USDA Livestock, Dairy, Poultry and Aquaculture Outlook
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17 May 2012
USDA Livestock, Dairy, Poultry and Aquaculture Outlook - May 2012
In 2013 small increases in farrowings and continued strong sow productivity gains, together with higher average dressed weights due to lower feed costs are expected to translate into a moderate increase in pork production. U.S. commercial pork production is forecast at 23.8 billion pounds, an increase of 2.3 percent over 2012. U.S. pork exports are also expected to grow moderately next year. 2013 pork exports are forecast at 5.4 billion pounds, an increase of close to 1.8 percent over this year’s level. Production and export forecasts point to 22.7 percent of production to be exported next year, compared with 22.8 percent in 2012.
Pork/Hogs
First-Quarter Wholesale-to-Retail Spread Record-Wide
The full set of data that is now available for the first quarter of 2012, is useful in explaining important hog and pork market dynamics of the quarter, as well as in indicating potential market direction as the markets move into summer. As a whole, the data suggest that of all the players in the pork market chain—hog producers, packer/processors, wholesalers, retailers, and consumers—the only ones left smiling by the price and demand/supply metrics of first quarter may be pork retailers. First-quarter retail pork prices finished at $3.49 per pound, 6 percent higher than a year ago and the highest first-quarter retail price on record. Record retail prices reflected, in part, robust first-quarter U.S. exports, which were 15.8 percent higher than a year ago. Strong exports—23 percent of first-quarter commercial pork production—left U.S. per capita disappearance almost 1 percent below the first quarter of 2011. Tighter first-quarter domestic supplies and higher prices for competing animal proteins likely supported record retail prices. At the wholesale level, the situation remains quite different. Wholesale pork prices have lagged year-earlier prices from late January to the present. First-quarter USDA wholesale primal cutout values were 5 percent below first-quarter 2011.
Strong retail prices combined with weak wholesale values to yield the widest firstquarter wholesale-retail spread ever: $2.03 per pound. While it is possible that soft wholesale prices reflect slower forward bookings for export, it is more likely that retailers are defending their spread by favoring strong returns over sales volumes. Higher first-quarter retail prices for beef (+9 percent) and for chicken (+5 percent) would accommodate a retail strategy that places less emphasis on maximizing pork sales volume. Such a strategy could lower wholesale pork demand.
Second-quarter 2012 commercial pork production is expected to be 5.5 billion pounds, 2.8 percent higher than a year ago. Increased April-June pork production derives from year-over-year larger fall and winter pig crops and heavier estimated dressed weights. Second-quarter prices for live equivalent 51-52 percent lean hogs are expected to average $62-$64 per cwt, 8.4 percent lower than a year ago. Prices for 2012 are expected to be about 6 percent lower than a year ago.
Commercial Pork Production and U.S. Pork Exports To Increase Moderately in 2013
In 2013, moderate increases in farrowings and continued strong productivity gains are expected to yield an annual pork production level that is about 2.3 percent above 2012. Commercial pork production is expected to be 23.8 billion pounds. Higher estimates for average dressed weights as a result of lower feed costs contribute to the higher production forecast. Hog prices next year are expected to be $57-$61 per cwt, about 2.7 percent below 2012.
Foreign demand for U.S. pork products will continue to be an important market focus in 2013. Lower U.S. pork prices next year, together with continued global economic growth will, in all likelihood, support continued strong exports. Next year USDA anticipates that 22.7 percent of commercial pork production will be exported, versus almost 23 percent this year. Total U.S. pork exports for 2013 are forecast at 5.4 billion pounds, about unchanged from this year. As is almost always the case, over two-thirds of U.S. exports in 2013 are expected to go to U.S. North American Free Trade Agreement (NAFTA) partners, Canada and Mexico, and to Japan. Japan is expected to remain—solidly—the no. 1foreign destination for U.S. pork exports in 2013.
U.S. pork imports next year are expected to be in line with 2012 estimates, or about 810 million pounds. In the past, the United States has imported about 4.3 percent of its annual pork disappearance; next year should be no different. U.S. imports of live swine next year are likely to be somewhat higher than forecasts for 2012: 5.87 million head in 2013, versus 5.78 million head expected this year, due mostly to expectations of higher Canadian production as indicated by stronger breeding inventories in Manitoba.
In 2013, per capita pork disappearance is expected to be year-over-year higher in each quarter. For the year, per capita pork disappearance is expected to be 47.2 pounds, 2.1 percent above 2012. For a demand inelastic commodity such as pork, small increases in per capita disappearance are often accompanied by disproportionately lower prices up and down the supply chain. Retail pork prices will likely average about $3.40 per pound, or about 3 percent below forecast retail prices for 2012.
First-Quarter Exports Up Sharply
First quarter U.S. pork exports were 1.4 billion pounds, 15.8 percent ahead of last year. The five strongest markets for U.S. pork are shown in the table below. Firstquarter exports to China likely represent the tail end of deliveries of large purchases made in 2011. The USDA’s Foreign Agricultural Service expects 2012 China’s pork imports from all sources to decline by 14 percent. See
http://www.fas.usda.gov/dlp/circular/2012/livestock_0412.pdf. USDA also forecasts a 14-percent reduction in South Korea’s imports in 2012, from all sources, as the pork sector recovers steadily from 2010-11 outbreaks of foot and mouth disease. The Government of South Korea recently announced that it would limit the initial 70,000 metric tons (MT) duty free tariff rate quota (TRQ) for fresh/frozen pork bellies announced for the period April-June to 20,000 MT.
Special Article
U.S. Pork Industry Moving Toward Open Sow Housing as an Alternative to Gestation Crates
Introduction
In recent years, a growing number of major U.S. companies that demand and supply pork products have adopted strategies that explicitly move away from direct or indirect use of gestation crates in pork production. McDonald’s Corp.—a major buyer of pork products—and thus an indirect user of gestation crates—recently announced that it would require its pork suppliers to submit plans by May 2012 that transition suppliers’ production facilities from use of gestation crates, to group sow housing. McDonald’s thus joins other major U.S. buyers of pork products along with major U.S and Canadian pork-producing companies, in adopting business models that incorporate group sow housing in pork production. Pork users and pork producers appear to be making this move in response to a developing public perception that crating sows during gestation is detrimental to the welfare of the animal.
The Current U.S. Hog Production System: Gestation Crates
For the last 30 years, typical U.S. hog production has employed individual crates to house pregnant females during gestation. The typical gestation crate measures 7 feet by 2 feet, or 14 square feet, and was adopted by the industry to overcome innate hierarchical swine behavior. Female swine, in particular, tend toward aggressive behavior to establish dominance when they are housed in groups. This means that freely moving pregnant swine tend to fight until dominance is established. Such aggression can cause serious injury to less-dominant females and to unborn piglets. When the females are crated, aggression and threat of injury are minimized. Gestation crates also facilitate individualized animal care, feeding, and monitoring.
The downside of gestation crates is the severe constraint on movement that the 14- square-foot crate imposes. While the crate affords the pregnant female some limited side-to-side and back-and-forth movement, it totally prevents the animal from turning itself around. The animal welfare questions that are raised by the movement limitations of gestation crates have motivated the industry to adopt a different means of pork production that allows the pregnant animal freedom of movement.
Group Sow Housing as an Alternative to Gestation Crates
A production model based on group sow housing places pregnant swine in open pens that allow them free movement. An accurate description of a “typical” group sow housing barn is elusive because no single type has yet evolved in the United States. Consequently, there is wide variation in design characteristics of existing grouped housing units. For example, the number of animals grouped in one pen can vary anywhere from 5 animals to more than 100, depending on per-animal space allocations. The groups themselves can be “static,” meaning that all the animals in a pen enter it together when the group is formed, or “dynamic,” meaning that animals enter and exit the group. The size of the groups and the per-animal space allocations often determine the method employed to feed the animals.
Feeding the animals in a group setting presents serious challenges given the tendency of swine toward aggression, particularly at feeding time. There are various methods available to feed the animals in a group setting. Three of the most common are electronic sow feeders, where the animals are trained to line up to enter feeding stations from which individualized rations are dispensed, based on information read from chips implanted in the animal’s ear; trickle feeding, where feed is delivered over a period of 15 to 30 minutes to troughs or on the floor of the pen; and free-stall feeding, where the animal enters a stall, often with a door closing upon entry, allowing her protection from aggressive pen mates during feeding. Each feeding method has a different set of cost, space, and management requirements, which together interact with group size, per animal space allocations, and numerous other physical characteristics of the unit’s design to affect the animals’ wellbeing.
Gestation Crates and Group Sow Housing: What Do Comparative Studies Show?
There are now many comparative studies in the animal science literature that document differences in production performance, behavior, and welfare indications between animals housed in gestation crates and those housed in pens. One of the most often-cited studies was carried out by McGlone et al. (2004). This study aggregated research findings from 35 previous comparative studies to determine whether sow behavior, performance, or physiology differed between the two housing types. The study tested for statistical differences between farrowing rates; pigs born per litter; oral, nasal, and facial behaviors; and cortisol blood levels in gestating animals. The research results, which are summarized in the table below, indicate that the differences between the means of measured variables were not statistically significant. That is, none of measures were significantly (P < 0.05) influenced by sow housing type. The study concludes that “gestation stalls or wellmanaged pens generally … produced similar states of welfare for pregnant [females] in terms of physiology, behavior performance, and health.”
This study also addresses two issues important in comparing the different systems. The study indicates that sow productivity—as measured by farrowing rates and pigs per litter—is not affected by housing type. This is good news to for U.S. pork producers, some of whom equate group housing with lower female productivity and lower asset returns. More important perhaps, the study identifies the producer’s animal handling/management skills as the key to maintaining productivity of sows housed in pens.
With respect to concerns about the effects of gestation crate housing on animal welfare, neither McGlone et al., nor current animal science research generally provide clear, empirical evidence that switching to group housing improves the welfare of pregnant female swine. The literature is supportive of the contention that sow/gilt welfare is not determined by housing type. “In other words proper design of stalls and pens can result in equivalent animal performance and welfare outcomes, although the design features for achieving that objective will differ. Therefore, it’s not clear that simply switching to group housing will inherently improve or reduce sow performance or welfare.”
The Group Sow Housing Model Often Employs Gestation Crates To Assure Swine Safety
As the sector continues to evaluate sow housing options, it will be important not to overlook two crucial safety features of the group sow housing model: First, the group sow housing model often does not exclude the usage of sow crates. In current practice in both the European Union and the United States, newly bred sows are crated for around 30 days to insure proper embryo implantation. Moreover, the pregnant females are typically crated for a 5-day period just prior to farrowing. Pregnant females are thus removed from group pens at periods in gestation when they are most vulnerable to aggression and injury. Second, both production models—gestation crate-based and group sow housing—move pregnant females into farrowing crates just prior to the birth of the litter.
The farrowing crate— different in dimension and design from the gestation crate—is designed to allow the female to position herself to nurse the litter. The sow’s movement is restricted to prevent injury to the litter, such as crushing or smothering . Crate use in the group sow housing model implies that the female spends about 35 percent of the year—4 months—in individual housing and the balance of the year in a group setting. Under a gestation crate system of production, the animal is crated 100 percent of the time.