain production and consumption are increased, especially for Sub-Saharan Africa, boosting global ending stocks prospects slightly.



Figure 1. US feed grain average prices received by farmers
Source USDA, National Agricultural Statistics Service, Quick Stats
Domestic Outlook
Domestic supply and use of feed grains unchanged from last month
US feed grain supplies for 2010/11 remain at 380.3 million metric tons this month, unchanged from last month’s projection but down 4.4 per cent from last year. Total use of the four feed grains is projected to be 359.4 million metric tons. With demand exceeding supply, ending stocks are expected to be drawn down to 20.9 million metric tons, the lowest level since the end of the 1995/96 marketing year.

Feed and residual use for the four feed grains plus wheat on a September-August marketing year basis decreased by about 0.7 million metric tons from last month to 143.8 million. Grain-consuming animal units (GCAUs) are projected at 93.0 million this month, down slightly from last month's 93.3 million. Feed and residual use per animal unit is unchanged this month at 1.54 tons, the same as last year.

Grain stocks report confirms tight stocks situation
The Grain Stocks report, issued by USDA’s National Agricultural Statistics Service (NASS) on 31 March 2011, shows relatively tight stocks for each of the feed grains. Corn stocks on1 March were pegged at 6,523 million bushels, down 15 per cent from the previous year. Stocks were considerably lower than most trade estimates but about what USDA was expecting. Within a few days of the Grain Stocks report, May corn futures rose more than $1.00 a bushel, and prices exceeded the previous all-time high for the nearby contract, providing evidence that more price rationing needs to occur. With incentives to feed wheat this summer



Figure 2. Corn feed and residual: comparison of first half of year versus second half of year
Source USDA, World Agricultural Outlook Board, WASDE
due to favourable wheat prices relative to corn, corn feed and residual use is lowered by 50 million bushels to 5,150 million bushels, offset by an increase in wheat feeding expected this summer.

Feed and residual use in the second half of the marketing year, forecast to be about 1,517 million bushels, is expected to be only 29.5 per cent of the 5,150 million bushel marketing year total. This would be the lowest share since at least 1975. Feed and residual use in the second half of the year is expected to be the second lowest in absolute terms since 1975, behind the drought year of 1983. It would be down slightly from the 1,571 million estimated for 1995/96. Since 1995/96, corn used for ethanol is up more than 12-fold, adding substantially to available supplies of feed byproducts.

Projected sorghum feed and residual is increased by 10 million bushels this month and oat feed and residual is decreased by 15 million bushels, reflecting feed and residual use to date as indicated by the March 1 stocks. Feed and residual use for barley remains unchanged from last month.

Corn and sorghum used for ethanol is increased
Corn used for ethanol is projected up 50 million bushels from last month at 5,000 million bushels for 2010/11. Sorghum used for ethanol is increased by five million bushels from last month. Ethanol production data are incomplete for the first half of the marketing year, as February data have not been released by Energy Information Administration (EIA). Monthly ethanol production for January 2011 (the latest available data) was record high at 1,181 million gallons. Ethanol corn use for February likely declined from January based on weekly EIA data for ethanol production. Weekly production data also suggest corn use for ethanol during March will be nearly as high as in January.



Figure 3. US corn: Central Illinois cash and average farm price, monthly
Sources: USDA, Agricultural Marketing Service, Weekly Grain Market News Summary, and USDA, Economic Research Service, Feed Grains Database





Figure 4. US sorghum: Kansas City cash and average farm price, monthly
Sources: USDA, Agricultural Marketing Service, Weekly Grain Market News Summary, and USDA, Economic Research Service, Feed Grains Database
Combining the February estimate with reported monthly ethanol production indicates that September-February corn used for ethanol was up 14 per cent from the first half of 2009/10.

Corn export for 2010/11 are projected at 1,950 million bushels, unchanged from last month but down 37 million from the previous year. Sorghum exports are lowered 10 million bushels to 140 million bushels due to the slow pace of sales and shipments caused by tight US supplies.

Even with record-high prices, total disappearance of corn is expected to be record high, pushing corn ending stocks for 2010/11 to 675 million bushels, a 15-year low. The corn stocks-to-use ratio is projected to fall to five per cent, matching the record low set at the end of the 1995/96 marketing year. This level translates into about an 18-day supply of old-crop corn at the beginning of the 2011/12 marketing year; however, some new-crop corn is usually harvested and available for use before the September 1 start of the new marketing year.

Minor changes to feed grain prices
The season-average corn farm price for 2010/11 is expected to hit a record level, averaging between $5.20 and $5.60 per bushel. The $5.40 mid-point is unchanged from last month but the range is narrowed by 10 cents. Price ranges are also narrowed for sorghum, barley and oats but the midpoints are unchanged at $5.40, $3.80 and $2.45 a bushel, respectively. The sorghum farm price forecast is a record high.

 



Figure 5. US barley utilisation
Source USDA, World Agricultural Outlook Board, WASDE





Figure 6. Barley prices received by US farmers, monthly
Source USDA, National Agricultural Statistics Service, Quick Stats





Figure 7. US oats utilization
Source USDA, World Agricultural Outlook Board, WASDE





Figure 8. US oats: average farm price, monthly
Source USDA, National Agricultural Statistics Service, Quick Stats
March prospective planting intentions report confirms USDA’s initial projections
US farmers plan to plant 92.2 million acres of corn this year, an increase of four million acres from last year. In February, USDA released the USDA Agricultural Projections to 2020 and forecast 2011 planted acreage at 92 million. Corn acreage increased the most in the Northern Plains region, comprised of Kansas, Nebraska, North Dakota and South Dakota. Corn acreage increased by 1.9 million acres in the Northern Plains, compared with a 1.1-million increase in the Corn Belt States (Illinois, Indiana, Iowa, Missouri and Ohio). The big year-to-year increase for the Northern Plains as compared with the Corn Belt has implications for the national average yield as yields in the Northern Plains are about 15 per cent less than yields in the Corn Belt.



Figure 9. Change in corn planted area from 2010 to 2011 (1,000 acres), USDA farm production regions
Source USDA/National Agricultural Statistics Service Prospective Planting, 31 March 2011
Almost all corn-producing States show an increase in expected corn acreage, with the exception of a 150,000-acre decline in Texas. Texas farmers indicate cotton will provide a much better return, increasing plantings by 548,000 acres.

US farmers also plan to increase plantings of sorghum and barley in 2011, up marginally for both crops from last year at 5.645 million acres for sorghum and 2.952 million acres for barley. Oat plantings are expected to decline to 2.839 million acres.

International Outlook
Global coarse grain supplies boosted this month
World coarse grain production and beginning stocks forecasts for 2010/11 are increased this month, boosting supplies 6.3 million tons. Production is up 4.5 million tons to 1,084.1 million, led by a 2.2-million-ton increase for sorghum, a 1.4-million-ton boost for millet and a 1.2-million-ton increase for corn. Global barley production is reduced 0.4 million tons this month, with rye, oats and mixed grain virtually unchanged.

Most of the increased global sorghum and virtually all the millet production increase are in Sub-Saharan Africa. Although some locations in the region have suffered excess dryness or floods, in general, rains and temperatures have been favourable across most of the region. Sorghum production is up 2.0 million tons for the region to 29.1 million.

There were numerous changes to coarse grain production as all Sub-Saharan countries in the database were reviewed this month but the most dramatic increases are for Niger, up 1.5 million tons to 5.5 million; Sudan, up 1.0 million to 5.9 million; Uganda, up 0.7 million to 3.4 million; Burkina, up 0.7 million to 4.2 million; and Chad, up 0.3 million to 1.6 million. These are all countries where sorghum and millet are used primarily for human consumption, especially among lower income groups, so the economic implications of the increased production are significant.

Although corn production in the region is projected up only 0.4 million tons this month to 54.7 million tons, reduced prospects in South Africa partly offset increases in several other countries. South Africa’s corn production is projected down 0.5 million tons to 12.0 million as dryness during February in the high-yielding eastern part of the Maize Triangle (Mpumalanga) hit corn during grain fill and reduced yields. Area was reported slightly lower as well. With large corn stocks and transportation problems limiting exports, the incentives to plant corn have not been strong enough to maintain area.



Figure 10. South Africa's corn production and yield
Source USDA, World Agricultural Outlook Board, WASDE





Figure 11. Brazil's corn production and yield
Source USDA, World Agricultural Outlook Board, WASDE
Important corn production changes are made this month to forecasts for several countries outside Sub-Saharan Africa. Brazil’s corn production projection is increased 2.0 million tons to 55.0 million. Harvest reports indicate the first-crop production was larger than expected as harvesting conditions were favourably dry in the south. Moreover, second-crop area planted exceeded expectations despite excessive rains and harvesting delays for soybeans in Mato Grosso and Mato Grosso do Sul. High corn prices and well-drained soils have supported corn planting despite excess rain. Good growing conditions supported increased corn production prospects this month for Paraguay, up 0.4 million tons; Cambodia, up 0.3 million; are Saudi Arabia, Thailand, Peru, Ukraine and Jordan, smaller increases.

Corn production prospects are reduced this month for Indonesia, down 1.3 million tons to 6.8 million. Excess rains and high input costs are limiting production. Forecast corn production in Egypt is cut 0.5 million tons to 6.5 million as both area and average yields are reduced. Iran’s production is reduced 0.3 million tons to 1.7 million as area and yields are reported similar to those of the past two years. There are smaller reductions in corn production for Colombia, Russia, Syria, Yemen and Malaysia.

Sorghum production prospects for Australia are up 0.2 million tons this month to 2.4 million as favorable moisture boosted area and yield prospects.

Syria’s barley production for 2010/11 is revised down 0.9 million tons to 0.8 million as area and yield are reported to have been similar to 4 of the last 5 years (much better than in 2008/09). The Syria revision and small changes to several other countries more than offset increased barley prospects for Iran, up 0.4 million tons, and smaller increases for China, Afghanistan, and Russia.

Coarse grain beginning stocks for 2010/11 are up 1.8 million tons this month to 196.9 million. There are small revisions for numerous countries causing changes in beginning stocks of less than 0.1 million tons, but these are offsetting. The largest change is for Iran, with beginning stocks increased 1.3 million tons, with corn up 0.8 million and barley increased 0.5 million. Revisions to historical production back to 2007/08 boosted estimated stocks for corn and barley. Indonesia’s corn stocks are boosted 0.2 million tons to 0.7 million due to reduced use estimated for 2009/10. Russia’s barley beginning stocks for 2010/11 are up 0.2 million tons because of small production revisions for several years of history. There are also increases in 2010/11 coarse grain beginning stocks of 0.1 million tons this month for Saudi Arabia, Peru and Benin. The largest decline in beginning stocks was a 0.2-million-ton decline for China’s barley due to reduced production estimated for 2009/10.

World coarse grain use projected higher
Global coarse grain consumption in 2010/11 is projected up 5.4 million tons this month to 1,125.4 million. Most of the increase, 3.3 million tons, is in Sub-Saharan Africa with increased human food consumption facilitated by increased production. China’s corn consumption is projected 2.0 million tons higher to 164.0 million tons. Half the increase is in feed and residual use and half in food and industrial use. Corn prices in China reflect strong demand supported by economic growth. Brazil’s increased corn production and growth in poultry production supports a 0.5-million-ton increase in feed use. Thai corn feed use is also up 0.5 million tons this month as more is being used domestically and less exported. This month there are increases of 0.3 million tons or less in projected coarse grain use for Iran, Cambodia, Russia, Ukraine, Peru and the EU.

Coarse grain consumption prospects are reduced this month for Syria, down 0.5 million tons due to reduced barley production. Egypt’s corn use is cut 0.5 million tons because of reduced production, with more than half the reduction in food and industrial use. There are also reductions of 0.1 million tons in projected corn use for Colombia, Israel, Saudi Arabia and Indonesia.

Global coarse grain stock prospects increased slightly
World coarse grain stocks for 2010/11 are projected 0.8 million tons higher to 155.7 million tons. Most of this month’s increased supplies are expected to be used, as demand remains strong despite high prevailing prices in most countries. Coarse grain ending stocks in the Sub-Saharan region are projected up 1.2 million tons this month to 11.3 million due to increased production prospects. Iran’s 2010/11 ending stocks are up 1.2 million tons because of increased beginning stocks. Ukraine’s coarse grain ending stocks are up 0.4 million tons this month mostly due to reduced barley export prospects. Saudi Arabia’s coarse grain stocks prospects are up 0.2 million tons due to increased corn stocks and reduced expected barley use. Cambodia’s ending stocks of corn are up 0.2 million tons because of increased production.

Reduced 2010/11 coarse grain ending stocks are projected for China, down 1.4 million tons, due to strong demand for corn. Syria’s coarse grain ending stocks are cut 0.5 million tons, mostly because of reduced barley production. Canada’s ending stocks are trimmed 0.4 million tons as corn import prospects are reduced. Other changes in projected ending stocks were less than 0.1 million tons.

World corn trade boosted slightly; US corn exports unchanged
Global corn trade in 2010/11 is projected to reach 92.4 million tons, up 0.3 million this month. Imports are up 0.9 million tons to 2.0 million for Indonesia as production prospects there are cut. China’s imports are boosted 0.5 million tons to 1.5 million supported by high prices in China relative to the United States in the first half of March. These increases are partly offset by reductions for Canada, down 0.4 million tons to 1.2 million due to the slow pace of purchases, and by reductions of 0.1 million tons each for Israel and Peru.

Corn export prospects are boosted 1.0 million tons for Brazil to 11.0 million due to increased production prospects and the strong pace of exports during the first months of the 2010/11 October-September trade year. These are record-large corn exports for the trade year. Brazil’s March-February local marketing year exports are raised 1.5 million tons to 8.5 million. Paraguay’s corn export prospects are up 0.2 million tons to 1.6 million due to increased production.

Corn export prospects are reduced this month for Thailand, down 0.5 million tons to 0.2 million, the lowest in five years, as domestic use has been strong. South Africa’s exports are trimmed 0.3 million tons to 2.2 million as transportation costs are limiting exports despite large stocks. Rail transport is not working as well as in the past, pushing exporters to truck more corn to ports.



Figure 12. US corn exports by month
Source USDC US Census Bureau
US corn exports remain projected to reach 50.0 million tons in 2010/11 (1.95 billion bushels for the local marketing year). Census data indicate October-February shipments of 17.3 million tons, down one per cent from a year earlier. March corn export inspections were 4.5 million tons, down three per cent from a year ago. However, outstanding export sales as of31 March 2011, were 13.5 million tons, up 37 per cent from the previous year. Strong shipments are expected in the last half of 2010/11 but the 2010/11 outstanding sales carried over to the next year are also expected to be exceptionally large.

US sorghum export prospects reduced
US sorghum exports for 2010/11 are reduced 0.2 million tons this month to 3.6 million – for the local marketing year, down 10 million bushels to 140 million – due to tight US supplies and increased domestic use. The early-season shipment pace has been slow, with Census exports for October-February of 1.3 million tons, down 32 per cent compared to the previous year. March inspections showed some turnaround, reaching 0.54 million tons, up from 0.36 a year ago. But as of 31 March 2011, outstanding sales were 0.70 million tons, down from 0.75 million tons a year earlier.

Global sorghum trade is projected slightly higher this month, with the US export reduction more than offset by an increase for Australia. EU imports were increased 0.1 million tons to 0.8 million based on strong purchases to date. World barley trade is reduced slightly this month to 15.6 million tons, with reductions in exports from the Ukraine due to the extension of export restrictions through the end of 2010/11. Imports by Saudi Arabia are also trimmed.

Wednesday, April 20, 2011
International Egg and Poultry Review: Philippines
PHILIPPINES - This is a weekly report by the USDA's Agricultural Marketing Service (AMS), looking at international developments concerning the poultry industry. This week's review looks at the 3.72 per cent growth of the Philippines poultry industry in 2010.

 


According to the Philippines Bureau of Statistics (BAS), the poultry subsector grew by 3.72 per cent in 2010 and accounted for 14.93 per cent of total agricultural production. Chicken and chicken egg production has steadily grown over the past few years. In contrast, duck and duck egg production has steadily declined. Native chickens accounted for 47 per cent of the chicken inventory, broilers 34 per cent, and layers 19 per cent in 2010.


Chicken production grew by 4.01 per cent in 2010. The larger volume of broilers was due to expansion in stocking capacity and sufficient supply of day old chicks. Chicken egg production grew by 5.12 per cent; a higher inventory of laying flocks combined with increases in the egg-laying efficiency ratio of hens in several provinces. The downward trend in duck and duck eggs production continued with this year’s declines of 8.24 per cent and 7.44 per cent, respectively. Duck egg production was constrained by lingering hot weather that resulted in low laying efficiency ratios.


The gross value of poultry production at current prices in 2010 totalled 152.1 billion pesos (PHP), up 4.80 per cent from 2009. The value of chickens rose 4.39 per cent, ducks 1.64 per cent and chicken eggs 7.16 per cent. The gross earnings of duck eggs fell 2.41 per cent due to lower production. Weighted average farmgate prices for poultry rose 1.04 per cent in 2010. The largest increase came in duck prices, from an average of PHP68.60 per kilogram in 2009 to PHP75.98 in 2010.

 

 


Chicken meat imports grew 47 per cent between 2008 and 2009. In 2009 the majority came from the United States (41 per cent), Canada (25 per cent) and Brazil (21 per cent). In 2009, the Philippine Department of Agriculture approved special importations of chicken of up to 8,000 metric tons (MT), exempt from special safeguard duties, which contributed to the increase in chicken trade last year.

Source: USDA GAIN Report, Philippines Bureau of Agricultural Statistics

Friday, April 22, 2011
China's Ag Sector Faces Rising Costs in 2011
CHINA - China's agriculture sector is expected to face increasing pressures from rising costs in 2011, according to China's Rural Economy (2010-2011), a report released Tuesday by a leading think tank.

According to China Daily, fertilizer prices, which increased during the fourth quarter last year, were likely to keep rising this year while stock feed prices are also likely to rise, the Chinese Academy of Social Sciences (CASS) said in the report.

The CASS report also predicted grain prices, especially of corn, to continue to trend upwards in 2011. Further, the report urged greater efforts to stabilize agricultural production costs, by increasing supply and tightening market regulations.

China's annual grain output is estimated to reach 550 million tonnes in 2011, the report said.

China's grain output rose 2.9 per cent year-on-year to 546.41 million tons in 2010, marking it the seventh consecutive year of growth for China's grain output.

On foreign trade of agricultural products, the report said imports and exports of China's agricultural products are both expected to slow in the medium and long term.

Statistics from the Ministry of Agriculture showed that China's export volume of agricultural products registered an average of 13.2 percent annual growth from 2002 to 2010.

According to the report, China has maintained a high rate of grain self-sufficiency.

In 2010, China's domestically-grown rice, wheat and corn is estimated to have accounted for about 99.8 percent, 98.9 percent, and 99.1 percent of the total domestic grain market share, the report said.

Thursday, April 21, 2011
NDRC Expects Food Prices to Stabilise
CHINA - China's consumer prices are likely to remain high in the second quarter of this year, but food prices, the main driver of the country's inflation, are predicted to stabilize, a senior official from the National Development and Reform Commission (NDRC) said on Wednesday.


Soaring prices for commodities in the international markets, including crude oil, iron ore, and grains, may continue to fuel the nation's inflation in the second quarter, said Zhou Wangjun, deputy head of the pricing department of the NDRC, the country's top economic planner.

"Food prices tended to be stable and some even declined in March, signaling the government's measures to rein in prices have taken effect," Mr Zhou said.

The nation's consumer price index (CPI), the main gauge of inflation, climbed to a 32-month high of 5.4 per cent in March, according to data from the National Bureau of Statistics (NBS).

Food prices, which account for about 30 per cent of the CPI basket, increased by 11 per cent in March from a year earlier, the same amount as the year-on-year rise in the first two months of this year, indicating a stabilizing trend, the NBS said.

The Chinese government has made stabilizing prices a key task in the first year of the 12th Five-Year Plan (2011-2015). The authorities have stepped up efforts to postpone price rises of utilities, increased support for grain producers and took administrative measures to control prices.

In March, vegetable prices fell by 6.2 per cent, egg prices by 7 per cent, and the price of aquatic products by 2.3 per cent, compared with a year ago, according to Zhou.

He said that industrial products in China are oversupplied, and food supply can "completely" satisfy consumers' demand. "The Chinese government has the ability to curb inflation," Mr Zhou said.

Zhu Hongren, chief engineer of the Ministry of Industry and Information Technology (MIIT), said on Wednesday that other than food prices, surging international raw-material prices are adding to the pressure of imported inflation in China, and this has been boosted by the quantitative easing policy in some major developed economies.

A report from the Chinese Academy of Social Sciences (CASS) said on Monday that the country's total grain output may increase to 550 million tons this year, from 546.41 million tons in 2010.

The output of oil seeds may increase by 2 per cent to more than 33 million tons in 2011 from a year earlier, and the output of meat is likely to grow by 3.5 per cent to at least 82 million tons, helping to counter food price increases this year, the CASS report said.

According to an NBS survey of more than 70,000 rural households, the planting area for grain was predicted to be 110.28 million hectares, 400,000 hectares more than that in 2010, the bureau said.

In the first three months of this year, the total output of pork, beef, mutton and poultry increased by 1.8 per cent year-on-year to 21.42 million tons, according to the data from the NBS released on 15 April.

, April 21, 2011
Sydney Show Suggests Pig Industry is Rebuilding
AUSTRALIA - Pig numbers at the Sydney Royal Easter Show have increased this year, suggesting the worst is over for pig producers. Up to 50 per cent of producers left the industry because of the introduction of imported pig meat from Denmark, lower prices for pigs and demands by the big retailers, who want producers to phase out sow stalls.


Chairman of the Royal Agricultural Society pig committee, Paul Hassab, says when the Royal Easter Show was still being held at Moore Park, they used to get 1,200-1,300 pigs attending.

"Those days are gone, and the number of pigs being exhibited got down to just 50 three to four years ago," he said.

"Now we've got about a dozen exhibitors and just over 300 pigs, and if we can maintain that, it would be great."

According to ABC, David Middleton, who has been a producer for 40 years, says in the north and north-west of NSW, 600 piggeries have shut down over the last five years.

"There are big changes underway and most producers have had enough," he said.

"There's not enough money it in, it costs a lot to change, so many are retiring.

"It will take a big change to move pigs from dry sow stalls to group houses.

"We don't use them...and pigs are not always happier ranging free."

Mr Middleton thinks that despite the problems, things are turning around for producers, with consumers keen to buy Australian pork.

"Woolworths have got behind us quite a bit and a lot of the local butchers are really getting behind it and I think it's working.

"We're certainly trying, but I don't think we're going to push those imports out."

Despite the increased numbers at the Royal Easter, the auction did not go well.

Mr Middleton sold one boar for $750, but he's not dissatisfied.

"If you think you're going to show and make money, you don't. You do it for the pleasure and the prestige.

"There's a show at Gunnedah at the end of the month and we usually sell them all there."

Brian Badgery, RAS councillor for pigs, says the auction was "disappointing".

"It's been very hard work, I'm sorry to say.

"There's a lot of interest in the coloured pigs, but generally not a lot of movement.

"The prices are reasonable, but maybe people are holding off to close a deal by private treaty."

Only two pigs were sold and the top price was $750, well below the $3000 record set in the late 1980s.

Auctioneer Mike Brady says there aren't many pig producers in Sydney and it's not surprising the selling was slow.

They switched to an open auction this year, but will probably return to a private selling arrangement next year.

Overall, Mr Hassab says the quality of the pigs at the show is the "best we've seen for 8-10 years".

Thursday, April 21, 2011
CME: Hog Price Series Post Significant Gains
US - Hog prices have commenced their annual rally the past three weeks with all of the major price series posting significant gains, write Steve Meyer and Len Steiner.


Two of those prices are shown in the charts below. The national weighted average net price for negotiated purchases is, in essence, the “spot market” price received by producers and paid by packers. It is the price of animals that are not sold under any sort of marketing agreement and it includes premiums/discounts for carcass quality — thus the “net” price designation as opposed to being a “base” price. As you can see, the rally for the net negotiated price has been very impressive, carrying it to a new records each of the past 2 weeks. The rally has nearly kept pace with last year’s spring rally and, should it continue at the ‘10 pace, into May, it would take “spot” hog values to about $105, even higher than today’s May close.

 


The national weighted average net price across all purchasing methods has rallied as well but, as should be expected, that rally has been much less explosive since this price series includes hogs sold/purchased through formula contracts, contracts tied to CME futures prices (which could have been executed as much as a year ago— and thus be assigning lower values to hogs moving to slaughter right now!) and other agreements with prices tied to feed costs, costs of production, etc.. This year’s rally of the total net price has been a bit slower than that of 2010 but should it match last year’s rise in magnitude even this average price would get close to $100.

We have documented the fact that both domestic and export demands for pork have been strong but this most recent rally is being driven by a very predictable occurrence — lower hog supplies. As can be seen in the following chart, weekly slaughter fell by over 100,000 head over the past two weeks. You can see that the same decline happened last year BUT — that drop included the short slaughter week of Easter in the first week of April 2010. Obviously that short slaughter week this year should be this week — and we are already sharply lower on hog slaughter.


The bottom chart at right shows the average carcass weight of the barrows and gilts whose prices and carcass data are reported to USDA as part of the mandatory price reporting system. Lower MPR barrow and gilt weights support the idea of tightening supplies as producers must dig a little deeper into their finishing buildings to deliver hogs against these higher spot bids. That is not to say we are finding many (or any!) “light” hogs since the average is all the way down to a still-whopping 207 pounds. But it does suggest that producers are pretty current and are getting more so each week.

Commercial Meat Production:Lessons Learned

-55 doe head level requires a barn of 1,100 sq.ft. or a barn of 20x55
-consider the size of the goats.Larger goats require more floor space and feeder space and more food
-make sure you have adequate feeder space for all he goats in the pen to eat at the same time.this can greatly reduce the chance of injuriies and miscarriage
-making use of pasture and browse will cut down on your feed bill.Soil quality is in direct relationship to the quality of forages grown,better soil equals better forages with higher protein and mineral content
-the average doe will eat approx. 1 ton of forages per year.Concentrates and minerals will help keep them healthier and produce better.Fat goats require less concentrates while thin does require more.
-show quality goats in general do poorly as pasture goats
-start cheap,better to make mistakes on less expensive goats than your high dollar breeding stock
-do not buy on pedigree alone,its the performance of the goat that counts,not the papers that come with it
-capital,are the goats going to be the sole support of the family,or will there be off farm income.Regardless,your goat enterprise should be sustainable within 3-5 years.Finances are individual,one cannot give much advice here.One needs to carefully evaluate your financial resources before starting a goat enterprise.Much more difficult to market your goats if you do not have a profitable outlet for them.One needs to have a business plan,commercial slaughter goats,breeding stocks either commercial or registered or show goats.
-rememver,do you realize that raising livestock is a 24/7/365 commitment,no matter the weather,time of day or other family,social or work obligations.Is your family supportive of your decision to raise goats
-all goats are amazingly adaptable.Using different breeds and systems you can set and meet your production goals.The goals you set will depend on your resources,management abilities,the ability of the goats and the products you hope to produce
-in order to make profits,your does need to get pregnant on their exposure to the buck(s),give birth to twins at least,raise the kids to weaning

Welcome to commercial meat goat production 101

Tuesday, April 19, 2011
Pork Commentary: US Pork Exports - Very Strong
US - In this week's Pork Commentary, Jim Long writes about US pork exports.


Jim Long is President &
CEO of Genesus Genetics.
US pork exports in February accounted for 27 per cent of US pork production versus 25.2 per cent in February 2010. Total pork exports jumped 15 per cent in value. A tremendous accomplishment, more pork sold at a higher price.

Regular readers of this commentary know we have been predicting for 3 months major US pork export increases will be had with South Korea due to the huge liquidation (35 per cent) of its swine inventory because of foot and mouth disease. South Korea has purchased $81.3 million of US pork in the first two months of 2011, double 2010. Last week Genesus had visitors from South Korea. The market hog price in South Korea they said is $500 per head; cost of production is $250 per head, net profit gain of $250 per head too. Imagine making $250 per head for a market hog – it is mind boggling!

With market hogs at $500 per head in South Korea expect US pork exports to stay strong, which is very price supportive.

Japan, the leading value market for US pork was up 17 per cent in value at $280 million the first two months this year compared to last.

With USA – Canada still having the lowest market hog prices in the world we expect pork exports will stay strong in the coming months as demand pulls pork to different countries. The 27 per cent of US pork production being exported will support the hog price move to $1.00 lean per pound expected in the coming weeks.

Markets
Hogs 53 – 54 per cent lean averaged $94.74 at the end of last week moving ever closer to $1.00.


USDA pork cut–outs were $96.57 lean per pound, the spread between hog prices and cut–outs has narrowed considerably from what was over $20. Weekly hog market numbers have dropped to just over 2 million a week (2.028 million) down around 300,000 head per week from last fall.


The market hog price has not only increased $50 per head in the last three months as market hog numbers have declined but so have packer margins as competition between packers to keep their plants full has cut their margins. We expect packers will continue to chase hogs over the next few months and will be working for lower margins.


USDA cash early wean pigs last week averaged $41.49 (32 – 49) while cash 40 pound feeder pigs averaged $74.94 (65 – 86). Decent historical prices but with higher feed prices not a lot of money left over.


Last week Iowa – S. Minnesota live hogs averaged 273.1 pounds compared to 270.12 pounds a year ago. Year over year weights continue to narrow as high feed prices take their toll.
Corn
May corn settled Friday at $7.42 a bushel after reaching $7.83 on Monday. The insanity of corn prices is going to have far reaching ramifications domestically and globally for pork and all meat production.

Some Observations
Oil a barrel has gone from July last year $75 to $110 a barrel. May corn have gone from $4.00 a bushel last July to $7.42. We expect if you want to know corn’s price direction figure out where oils going.


We read some industry facts in feedstuff in an article by Thomas Elam of Farm Econ LLC.


On an energy basis 211 million barrels of ethanol (gasoline equivalent) were produced in the US in 2010. The USA consumes approx 20.680 million barrels of oil per day or approx 73 billion barrels of oil per year. Corn ethanol at 211 million barrels produces about 1.5 per cent of consumption – not much is it?


Dr Elam estimates the US corn ethanol program increased grain prices globally $60 per ton in 2010. The direct cost to the global food system, increased cost of oilseeds, and other primary food commodities he estimated was $200 billion.


The US oil industry received 7 cents/gallon in subsidies in 2010. Ethanol production received 45 cents/gallon (67 cents/gallon on a gasoline energy basis. (Big subsidies – boondoggle).


The world consumes 85 million barrels of oil per day. US corn ethanol replaces 2.5 days of yearly global oil consumption.


Dr Elam “in summary, ethanol is an expensive gasoline substitute that is produced mainly due to subsidies and usage mandates. Take away tax credits, tariff production and usage mandates, and the US ethanol industry would collapse. With that collapse would come much lower grain and soybean prices.”


A Wall Street Journal editorial a couple of weeks ago on corn ethanol stated “driving up the cost of food and fuel with no benefit for the environment or American energy security.”
In the coming months the corn ethanol battle will continue to be engaged. For the sake of our livelihoods we hope common sense can and will prevail.

Summary
US pork exports continue strong, the US lean hog price has hit 94 cents and we are on track to get to $1.00. High feed prices are cutting profit margins but also initiating any sow herd expansion. In the next few weeks record hog prices will be received.


Author: Jim Long, President & CEO, Genesus Genetics

US Pork Outlook - April 2011
Recent larger pig numbers are expected to be mainly offset by continued strong domestic and international demand for US pork, according to the latest Livestock, Dairy, and Poultry Outlook from the USDA's Economic Research Service.
 

Summary
Pork/Hogs: The March Hogs and Pigs report showed a slightly larger inventory of market hogs, but any price effects of the slightly larger numbers are expected to be largely offset by continued strong domestic and international demand for US pork. Continued productivity gains are likely to reduce effects of hog producers’ stated intentions to reduce spring and summer farrowings.

2011 live equivalent prices of 51 to 52 per cent lean hogs are expected to be $62 to $65 per cwt, compared with $55.06 a year ago. Second-quarter 2011 prices are expected to be $67 to $69 per cwt, up from $59.60 in the same period of 2010. February exports were more than seven per cent greater than in February 2010, with Japan, Mexico and South Korea together accounting for 64 per cent of shipments.

Pork/Hogs
All hogs and pigs inventory increases while farrowing intentions lag
The Quarterly Hogs and Pigs report released by USDA on 25 March offered a mixed perspective of US hog production. The report showed a slightly higher 1 March inventory of all hogs and pigs. The market hog component of the inventory was almost one per cent larger than a year ago. With all other factors unchanged, slightly higher market hog numbers could be expected to have a dampening effect on hog prices. But it is more likely that expected strong domestic and foreign pork demand will offset any downside price effects of higher market hog inventories.

The report also indicated that producers intend to farrow about three per cent fewer female breeding animals in both the spring (March-May) and summer (June-August) quarters of this year. Even if producers follow through with their stated intentions, it is likely that continued gains in pigs per litter will limit production effects of lower farrowings. Productivity gains are thus expected to combine with lower stated intentions to yield a spring pig crop only slightly smaller than a year ago. Lower summer farrowings are expected to be more than offset by continued gains in seasonally high litter rates, and thus to result in a marginally higher summer pig crop.

Commercial hog production this year is expected to be 22.6 billion pounds, slightly higher than last year. Second-quarter production is expected to come in at 5.35 billion pounds, almost one per cent above the same period last year. Live equivalent prices of 51 to 52 per cent lean hogs are expected to be $62 to $65 per cwt this year, more than 15 per cent above 2010 prices. For the second quarter, the expected price of $67-$69 is more than 14 per cent above the same period last year.

February exports strong
February US pork exports were almost 388 million pounds, more than seven per cent higher than a year ago. While the relatively low-valued US dollar benefited most buyers of US pork products in February, the value of the dollar with respect to the Japanese yen, in particular, likely spurred Japanese purchases of US pork. February exports also reflect expected higher shipments to South Korea, in the aftermath of a series of recent outbreaks of foot and mouth disease. Shipments to Japan, Mexico and South Korea accounted for about 64 per cent of exports in February. First-quarter pork exports are expected to be 1.15 billion pounds, almost 10 per cent above the same period a year ago. For the year, US pork exports, forecast at 4.675 billion pounds are expected to be 10.6 per cent higher than a year ago and to account for 20.7 per cent of US commercial pork production.

US pork imports, at 60.4 million pounds in February, were about 7.2 per cent lower than a year ago. Of the five largest sources of imported pork, February shipments from Canada, Denmark and Italy were lower, while imports from Poland and Mexico were higher, year-over-year. While the relatively low value of the US dollar typically spurs US pork exports, it is also likely that US pork imports in February were slowed by the effects of the low-valued dollar. Live swine imports were almost 461,000 head in February, 1.7 per cent lower than in February 2010. Live swine imports were almost 461,000 head in February, 1.7 per cent lower than in February 2010. US imports of segregated-early-weaned animals increased almost nine per cent, likely reflecting strong returns in February from finishing hogs in the United States.