Tuesday, November 15, 2011
Pork Commentary: US Pork Exports Explode
US - In this week's Pork Commentary, Jim Long writes about US pig meat exports.


Jim Long is President &
CEO of Genesus Genetics.
Record setting pork exports to China led September US pork exports up 23.6 per cent in volume and 40.5 per cent in value from last year.

US September pork exports equated to 26 per cent of the total US pork meat production up from last year’s 22 per cent of total production.

For the month, the US exported 183,495 metric tons of pork valued at $537.6 million, which trails only March of 2011 as the second highest monthly export value on record. For the year the US has exported more than 1.6 million metric tons of pork valued at nearly $4.4 billion, increases of 16 per cent and 25 per cent respectively over the first nine months of 2010.

Going forward the latest USDA meat supply and use report projects pork exports will continue to increase in 2012 reaching 5090 million pounds up 2 per cent from 2011. We agree with this projection trend. Currently the price points of pork in the major importing countries of the world are significantly higher than USA – Canada which indicates low supply and strong demand in the importing countries. We expect pork to continually pull to China, Japan, Mexico, South Korea, and Russia over the next several months. Record pork exports are the major reason US market hogs are receiving $55.00 per head more than a year ago despite similar pork production. Demand, pork demand, pork export demand – every producer in USA – Canada should be thankful for pork exports. The benefit of having a dynamic packing industry with capital, scale, and expertise to export is a huge advantage.

We are seeing a trend that packers are pushing to improve pork quality not only for export but domestic demand. Recently Smithfield Foods the world’s largest hog producer and packer have for the most part stopped grading hogs. They are now paying for carcass weight and measuring fat quality with iodine testing. It is not hard to figure out they don’t want soft fat whether fresh, processing, domestic or export no one wants soft fat. DDG’s and Pietrain boars have been the curse of pork quality and demand is limiting. Pietrains can go away easy enough but DDG’s not so easy, the curse of corn ethanol goes on and on.

We also heard this past week another major packer is looking at major changes in its grade system. If we understand correctly this packers new grid will pay maximum grade premiums at 54 – 55 per cent lean. There will be discounts over 55 per cent. The discount level will be significant enough to really hammer the use of Pietrain boars and at the same time make the use of pay lean less desirable. Pfizer will also be impacted; one of their major pushes for producers to use their chemical castration vaccine is to get hogs leaner. Paying big money to get leaner with chemical castration won’t happen if you get discounted $4.00 per head for being over 55 per cent. Too bad for Pfizer, but as the world’s largest drug company they will survive.

Bottom line: The industry is beginning to see some major packers realigning how and what they will pay for. Hogs that are too lean, hogs that have soft fat are not what domestic consumer and export markets want. Going forward smart producers will evolve to this market push. To keep pork demand we must continually adjust to market requirements.


Author: Jim Long, President & CEO, Genesus Genetics 

Monday, November 21, 2011
Liquid Swine Feed Gaining in Popularity
NEBRASKA, US - Liquid feeding systems may not be common in US swine production, but were explained how they are being used satisfactorily elsewhere during a conference in Omaha.


"We're seeing an opportunity to improve feed efficiency," said Case De Lange from the University of Guelph in Ontario Province in Canada.

Mr De Lange's talk on liquid feed was one of 15 topics expressed at the International Conference on Feed Efficiency in Swine, held from 8-9 November at CenturyLink Center Omaha.

Midwest Producer reports that the conference was organized by animal science divisions at Kansas State University and Iowa State University.

The event had registered 420 by the start of the first day, from 15 countries and at least 20 states.

It was the kickoff to a five-year project to study swine feed efficiency. Another conference is expected in five years to see advancements in research.

"One of five pigs in our province is raised on liquid feed systems," Mr De Lange said.

The computerized systems were first used in Europe. They use high-moisture (25 per cent) corn - saving money that would have been used for drying - and inexpensive co-products from the food and biofuel industry.

Liquid swine feed in Europe is based more on wheat and barley, so corn has been quite different, Mr De Lange said.

"There is a learning curve," he acknowledged.

The distillers grain with solubles has shown no impact on carcass and meat quality, Mr De Lange said. The liquid feeding allows for use of inexpensive liquid co-products, though there may be some reductions in pig performance.

Liquid systems allow control and flexibility in developing unique feeding programmes, with good records, environmental impact and profits, he said.

"In 10 years of the University of Guelph system, no antibiotics have gone through the feeding system," he said. The liquid feeding provides a means to provide gut health promoting lactic acid and related compounds.

Liquid systems improve the workplace with less dust, better labor efficiency and reduced staff turnover, Mr De Lange's research showed. And the pigs' well-being has improved, possibly because of the quieter delivery system more than the feed itself.

The feeding results need predictability, he said, with good people in the barns who recognize problems or situations.

The staff requires unique skills and attitude. The computer systems are technologically intensive. Not everything will work satisfactorily. A mix of corn and water sitting in the feed lines will plug and burst the lines.

Operators must have flexibility because inputs will vary in quality and availability. Because of the liquids, pens will be dirtier.

Fermentation occurs in any liquid feeding system, but usually is not an issue, he said. Unfavorable microbes can lead to loss of feed palatability; only then should the system be cleaned and disinfected.

Guelph chose to use air to move the liquid feed through the pipes. Computerization allows the feed ingredients to be blown to specific troughs, Mr De Lange said.

The size of feeding operation has little to do with the efficiency of a liquid system, Mr De Lange said Guelph research showed.

Friday, December 09, 2011
Smithfield to End Use of Gestation Stalls by 2017
VIRGINIA, US - President and CEO of Virginia-based Smithfield Foods reports that the company's livestock production subsidiary Murphy-Brown, LLC has made major progress toward the conversion from individual gestation stalls to group housing arrangements for pregnant sows on company farms.


Smithfield, which has often been criticized for continuing to breed sows in gestation crates that severely restrict the animals’ movement, is committed to converting sow housing to group pens.

Mr Pope said he is confident that by 31 December, the company will have completed conversions for 30 per cent of the sows on it's farms, which was Smithfield's target for this year.

According to Mr Pope, Smithfield was the first major producer in the pig industry (which includes over 60,000 producers) to publicly commit to converting sow housing to group pens and remains the only large producer to do so.

"We will continue the conversion as planned with the goal of completing conversion for all sows on company farms by the end of 2017, and today we are on course to achieve that goal. While we initially had concerns during the recession about whether we could meet the 2017 goal, we are now back on track and barring unforeseen circumstances beyond our control we are confident that we will achieve our stated goal," said Mr Pope.

Monday, December 12, 2011
Pork Production Expected to Rise in 2012
US - USDA’s December World Ag Supply and Demand Estimates (WASDE) did not change US corn production but did increase predicted foreign corn production by 336 million bushels, writes Ron Plain in his Hog Outlook for 9 December.
 
Ron Plain
USDA lowered their midpoint forecast of the marketing year average price of corn by 30 cents to $6.40 per bushel. They lowered their midpoint estimate of soybean meal price by $30 to $295 per ton.

USDA is now predicting that 2012 US pork production will be up 1.7 per cent from this year. They are predicting 2012 beef production will be down 4.6 per cent, broiler production down 2.1 per cent and turkey production up 0.7 per cent. Total US red meat and poultry production in 2012 is expected to be down 1.7 per cent compared to this year.

Given a typical 0.9 per cent increase in the US population, per capita meat supplies should be tight enough to allow hog prices to hold steady despite an increase in production. USDA is forecasting the average live price for barrows and gilts will average $66.32/cwt this year and somewhere between $63/cwt and $68/cwt in 2012.

Hog prices were slightly lower this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $81.42/cwt, down $1.02 from last Friday. The Friday morning average price for both the western corn belt and Iowa-Minnesota was $83.44/cwt. The eastern corn belt averaged $80.75/cwt. Friday’s top live hog price at Peoria was $57/cwt. Zumbrota’s top was $58/cwt. The top for interior Missouri live hogs was $59.25/cwt, down 75 cents from the previous Friday.

USDA’s Thursday afternoon calculated pork cut-out value was $89.92/cwt, up 62 cents from the previous Thursday. Loins, bellies and butts were higher. Hams were lower. Hog prices are 90.5 per cent of cutout, a bit high for this time of year.

Hog slaughter totalled 2.33 million head this week, down 1.3 per cent from the week before and up 3.9 per cent compared to the same week last year. Barrow and gilt carcass weights for the week ending 26 November averaged 206 pounds, up one pound from the week before and the same as a year ago. Iowa-Minnesota live weights for barrows and gilts last week averaged 276.2 pounds, up 0.2 pound from the week before and up 0.6 pound compared to last year.

Total pork production this week is estimated at 484.7 million pounds, up 4.0 per cent from the same week last year. Year-to-date pork production is up 1.2 per cent. Seasonally, pork production typically declines and hog prices rise once we pass mid-December.

Today’s close for the December lean hog futures contract, $85.40/cwt, was down 85 cents from last Friday. The February lean hog futures contract settled at $86.42/cwt, down $2.80 from the previous Friday. April lost $3.27 this week to settle at $88.75/cwt. June hogs ended the week at $95.47/cwt.

The December corn futures contract ended the week at $5.855 per bushel, down 1 cent from the week before. May corn futures closed at $6.03 today.

Wednesday, December 14, 2011
CME: Overseas Market to Boost Meat Export Growth
US The latest US meat export data showed tremendous growth in pork exports and sustained increases in beef and poultry shipments, but it also highlights the growing dependence on foreign purchases, particularly from Asian markets, write Steve Meyer and Len Steiner.


The surge in export demand helped pork prices avoid much of the seasonal price decline in Q4 but the market remains vulnerable to a possible correction in export shipments, especially if Chinese purchases slow down.

Below is a brief recap of the latest numbers:

Pork: Total US pork exports in October jumped some 40 million pounds or nine per cent compared to the previous month and were 143 million pounds or 42 per cent larger than a year ago.

The graphic below shows monthly pork exports to the top five US pork markets. In October, these markets accounted for 85 per cent of all US pork shipments.

While most markets have registered strong growth in the past five years, shipments to China/Hong Kong remain fickle.

Exports to this market have tripled in just four months making it once gain the second largest export destination for US pork, after Japan. It is a situation eerily similar to the summer of 2008 when Chinese buyers ramped up purchases to fill short term needs but then left just as quickly when domestic supplies recovered.

The outlook for Chinese domestic pork supplies remains critical for US pork exports and US pork prices in 2012.

China has the world’s largest sow herd, estimated at 47.5 million head (USDA/FAS) or 61 per cent of the global breeding stock. By comparison the US breeding stock stands at less than six million head. According to USDA, the Chinese sow numbers were down three per cent at the start of 2011 and are expected to be slightly lower on 1 January, 2012.

Rampant inflation in feed costs stunted Chinese pork production in the last 12-18 months. But, with feed prices drifting lower, not just in the US but globally, it is a matter of time until Chinese producers start expanding again.

Different from the US, where most operations are large scale and require significant capital investment to expand, in China the majority of production is in backyard operations. This makes those operations much more sensitive to changes in feed prices but also more flexible in expanding production.

Beef: US beef export growth remains positive even as the growth rate has slowed down. Total shipments in October were 230 million pounds in October, 10.7 per cent higher than a year ago.

Key markets, such as Japan and Mexico, actually declined in volume compared to last year. Exports to Russia have more than doubled and even though that market accounted for about six per cent of US beef exports, it contributed more than a third of the growth in beef exports.

Broilers: Broiler exports in October were 689.7 million pounds, 2.5 per cent higher than a year ago and the second largest monthly export volume on record. Exports to Russia are down 70 per cent from a year ago but other markets have picked up the slack.

US Pork Outlook – December 2011
Strong export growth is expected to continue through the fourth quarter, before tailing off in 2012, according to the latest Livestock, Dairy, and Poultry Outlook from the USDA's Economic Research Service.



Pork/Hogs: October pork exports were more than 42 per cent greater than a year ago, propelled primarily by very strong Asian demand (ie, Japan, China, and South Korea). Strong export growth is expected to continue through the fourth quarter, before tailing off in 2012. Total US pork exports are expected to be 5.1 billion pounds, both this year, and in 2012.

Beef/Cattle: Disproportionally large cow slaughter has kept average dressed weights lower during most of 2011 than if steers had constituted half or more of beef slaughter, as they typically do. Packer margins and high feed and feeder cattle prices are exerting downward pressure on fed cattle prices.

Beef/Cattle Trade: US beef exports are expected to increase by 21 per cent in 2011. Although US domestic beef supplies will be 5 per cent lower in 2012, exports should remain strong and stay about even with levels exported this year. As tight global beef supplies will continue into next year, US beef imports are expected to increase only moderately into 2012.

Poultry: Sharply lower broiler chick placements and slower growth in bird weights have lowered the fourth-quarter 2011 broiler meat production estimate by 25 million pounds to 9.0 billion pounds and resulted in decreased estimates for the first and second quarters of 2012. The lower production is expected to gradually lower stocks. Turkey production was basically unchanged in October as slightly higher bird numbers were offset by lower bird weights. Cold storage holdings for whole turkeys continued below those of a year earlier, putting upward pressure on prices.

Poultry Trade: Broiler and turkey shipments rose in October. Broiler exports totaled 689.7 million pounds, a 2.5- per cent increase from a year ago. Turkey exports totaled 59.2 million pounds, an increase of 20.7- per cent from October 2010.

Sheep/Lamb: The sheep industry, buoyed by strong prices and an industry policy to grow the inventory, may be poised to see its first inventory increase since 2006. Consistently high Choice Slaughter lamb prices at San Angelo coupled with reductions in production and live trade may be signaling increased retention.

Dairy: An improved feed price outlook is balanced by lower milk prices in 2012. Production in 2012 is forecast to rise slightly based on higher milk output per cow. Exports are likely to decline next year compared with 2011, contributing further to the lower milk price outlook.


Pork/Hogs
Fourth-Quarter Pork Export Forecast Increased On Strong Asian Demand
The US pork industry is expected to ship 1.4 billion pounds of pork products to foreign destinations in the fourth quarter of this year, an increase of more than 22 per cent over the same period in 2010. Sales are expected to be strong to Asia, where demand for US pork is expected to increase year-over-year due to a combination of factors, including continued low-exchange values of the US dollar and government efforts to moderate consumer pork price increases brought about, in part, by recent outbreaks of various swine diseases. With larger fourth-quarter exports, total exports for 2011 are expected to reach slightly more than 5.1 billion pounds, an increase of 21 per cent over exports in 2010.

Export growth next year is expected to tail-off as Asian pork production increases, and consumer food price inflation abates. Total US pork exports in 2012 are expected to be about the same as this year, 5.1 billion pounds.

Pork products available to the domestic US market, evaluated in terms of retail weight per capita quantities, are likely to be year-over-year larger next year for the first time since 2009. With higher domestic availability, the average 2012 price of live-equivalent 51-52 per cent lean hogs should decline about 1.6 per cent, averaging $63-$68 per cwt, compared with $66.32 in 2011. Further declines in hog prices are likely to be checked by expected lower 2012 poultry production (-1.8 per cent, yearover- year) and sharply lower 2012 beef production (-4.6 per cent, year-over-year). Substitution effects from higher retail prices for poultry and beef prices should keep 2012 retail pork prices in the high $3.40s per pound.


Shipments to Asia Continue To Lift US Pork Export
US pork exports in October were over 482 million pounds, more than 42 per cent above October 2010 shipments. Similar to patterns set early in 2011, 80 per cent of October exports went to five countries: Japan (+37.8 per cent year-over-year), China (almost 4 times greater than a year ago), Mexico (+.3 per cent year-over-year), Canada (+27.4 per cent year-over-year), and South Korea (+64.5 per cent yearover- year).

US pork imports in October were 69 million pounds, 11 per cent less than a year earlier. As has become the norm, almost 12 per cent of October imports were of Danish origin, and 77 per cent came from Canada. Imports from Denmark were almost 15 per cent ahead of a year ago, while shipments from Canada were off by more than 14 per cent. Live swine imports from Canada in October were almost 498,000 head, 9 per cent above a year ago. All categories of finishing animals (segregated early-weaned pigs and feeder pigs) were up strongly, while slaughter hog imports declined 9 per cent compared with October 2010.

USDA will release the Quarterly Hogs and Pigs Report on December 23. The report will contain December 1 hog and pig inventories, as well as fourth-quarter (September-November) farrrowing, pig crop, and litter rate information. Additionally, the report will detail producers’ second set of farrowing intentions for the first quarter of the new year (December-February (2012)), and the first set of producers’ farrowing intentions for the second quarter (March-May) of 2012.


Beef/Cattle
Large Cow Slaughter Holding Average Dressed Weights Lower
Thus far in 2011, federally inspected cow slaughter has been large relative to the January 1, 2011 cow inventory, surpassing last year’s cow slaughter for the same period, which was also atypically large for its January 1 inventory. Year-to-date (through November 26, 2011), cumulative weekly federally inspected cow slaughter in 2011 was 4.3 per cent greater than for the same period in 2010. For beef cows, year-to-date slaughter in 2011 was 14 per cent above the same period in 2009, while dairy cow slaughter was only 2 per cent above 2009 slaughter. Because cows generally have lower dressed weights than steers, heifers, or bulls, these atypically large proportions of cow slaughter have resulted in lower average dressed weights for all cattle than trend lines and typical steer and heifer dressed weights and proportions of total slaughter would indicate.

Beginning with December 2009 prices for 750-800 pound Medium and Large No. 1 Oklahoma City feeder cattle prices that were 4 per cent above 2008 prices, feeder cattle prices have exhibited year-over-year increases every month. Increasingly scarce supplies of feeder cattle, especially heavier, older yearlings, make it likely that feeder cattle prices will continue high for the next 2 or 3 years until calf crops begin increasing year-over-year. Additional longer term support for feeder cattle prices will come as the expected lower corn and feed prices materialize in 2012-13.

March was the only month in 2011 that did not have higher year-over-year placements of feeder cattle under 600 pounds. This has resulted in an atypical inversion of price premiums between Central and Southern Plains fed cattle prices (See Cattle Sector Production Practices and Regional Price Differences, http://www.ers.usda.gov/Publications/LDP/2011/04Apr/LDPM2021/). January, July, and September are the only months in 2011 (through November) in which Texas-Oklahoma fed steer prices (35-65 per cent Choice) were higher than Nebraska fed steer prices (65-80 per cent Choice)..

Despite the high fed cattle prices, profit margins have stayed at breakeven levels or lower, in some cases much lower. In addition, cattle feeders continue to place expensive feeder cattle in anticipation of higher fed cattle prices in 2012, when supplies of fed cattle are expected to become scarce. However, fed cattle supplies will likely continue at or near current levels until sometime during the first half of 2012 because of the large numbers of lightweight feeder cattle that were placed on feed during the last half of 2011. These fed cattle will likely be marketed during the first half of 2012.

Packer margins are negative at a time when they typically recover. Negative margins have driven packers to reduce slaughter numbers somewhat and have dampened their willingness to continue to pay the record and near-record-high prices for fed cattle.


Beef/Cattle Trade
Foreign Demand for US Beef To Remain Strong into 2012
US beef exports for 2011 continue to remain robust. Twenty-one-per cent growth is expected this year as beef exports are forecast at 2.78 billion pounds. Key factors supporting the strong export market in 2011 are: (1) increased demand for US beef as disposable incomes of foreign consumers increase, (2) a worldwide multi-year decline in total cattle inventories and beef production, (3) an increased number of foreign countries purchasing US beef, and (4) a favorable exchange rate (with a relatively weaker US dollar making US product more attractively priced in global markets).

Through October, the largest increases in US beef exports have come from South Korea (+45 per cent), Japan (+31 per cent), and Canada (+33 per cent). Along with Mexico (+1 per cent), these countries are the largest importers of US beef, totaling almost two-thirds of the total US beef exported through October 2011. Notably, export totals to Hong Kong (+41 per cent), Egypt (+23 per cent), and Russia (+85 per cent) have also posted strong growth increases. Through October, the seven countries listed above imported just over 80 per cent of total US beef exports. In 2012, with US beef production expected to be down 5 per cent, total exportable supplies will be squeezed. The strength seen in the export market, however, is expected to continue into next year, including growth in Asian markets. Although there will be a tighter US supply, beef exports are expected to be about even with this year’s levels.


2012 Beef Imports to the United States Expected To Show Only Modest Recovery
US beef imports for 2011 are expected to be 11 per cent below year-earlier levels, at 2.05 billion pounds. Through October, imports from traditional major suppliers are down. Imports from Australia and Canada are down 25 and 22 per cent through October. These two countries have historically been beef suppliers to the United States, and, combined in the last 10 years, have averaged over 60 per cent of total US beef imports in the last 10 years. Imports from New Zealand (-3 per cent), Brazil (-53 per cent), and Uruguay (-11 per cent) are also lower year-over-year, while imports from Mexico (+49 per cent) and Central America (+29 per cent) through October are higher. The increase in federally-inspected plants in that country, as well as increased grain-fed beef production, are increasing the supply of higherquality, exportable beef. Tight global beef supplies, however, will continue into 2012 when US beef imports are expected to increase by 2 per cent to 2.09 billion pounds.

Poultry
Broiler Meat Production in October Falls by 3 per cent
Broiler meat production, which has fallen in 3 of the last 4 months, totaled 3.1 billion pounds in October, down 3 per cent from the previous year. Total broiler meat production during the first 10 months of 2011 was 31.4 billion pounds, 2.6 per cent higher than in the same period a year earlier. In October, the number of birds slaughtered fell to 700 million, down 3.2 per cent from the previous year, as integrators have been reducing the number of chicks placed for growout over the last several months. The lower number of birds slaughtered was partially offset by an increase in the average live weight of birds at slaughter, up fractionally to 5.94 pounds. Average broiler weights at slaughter are expected to continue higher in November and December, but the rate of growth is expected to be much slower than it was over the first three- quarters of 2011. With these expected changes, the estimate for fourth-quarter 2011 broiler meat production was decreased 25 million pounds to 8.98 billion pounds, 5.4 per cent below the previous year. This lowers the annual forecast for broiler meat production in 2011 to 37.3 billion pounds, an increase of 1 per cent from 2010. The broiler meat production projections for firstand- second-quarter 2012 were each reduced by 100 three quarters of 2012. The revised forecasts in the first two quarters are down 5.3 and 4.2 per cent on a yearover- year basis, and the revised total broiler meat production for 2012 is now 36.5 billion pounds, down 2.1 per cent from 2011.

With relatively high corn prices forecast for the remainder of 2011 and into 2012, and with relatively weak prices for most breast meat products, broiler integrators are expected to scale back production through much of 2012. The number of chicks being placed for growout continues to be well below that of the previous year. Over the last 5 weeks, (November 5 to December 3), chick placements have averaged 154 million, down 6.6 per cent from the same period in 2010. Chick placements are expected to remain below year-earlier levels through the first half of 2012 and gradually pull even with and then exceed year-earlier levels in the second half of 2012.

Cold storage holdings of broiler products at the end of third-quarter 2011 were revised downward slightly to 639 million pounds, down 6 per cent from the previous year. With strong declines in broiler meat production expected in fourth-quarter 2011 and the first two quarters of 2012, ending stocks are expected to remain below year-earlier level through third-quarter 2012.

Broiler stocks at the end of October totaled 667 million pounds. This is an increase of around 28 million pounds from September, but still about 5 per cent lower than the previous year. Stocks for most broiler products continue to be well below their year- earlier levels, with the exception of breast meat products. With lower yearover- year production expected and resulting lower stocks levels, broiler product prices are expected to get some upward pressure.

Prices for almost all broiler products were higher in November than the previous year. The lone exception was whole broilers, which are still considerably lower (down 6 per cent). Strong exports continue to place upward pressure on leg quarter prices (up 31 per cent) and other leg meat products such as boneless/skinless thighs (up 27 per cent) and whole thighs (up 44 per cent).

The forecast lower boiler production levels through the first half of 2012 are expected to gradually place upward price pressure on almost all broiler products. Whole bird prices are expected to be at $0.77-$0.78 per pound in fourth-quarter 2011, down 3 per cent from the previous year. However, prices in 2012 are expected to increase and be above year-earlier levels throughout the year.

October Turkey Production Even with Year Earlier Output
Turkey meat production in October totaled 525 million pounds, almost identical to production a year earlier. Although the total meat production was unchanged, the number of turkeys slaughtered rose by 0.5 per cent to 23.3 million. The increase in the number of birds slaughtered was offset by a slight decline in the average weight at slaughter from a year earlier to 28.3 pounds.

The fractional growth in turkey meat production in October contrasts to the strong expansion in production over the first half of 2011, when production was up 5.5 per cent compared with the same period in 2010. Over the first 10 months of 2011, turkey meat production has been 3.4 per cent higher. The second half of 2011 is expected to be a sharp contrast as production was only 0.5 per cent higher in the third quarter, and the fourth-quarter production forecast is 1.5 billion, only 0.3 per cent above the previous year.

With little growth in production and turkeys being taken out of storage in preparation for the Thanksgiving holiday, stocks of all turkey products fell by over 100 million pounds between the end of September and the end of October. Total turkey stocks were 407 million pounds at the end of October, down almost 1 per cent (0.7) from the previous year. This is a significant change from stocks at the end of September that were 7.6 per cent higher than the previous year.

Declines in stocks of whole birds accounted for 69 per cent of the decline in total turkey product stocks from September to October. Whole turkey stock levels always decline at this point in the year, but stocks of whole birds fell by almost 71 million pounds, dropping the level for whole birds to 209 million pounds, almost 14 per cent lower than the previous year. Whole bird stocks at the end of September were only 2.6 per cent lower than the previous year. The decline in stocks of turkey products was much less (down 32 million pounds), and stocks of turkey products at the end of October were 199 million pounds, 18 per cent higher than in October 2010.

With the steep October decline, the estimate of ending stocks for 2011 was lowered to 205 million pounds, down 10 million pounds from the previous estimate but still 7 per cent higher than a year earlier. The stock estimate for first-quarter 2012 was lowered by 15 million pounds to 325 million. However, the estimates for the second and third quarters were both increased to 500 million pounds. Anticipating a strong drawdown in stocks during in the holiday period in 2012, ending stocks for 2012 were reduced by 10 million pounds to 200 million.

During the first 11 months of 2011, the national price for whole hens has been higher than the previous year on a year-over-year basis. Prices for November were $1.14 per pound, up 7 per cent from a year earlier and 38 per cent higher than the 2009 price. Prices are expected to decline seasonally in December but remain well above a year earlier, and the average for fourth-quarter 2011 is forecast at $1.10- $1.11 per pound, an increase of over 6 per cent from fourth-quarter 2010. Lower stocks of whole birds during most of 2011 have placed upward pressure on prices. Even with higher production, low stock levels at the start of 2012 are expected to pressure prices higher and whole hen turkey prices are expected to average $0.90- $0.94 per pound in first-quarter 2012, an increase of approximately 2 per cent from the previous year. However, production gains in 2012 are expected to gradually reduce prices, with hen prices in the second and third-quarters lower than the previous year.

Over the first 10 months of 2011, turkey poults placed for growout totaled 232 million, an increase of 0.9 per cent from the same period last year. The small increase would indicate that turkey production in the first half of 2012 is likely to be close to or slightly higher than in 2011. Given the strong wholesale prices for whole birds and most turkey products in the second half of 2011, turkey producers would normally be more heavily expanding production, but forecasts for continued high feed prices and a weak domestic economy through 2012 are likely contributing to producer resistance to expand.


Table Egg Production Continues Higher
The table egg laying flock in October was estimated at 282 million hens, 0.9 per cent above the previous year. Changes in the table egg flock numbers on a year-overyear basis have generally been lower in 2011. The flock size was higher in only 3 of the first 10 months, although table egg production has been higher throughout the year. The table egg flock is expected to remain higher than the previous year through the remainder of 2011, but only slightly. At the beginning of November the estimate of the number of birds in the table egg flock was down, but the decrease was less than 1 per cent. With expected higher feed prices and continuing economic uncertainties, egg producers are not expected to have much of an incentive to expand production in 2012.

Even with table egg production higher throughout the first 10 months of 2011, total production has been 5.5 billion dozen, only marginally higher (0.8 per cent) than the same period in 2010. In October, production was 562 million dozen, an increase of 1.9 per cent from the previous year. Fourth-quarter 2011 table egg production is estimated at 1.69 billion dozen, or about 1.1 per cent higher than the previous year. Even with the higher forecast, table egg prices are expected to remain strong through the end of the year. The fourth-quarter 2011 wholesale price for one dozen Grade A eggs in the New York market is forecast to average $1.27 to $1.28, up about 10 cents per dozen from third-quarter 2011 and about 4 per cent higher than a year earlier.

Hatching egg production has been lower than the previous year through the first 10 months of 2011. Over the first half of 2011, hatching egg production was down by relatively small amounts per month, but since July the declines have been much sharper, averaging around 3 per cent per month. Although there have been some declines in the number of egg-type eggs produced, the majority of the decline has come from a lower number of broiler-type eggs. The decrease in the production of broiler-type eggs is expected to continue through the first half of 2012 or until broiler integrators begin to expand production.


Total Egg Exports Fall in October
Monthly exports of eggs and egg products had been mostly higher in 2011 on a year-over-year basis through September, but fell in October to the equivalent of 22.4 million dozen eggs, 13.3 per cent below a year earlier. The exports were down to Canada, Hong Kong, and Germany and a number of smaller markets, but were partially offset by higher shipments to Japan and Mexico. Exports of both shell eggs and egg products declined in October, with shipments of shell eggs at 11.5 million (down 12 per cent) and shipments of egg products at the equivalent of 10.9 million dozen (down 12 per cent). The October shipments were likely impacted by strengthening US prices. Domestic shell egg prices have continued to strengthen in November and into December. Over the first 10 months of 2011, total egg shipments were 232 million dozen, up 6.7 per cent from the same period in 2010.

Poultry Trade
Broiler Shipments Remain Strong in October
October broiler shipments were up from a year ago. Broiler meat shipped in October 2011 totaled 689.7 million pounds, a 2.5- per cent increase from the same period in 2010, although last October shipments in 2010 were at the highest monthly volume recorded that year. There are several notable differences in trade flows between 2011 and 2010. Shipments to Russia in October 2010 totaled 211 million pounds, which accounted for 31.5- per cent of the US broiler exports for that month. In October 2011, Russia imported only 64.4 million pounds, a 69.5- per cent reduction. One reason for this big change is that imports were high in 2010 as the US re-entered the Russia’s market following resolution of trade restrictions.

Another market that made a considerable difference in 2011 October broiler shipments was Hong Kong. Broiler shipments to Hong Kong totaled 55.7 million pounds in October 2011, a 45-per cent increase from last October. In October 2010, shipments to Angola totaled only 14.4 million pounds. However, 12 months later these shipments rose to 60.5 million pounds, a 320-per cent increase from a year ago. Secondary markets also imported more broiler meat in October 2011, offsetting lower shipments to Russia.


Turkey Shipments Rose in October
Turkey shipments totaled 59.2 million pounds in October, up 20.7- per cent from a year ago. Shipments to the largest US market, Mexico, totaled 31.4 million pounds, accounting for 53 per cent of total turkey exports. Exports to China, the second largest US turkey market, rose considerably in October, from 3.2 million pounds in October 2010 to 5.2 million pounds in October 2011. Sizable turkey shipments also went to the Philippines, for an increase of over 1 million pounds from a year earlier. Through October, turkey exports are up 23- per cent in 2011.

Sheep/Lamb
Sheep Industry Buoyed by Strong Prices and Industry Policy
The sheep industry, with strong prices and an industry policy to grow the inventory, may be poised in 2012 to see its first inventory increase since 2006. A number of factors points to this. The 2011 live auction slaughter lamb prices at San Angelo, Texas have consistently remained above 2010 levels. Choice Slaughter lamb prices at San Angelo have remained in a fairly narrow range, between $155-$175 per cwt for the entire year. Though fourth-quarter Choice prices are forecast at the bottom of that range at $155-$156 per cwt, continued high prices could trigger a higher than normal rate of lamb retention as producers engage in herd rebuilding in anticipation of even higher prices.

At the beginning of the year the industry launched a “let’s grow program” designed to encourage producers to increase their flocks. Indications are that this policy may be working, as producers appear to be holding on to their animals for longer periods. For the first three quarters of 2011, less than 54,000 head of live sheep (mainly older ewes) were exported, a decline of 58 per cent from the same period last year. In 2010, the number of live sheep exports exceeded 150,000 head. Live exports for 2011 are expected to be significantly lower than in previous years.

Signs of increased retention can also be seen in the sharp drop in production. Although sheep inventory was about 2 per cent lower on January 1, 2011, compared with the previous year, with similar per centage declines in both the breeding inventory and market lambs, lamb and mutton production has been down 8 per cent in the first three quarters of 2011 compared with the previous year and is forecast to be down around 9 per cent for 2011. Through October 2011, the number of sheep slaughtered was 11 per cent lower than in the same period last year. Fourth-quarter 2011 commercial production of lamb and mutton is forecast at 37 million pounds. This is about 13 per cent below the fourth quarter of 2010. Typically, distinct seasonal increases begin in the fourth quarter, but in November less than 12 million pounds of lamb and mutton were produced and December is expected to be below 2010. It is likely that high prices and increased retention could be contributing to the low production levels in 2010.


Lamb and Mutton Trade Still Vibrant
Despite fairly strong Australian and New Zealand currencies relative to the US dollar and a slow economic recovery during 2011, imports have been relatively strong, continuing to offset tight domestic supplies. For the first 10 months of 2011, lamb and mutton imports were 140 million pounds, up 6 per cent from the same period last year. Imports for October 2011, though typically lower than most other months, were 16 per cent above the same period last year. Fourth-quarter 2011 imports are forecast at 43 million pounds, 2 per cent above the same period last year. Import increases are expected for the rest of 2011, as continued tight domestic supplies are expected to persist.

Lamb and mutton exports have shown strength and are forecast at 18 million pounds for 2011, up 12 per cent from 2010. October exports were 1.6 million pounds, 80 per cent higher than last year. Fourth-quarter 2011 exports are forecast at 4 million pounds, up 33 per cent above the same period in 2010.


Dairy
Higher Domestic Milk Production and Stronger Competition in Export Markets Will Lower Milk Prices in 2012
The December corn price forecast for 2011/12 is $5.90 to $6.90 a bushel. This adjustment represents a lowering of 30 cents a bushel on each end of the price range from last month. Although the 2011/12 use numbers were changed only slightly, prices received by farmers are reported to be below cash market bids, reflecting deliveries of grain that were forward-priced earlier in 2011. Also, declines in futures prices since November have tempered the price outlook for the coming months. Soybean meal prices have also been lowered, the December forecast being $280 to $310 a ton in 2011/12. Lower forecast production is balanced by lower expected domestic use. The preliminary November price for alfalfa hay was reported in the Agricultural Prices report at $198 a ton, a slight decline from October’s reported $206 a ton but still well above year-earlier prices. With a return to more normal weather conditions next year, alfalfa hay prices should moderate in 2012. The preliminary milk-feed price ratio for November was estimated at 1.80, virtually unchanged from October but well below the 2.23 a year earlier.

Cow numbers were virtually unchanged from the November forecast at 9,200 thousand head for 2011 and remain at 9,190 thousand head in 2012. Dairy cow slaughter for the January to October 2011 period is about 4 per cent above slaughter for the corresponding period of 2010 according to the November Livestock Slaughter report, and replacement heifer prices are steady. This suggests no major liquidation is in the offing, but cow numbers are expected to decline slightly next year. Output per cow continues to rise, and lower expected feed prices are the basis for the increase in the December projected output per cow to 21,315 pounds this year and 21,610 pounds next year. Slightly more milk is forecast in December than in November, both this year and next. Production is forecast at 196.1 billion pounds this year, rising to 198.5 billion pounds in 2012.

Fat-basis milk equivalent dairy import forecasts in 2011 were raised this month to 3.3 billion pounds, based on slightly higher imports of butterfat and food preparations. In 2012, fat-basis imports are forecast at 3.2 billion pounds, unchanged from the November forecast but down from 2011. Skim-solid basis import forecasts were left unchanged from last month at 5.3 billion pounds. In 2012, skim-solid basis imports are forecast to fall slightly to 5.2 billion pounds.

Milk equivalent fat-basis exports were raised slightly this month to 9.3 billion pounds. The export total was raised due to higher than expected milk and cream shipments. Next year, fat basis exports are forecast at 8.6 billion pounds, unchanged from last month. This year’s skim-solid basis exports are forecast at 33.6 billion pounds, up from November due to stronger skim milk powder exports. Next year, the forecast is unchanged from last month at 31.9 billion pounds. Increased global production will likely present stronger competition for US exporters of skim powder products.

Commercial domestic use is projected at 188.8 billion pounds fat basis for 2011 and 191.9 billion pounds in 2012. Commercial domestic use on a skim-solid basis is forecast to reach 166.9 billion pounds this year, a decline from November’s forecast, but an increase from 2010. Next year, skim-solid domestic use is forecast to rise from 2011 to 171 billion pounds, an increase from November expectations and a 2.5 per cent rise above 2011 expected totals.

Cheese prices are forecast to average $1.820 to $1.830 a pound in 2011, unchanged from November’s forecast, but are projected lower in 2012 at $1.675 to $1.755 a pound. Domestic use of cheese was lower in the third quarter of 2011 compared with 2010, and both domestic and Oceania prices have recently declined sharply, supporting the lowered price forecast. Recent weakness in butter prices has led to a lowering of 2011 butter prices from November projections to $1.935 to $1.965 a pound in the December forecast. Stronger global competition in 2012 is expected to moderate butter prices even further in 2012. Butter prices are forecast at $1.605 to $1.715 a pound next year. Higher global production will similarly affect NDM prices. NDM prices are projected at $1.495 to $1.515 a pound this year, a slight downward revision from last month. Next year, prices are expected to drop more significantly to $1.360 to $1.420. The outlier is whey. Exports have been brisk in 2011 and are likely to continue strong in 2012. Whey prices are forecast at 52.5 to 53.5 cents a pound in 2011, unchanged from last month. Next year, prices are expected to rise from 2011 to 53.5 to 56.5 cents a pound, a substantial upward revision from November.

Milk prices will be lower next year based on lower product prices. Class III prices are expected to be $16.90 to $17.70 per cwt next year, down from an expected $18.30 to $18.40 per cwt in 2011. Lower cheese prices will probably overcome the relative strength in whey prices, lowering the Class III price. The Class IV price is also expected to be lower in 2012 at $16.35 to $17.25 per cwt, a decline from $18.95 to $19.15 per cwt in 2011. The 2012 all milk price is forecast at $18.10 to $18.90 per cwt, down from $20.05 to 20.15 per cwt in 2011.

Wednesday, December 21, 2011
Herd Expansion Expected after Record Prices
US - On 23 December, the USDA will release the results of its latest survey of the US swine inventory. Hog producers enjoyed record hog prices this summer and I believe that has caused some modest herd expansion, writes Ron Plain in his Swine Economic Report.
 
Ron Plain
My estimates are that the breeding herd is 0.8 per cent larger than a year ago; the market hog inventory is 1.4 per cent larger; and the total herd is 1.4 per cent larger than in December 2010. My estimates of the 1 December market hog inventory by weight groups are: 180 pounds and heavier 102 per cent, 120-179 pounds 101.3 per cent, 50-119 pounds 101 per cent, and under 50 pounds 101.6 per cent of a year earlier.

September-November sow slaughter was up 4.2 per cent. Imports of Canadian sows for slaughter during this period were up 8.4 per cent. Thus, net slaughter of US sows was up 3.5 per cent out of a sow herd that was 0.6 per cent larger compared to 12 months earlier.

Slaughter of barrows and gilts during September-November was up two per cent with a year earlier. USDA's September report implied summer slaughter would be up 2.1 per cent. There appears little need for USDA to make any large changes in their September market hog inventory or their estimate of sows farrowed and pig crop during March-May.

In their last inventory report, USDA predicted that September-November farrowings would be down 0.2 per cent and December-February farrowings would be 0.5 per cent higher than a year earlier. There is a good chance that hot weather last summer slightly reduced the size of the winter pig crop. I believe fall farrowings actually were down 0.5 per cent. I'm forecasting winter farrowings to be unchanged and March-May farrowings up 0.5 per cent compared to last spring.

I believe pigs per litter were up two per cent this fall. My estimate is the September-November pig crop was 101.6 per cent of a year earlier.

My estimate of hogs in the 50-179 weight groups implies that daily hog slaughter during the first quarter will be one per cent to 1.5 per cent above year-ago levels, if the inflow of slaughter hogs from Canada is close to year-earlier levels. I expect hog slaughter during the second quarter of 2012 to be 1.5 per cent higher than the number slaughtered in April-June 2011. Look for third quarter slaughter to be up 1.7 per cent and fourth quarter slaughter up two per cent on a daily basis.

I expect live hog prices to average close to $64/cwt ($85/cwt carcase) in the first quarter of 2012; $69/cwt ($91/cwt carcase) in the second and third quarters of 2012; and $58/cwt ($77/cwt carcase) in the fourth quarter of 2012.

Wednesday, December 28, 2011
CME: Hogs and Pigs Report No Big Shock
US - Friday’s quarterly Hogs and Pigs report from USDA is being called neutral by industry analysts — a judgment we agree with for the nearby and intermediate terms but would find a bit negative for the deferred months, write Steve Meyer and Len Steiner.


This was an interesting report in that it was released while CME Group trading pits were still open on Friday. Most LH contracts gained $0.40 to $0.60 just after the report’s release, suggesting that the market may have seen it a bit bullish. The reaction was not large but the report numbers were not much different than expected, so this was not much of a test of the impact or releasing while the pits were still open.

 


We can’t recall the Hogs and Pigs report ever before being released while pits were open but electronic markets have made the concept of "after the markets close" rather quaint it seems since they have been trading at the time of release for several years. Is this reaction any different from those of electronic markets? We doubt it. Let’s try it with a shocker report and see what happens. Anyone really want to do that?

Some highlights of the report are:

There were no big shocks. Virtually all of the actual numbers were within 1 per cent of the analysts’ pre-report estimates. These numbers were substantially already "in the market."


The report passes the litmus tests. The 180-and-over inventory was 0.4 per cent lower than last year. Slaughter is 0.3 per cent lower this December (thru 17 weekdays and 4 Saturdays) versus the same number of weekdays and Saturdays last year — very close. The percentage changes for September-November farrowings, Sep- Nov pigs per litter and September-November pig crop all fit together. No adjustments for imports of Canadian market hogs or feeder pigs are necessary since this year’s numbers are reasonably close to last year’s.


The breeding herd of 5.803 million head was only 0.4 per cent larger than last year. That is just half the year-on-year growth rate expected by analysts and represents growth of just 25,000 sows since 1 September. Reactions to profits have remained modest even since the size of the corn crop has been known.


The market herd was 1.7 per cent higher than last year with all of the increase coming in pigs weighing 179 lbs. or less. Those pigs will begin reaching slaughter in January and will lead to higher 2012 weekly totals through March.


December-February farrowing intentions fit the breeding herd very well and suggest higher hog numbers through August but March-May intentions were significantly lower than expected and somewhat lower than a 100.4 per cent breeding herd would suggest. If this farrowing level and the 1.1 per cent litter size growth rate hold, Q4 slaughter will be almost exactly the level of this year. That is very good given the level of slaughter capacity — which we have tested on several occasions this fall.


Average litter size of 10.02 pigs was record large for the September- November quarter. The 1.1 per cent growth rate leaves the average litter size growth since March 2008 at 1.91 per cent per year.

Thursday, December 29, 2011
Pork Commentry: No Breeding Herd Expansion
US - The US breeding herd is holding steady and there has been no net expansion, writes Jim Long.


Jim Long is President &
CEO of Genesus Genetics.
Despite hitting record high hog prices in the last six months not one more sow.

Why? High hog prices have been accompanied by high feed prices. Farrow to finish profit margins have been okay but not substantial. Small pig cash prices were at times $25 per head below cost of production, which in itself does not make more pigs.

The hog to corn ratio, which has been below 15:1, has never and will never lead to breeding herd expansion.

To have breeding herd expansion you need optimism. Our industry is not optimistic. We are an industry of survivors. We have seen too many things hit us over the last few years. The list is long, months of financial losses, volatile and high feed prices, animal welfare, environment, labour, H1N1 (swine flu), recession, etc. All in all not a recipe for getting pumped up to add sows.

Productivity
Even though the breeding herd has held steady the last six months, the productivity of the herd continues to increase with the September – November pig crop up 750,000 more than the same time frame a year ago (57,359–58,088).

Productivity gains are expected to continue. The genetic trend line on litter size continues to increase. At Genesus, we are increasing our genetic trend by over a half pig per sow per year annually. Many of our competitors are also increasing litter size, while the genetic companies that are not keeping up are losing market share. Our premise is that the industry is inhabited by survivors plays out in the genetic business. Survivors realise they cannot stay competitive starting the day one pig born alive per litter behind their neighbours.

As incredible as it may seem, Genesus customers jump four pigs per sow per year by changing genetics – the same barn, same health, and the same people. This is a huge difference for cost of production and profitability. The best producers will continue to push the envelope and look for practical technology to enhance their production capacity.

Market inventory
The USDA December Hogs and Pigs Report market hog inventory indicates one million more hogs than a year ago (59,147 in 2010; 60,128 in 2011). The extra numbers will lead to about 40,000 more market hogs a week going forward in 2012. A significant number and certainly not price enhancing. The flip side is the continuing increase in US and world population, which continues to increase demand.

The US population in 2001 was 285 million; today, it is estimated to be about 313 million. That is an increase over the last 10 years of 28 million people or about an average of three million more per year. More people equal more pork customers. The world population is expected to increase 77 million this year. Global pork demand has been a major push for higher hog prices. People want meat protein.

Summary
The USDA December Hogs and Pigs Report had no surprises. The breeding herd has had no change in the last six months, productivity gains lead to bigger pig crop and market inventory. Total supply change is not significant. Price movement will be a demand driver. Less US total meat in 2012 (beef and chicken) will be price enhancing. We expect lean hogs to reach over a $1.00 lean in the summer of 2012.

“I am an optimist. It doesn’t seem too much use being anything else.” – Sir Winston Churchill.

Wednesday, January 04, 2012
Less Bedding Can Benefit In-Transit Market Pigs
US - In a new study, funded by the Pork Checkoff, researchers at Texas Tech and Iowa State universities found that the pork industry can generally use less bedding year-round that it currently does while improving overall animal well-being - a breakthrough finding that could save the industry an estimated $10.1 million per year.


John McGlone, a swine researcher at Texas Tech University and principal researcher for the study, along with Anna Butters-Johnson an Iowa State University researcher, looked at various rates of bedding in semi-trailers at different times of year and in different locations throughout the Midwest. This approach provided data representing cold, mild and hot weather.

Specifically, the research trials showed that groups of pigs headed to market can experience lower mortality rates in warm weather and overall improved well-being year-round when less bedding is used in transport trailers. According to Dr McGlone, the current standard in the industry is to use four bales of bedding per semi-trailer.

"During the study we found that the surface temperature of the pigs changed with the air temperature and that increased surface temperature actually caused a negative effect on the pigs' welfare," Dr McGlone said. "In cold weather, we found that there is no added effect to using more than six bales of bedding per trailer."

Dr McGlone explained that freezing temperatures cause used, wet bedding on the trailer beds to freeze, which means pigs are more likely to slip on the ice, thereby creating more down pigs. While in warm or mild weather, they found no added effect in using more than three bales of bedding per trailer.

"We concluded that if the industry changed to using only three bales per trailer, it would create a big savings with no change in welfare," Dr McGlone said. "So it's something the industry will need to consider carefully."

Karen Richter, a pork producer from Montgomery, Minnesota, and a National Pork Board member, said, "This bedding research offers us as an industry win-win situation because the results show that we can continue to improve animal well-being practices and actually save money at the same time."

According to Sherrie Niekamp, Checkoff's director of swine welfare, the pork industry overall is doing a good job of transporting its roughly 2 million pigs per week in a safe and pig-friendly way. Statistics back up this assessment, with more than 99.3 per cent of pigs sent to market arriving in good condition.

However, the small percentage of transport losses that occur, according to previous research done by the University of Illinois, still represents a total annual industry economic hit of $46 million. This includes losses from fatigued pigs (non-ambulatory), mortalities and other losses at plants.

"We're excited about what this research can mean to the industry on many fronts," Ms Niekamp said. "It's always a good day when we can find innovative ways to continually improve how we care for pigs during all phases of production, including transportation."

According to Ms Niekamp, the Transport Quality Assurance® task force will take this new research into consideration when updating the program's transport recommendations. The current TQATM Handbook is online at pork.org.

In the meantime, Dr McGlone says producers should evaluate their current bedding practices and determine if they can implement the study's protocols. He said, "We've clearly shown there is no advantage to using more bedding than is necessary."

Wednesday, January 04, 2012
Hog Producers Follow Prudent Path
US - Hog production returned to profitability in 2011, but producers remain cautious about the future. This is evidenced by the modest expansion of the breeding herd as reported by USDA at the end of the year, writes Chris Hurt, extension economist at Purdue University.
 Chris Hurt
Extension Economist
Purdue University
 

Limited expansion would seem to be the prudent path until more is known about 2012 crop yields and feed prices. This suggests no expansion of the breeding herd until mid-summer 2012.

Pork production is expected to rise by 2 to 2.5 per cent in 2012, but most of that increase is due to more pigs per litter rather than from larger farrowings. Exports are expected to remain strong so that the per capita pork availability in the US will only increase by about one per cent. Pork demand will also be supported by smaller per capita supplies of beef and poultry in 2012. As a result, hog prices are expected to be down only modestly from 2011 levels with similar costs. This means another year of profitability is likely.

The breeding herd was up only 0.4 per cent in the December inventory report from USDA. Market hog numbers were up about two per cent for hogs coming to market through next May. Winter farrowings, that represent next summer’s hog supply, were up about one per cent. With the number of pigs per litter increasing about two per cent, slaughter numbers will be up near three per cent next summer. Fall hog supplies will be drawn from the spring 2012 farrowings where producer’s intentions were down almost one per cent. If so, this means fall 2012 hog slaughter would only be up one per cent.

Demand should remain favorable for pork in 2012. The US economy is expected to continue to show signs of recovery and some modest improvement. Exports are expected to continue at a record pace in 2012, representing 22 per cent of production. Exports are expected to be near records for beef and broilers as well, according to USDA forecasts. The amount of pork available per person in the US is expected to rise only one per cent in 2012. However, competitive meat supplies will be lower. Beef availability will be down about six per cent with poultry supplies per person down about three per cent.

Live hog prices averaged about $66 in 2011. Current forecasts are for 2012 prices to average about $65. Prices are expected to average in the very low $60s for the first quarter, and then move to the higher $60s for the second and third quarters before moderating to near $60 in the final quarter of 2012.

Costs of production this year are expected to be similar to 2011 as well. The price of corn received by US farmers averaged about $6.00 per bushel in 2011. Current futures are suggesting the averaget will be about 20 cents higher in 2012. High protein soybean meal at Decatur, Illinois averaged about $335 per ton in 2011 and current futures markets expect that to be about $20 lower in 2012.

Estimated profits above all costs in 2011 were around $15 per head and are expected to drop to about $10 per head in 2012. The strongest profits are expected in the second and third quarters with seasonally strong hog prices. Some profit is expected in the final quarter of 2012 due to lower corn prices if US corn and soybean yields return to near normal.

In summary, pork producers have remained cautious about expansion. The uncertain US and European economies are an important part of that caution. Also contributing to that caution is the memory of large losses experienced in 2008 and 2009. Probably the largest uncertainty is the price of feed.

Inventories of corn and soybeans remain very tight. Normal 2012 yields around the world should provide somewhat higher inventories and bring down feed prices. However, any yield reductions in major growing areas this year could push feed costs up once again. Given the hog and soybean meal price outlook for 2012, the breakeven corn price is about $6.75 to $7.00 per bushel. If corn prices stay at-or-below this area, hog producers could cover all costs or make a profit. If they move above this area, the 2012 profit potential could shift toward a loss.

These uncertainties suggest producers should continue to wait to expand until 2012 yields in the US are better assured. This means expansion should not begin until mid-summer 2012.

Monday, January 09, 2012
Sow Slaughter High this Autumn
US - USDA's December Hogs and Pigs report said the inventory of market hogs weighing 180 pounds or more on 1 December was down 0.4 per cent, writes Ron Plain in his Hog Outlook report for 6 January.
 
Ron Plain
Most of those hogs have gone to slaughter by now and it looks like 2 per cent more would have been a better estimate of the heavy weight barrow and gilt inventory rather than 0.4 per cent fewer.

Sow slaughter this fall has been high. Adjusted for Canadian imports it looks like fall sow slaughter was up 3.6 per cent. This is consistent with USDA reporting the breeding herd declined by 3,000 head from September to December.

Hog prices were higher this week. The national average negotiated carcass price for direct delivered hogs on the morning report today was $80.44/cwt, up $2.21 from last Friday. For the second Friday in a row, there were no morning price quotes for the western corn belt or for Iowa-Minnesota. The eastern corn belt averaged $80.02/cwt this morning. Friday's top live hog price at Peoria was $56/cwt. Zumbrota, MN had a top of $57/cwt. The top for interior Missouri live hogs was $60/cwt, up $2 from the previous Friday.

USDA's Thursday afternoon calculated pork cutout value was $84.33/cwt, down $1.70 from the previous Thursday. Loins, hams and butts were lower; bellies a bit higher. This week's pork cutout is the lowest since 13 January of last year.

Does the weak cutout value reflect the higher-than-expected slaughter in recent weeks, or does it reflect a weakening in meat demand. The unemployment rate dipped to 8.5 per cent in December. Hopefully, 2012 will be positive for domestic meat demand.

Hog prices this morning are 95.4 per cent of the pork cutout value, a very high level for this time of year. Either the cutout rises next week or the pressure will be great for lower hog prices.

Hog slaughter totaled 2.063 million head this week, up 4.9 per cent from the week before, but down 5.1 per cent compared to the same week last year. Barrow and gilt carcass weights for the week ending December 24 averaged 204 pounds, down 1 pound from the week before and unchanged from a year ago. Iowa-Minnesota live weights for barrows and gilts last week averaged a record 277.9 pounds, up 2.2 pounds from the week before and up 3.2 pounds compared to last year.

Today's close for the February lean hog futures contract, $83.90/cwt, was down 40 cents from the previous Friday. The April lean hog futures contract settled at $87.75/cwt, up 5 cents for the week. May hogs settled at $94.50/cwt. June hogs ended the week at $94.90/cwt.

The March corn futures contract price lost 3 cents this week to settle at $6.435/bushel.

Friday, January 06, 2012
PIC Announces First Shipment from US to Russia
US and RUSSIA - PIC has completed delivery of 1,071 high-health breeding pigs from the US to key account Gvardia in the Stavropol Region of Russia.
 

The shipment will form the genetic core of its pork production programme and will drive expansion of the project’s capacity, to an output of 420,000 slaughter pigs per year. Gvardia is part of the Agrico Group, one of the largest private agricultural companies in the Russian Federation, farming on 100,000 hectares and employing more than 3000 people.

Though PIC has supplied many thousands of elite breeders from Canada, Europe and its local Russian production network to its Russian clients, this is the first delivery to be sourced from the US. Lack of suitable scheduled routes necessitates contracting a full charter and the scale of the order justified the investment in this case.

Moreover, the landmark delivery was marked by another first in porcine aviation: The jumbo freighter flew from Chicago not to a major hub, like Moscow or St Petersburg, but to the town of Mineralnye Vody.

While the runway at the local airport is rated long enough to land a Boeing 747, it had never been put to the test before and additional permitting, purchase of new equipment and staff training all needed to be resolved to make it happen.

After unloading, the pigs were driven the remaining 250km to the new breeding facility in Sturm. Amiram Zakim, General Director of Gvardia, commented: “At times this delivery seemed impossible but due to the combined efforts and determination of PIC, Stavropol Government, Mineralnye Vody Airport and ourselves it became a reality. If you believe you want it to happen you will make it happen.”

Nick Brookes, General Director of PIC Russia, said: “This has been a huge effort by all involved. I would like to formally thank our friends in Mineralnye Vody Airport for their support and resolve, and our partners at Gvardia for making this delivery possible. As the aircraft touched down at 17:08 on 19 December another case of extraordinary people doing extraordinary things entered the record books!”

Thursday, January 12, 2012
Pork Production Increases 30 Per Cent
US - Pork producers had a good year in 2011, Dr James Mintert, professor of Ag Economics and assistant director of Extension at Purdue University, spoke earlier this week at the American Farm Bureau Federation’s 93rd Annual Meeting.


However, consumers should expect little relief in the price of a T-bone steak as cattle producers continue to decrease their herds because of soaring feed prices and a weak economy.

High demand for ethanol has forced the price of corn to nearly double in the past few years, driving livestock production costs up and putting cattle producers in the red. They’ve responded by raising fewer cattle, according to Dr Mintert.

"Beef producers are recouping production costs by putting less meat on consumers’ plates," Dr Mintert said. "Fewer pounds of meat mean higher prices throughout the system."

From 1925 to 1975 the beef industry was relatively healthy, Mintert explained, as demand and production grew with the population and income growth. The span from1975 to 2011 looks a lot different, as the number of cattle dropped from 132 million head to 90 million in 2011.

"That’s the picture of an industry shrinking because of a lack of profitability," Dr Mintert said. "This is an industry that has struggled to make money for a long time."

A saving grace for the beef industry is the export market, which has rebounded from the lows in 2004 when a case of bovine spongiform encephalopathy was discovered in a US cow. The United States is now a net beef exporter.

"That has really helped hold down the number of pounds we put in front of consumers," Dr Mintert said.

The pork industry is much healthier than the beef industry, as production has increased 30 per cent during the last 20 years in the United States and Canada. Pork producers face the same challenges as beef concerning feed costs, and like beef producers, are putting fewer pounds of pork on consumer plates. The difference is pork exports. Today, almost one pound of pork in four goes to the export market.

"Export growth has helped pork see steady increases over a long period of time," Dr Mintert said. "Pork exports were up 15 per cent this year over last year. They are up 54 per cent compared to 2007."