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Articles from 2010 In October


Hog Numbers in Canada Continue Their Decline

The quarterly survey of Canadian hog operations released Oct. 28 by Statistics Canada confirms what has been known for some time. The Canadian hog industry continues to contract in its breeding herd and ships less pork and hogs to export markets, according to The Daily Livestock Report (www.dailylivestockreport.com) authors Steve Meyer and Len Steiner.

That trend of reductions in Canadian hog numbers will be difficult to reverse in 2011 given expectations for high feed prices and a strong Canadian currency.

As of Oct. 1, the total Canadian hog inventory was 11.854 million head, 0.8% lower than a year ago. Since the third quarter of 2005, Canadian hog and pig inventories are down 3.3 million head or 22%. Combined, United States and Canada inventory now stands at 76.845 million head, 2.3% lower than a year ago.

Canada’s total inventory of breeding animals on Oct. 1 was 1.298 million head, 51,300 head or 3.8% lower than a year ago, according to Meyer and Steiner’s report today.
The breeding herd in Canada now stands at 21% below levels in 2005. The combined U.S.-Canada breeding herd is now estimated at 7.068 million head, 2.2% lower than a year ago.

Erosion of hog profitability has played a role in the reduction in the number of hog operations in Canada. The most recent data shows 4,430 farms in eastern provinces, down about 56% from the number of farms reporting in 1997. In western provinces, there are about 2,605 farms reporting pig inventories, compared to 10,160 farms in 1997, a 75% decline.

Precision Manure Application Methods Appear Promising in Manitoba Study

A recent Canadian demonstration project measuring whether variable-rate (VR) fertilizer application techniques can be adapted to manure application showed producers were impressed with the concept, but found current manure application technology fell short of the challenge.

The potential agronomic/economic benefit would be increased yields in more productive areas of the field by applying more nutrients to these areas and, therefore, decreasing the environmental risk of nutrient leaching to bodies of water.

Optimizing Application Rates

The Manitoba Rural Adaptation Council (MRAC), the Manitoba Pork Council and producer participants funded the $54,750 study, which was carried out by Agra-Gold Consulting and Farmer’s Edge Precision Consulting.

Thirteen producers provided about two sections of land, a sampling base which represented a cross-section of cropping conditions in the Canadian province.

In the study, manure was applied using the drag hose application method. Application rates were varied based on global position satellite field maps indicating different nutrient requirements for different parts of the fields. Satellite imagery identified zones using different light bands to create a vegetative index of better growing parts of the field. The zones were then individually soil tested to determine the reasons for the variability across zones and establish the optimal nutrient application rate.

Project leader Scott Dick with Agra-Gold Consulting, Ltd. says an increasing number of producers are adopting VR application with commercial fertilizer to tailor application rates to the varying nutrient requirements on different sections of a field. That technique can produce better nutrient utilization by the crop, higher yields, lower costs and reduced environmental risk of excess nutrients contaminating water supplies.

While adapting variable-rate techniques to manure application would seem to have good potential, there still needs to be some refinement in the application of the technology, he says.

“Producers accepted the methodology used in creating the different management zones, but they weren’t ready to embrace this precision approach yet,” Dick reports.

He found that there are three reasons for that conclusion:

  • “The commercial drag hose equipment used to apply manure just couldn’t accurately and efficiently vary application rates to match specific nutrient needs,” he notes.
  • Equipment operators were limited in adjusting application rates to speeding up or slowing down the tractor speed. “On a half-mile run, that could mean between one and three speed adjustments – not a major problem – but enough to affect accuracy,” Dick says. Plus, without an “on-the-go” sensor to determine soil nutrient levels, planners had to rely on previous soil analyses to set application rates. “The only way to accurately measure nutrient levels was to send a sample to the lab after application,” he says.
  • Finally, unlike commercial fertilizer applications, where nitrogen (N) and phosphorus (P) can be applied independently to correct soil shortages, the nitrogen and phosphorus content in hog manure is fixed. So individual N and P application rates can’t be adjusted on the go.

Precision has Potential

Even though the study indicates variable rate manure application isn’t commercially feasible at the present time, information gathered outlines ways producers can use precision farming techniques to increase yields and reduce environmental risks.

For instance, producers can begin by applying a base rate of manure using conventional techniques, then follow up with a variable-rate application of commercial starter fertilizer at seeding time. That scenario allows them time to get accurate manure and soil analyses results back from the lab to provide an accurate match of nutrient applications with crop requirements.

More Information

A complete report on the Manitoba project, “Applying Manure to Defined Management Zones Using Precision Farming Techniques,” is available on the Manitoba Livestock Manure Management Initiative (MLMMI) Web site at www.manure.mb.ca under completed projects.

For more information on the Manure Initiative or its projects, please visit www.manure.mb.ca or contact Brandy Street, executive director, by phone at (204) 945-2122 or by e-mail at Brandy.Street@gov.mb.ca.

Manure Initiative research funds are provided by the governments of Canada and Manitoba through Growing Forward, a Federal-Provincial-Territorial Initiative. Base funding for the Manure Initiative’s research program is provided by the Manitoba Pork Council.

Scott Dick has offices in Niverville, Manitoba and can be reached at Scott1@mts.net.

North Carolina Swine Nutrition Conference Slated for Nov. 10

A variety of swine nutrition and related issues will be covered at the 26th Annual Swine Nutrition Conference set for Nov. 10, 2010 at the Sheraton Imperial Hotel, Research Triangle Park, Raleigh, NC.

Morning coffee and poster session kicks off the program at 7 a.m.

Neil Dierks, National Pork Producers Council, will present an overview of legislative and regulatory issues facing the U.S. pork industry.

Frank Dunshea of the University of Melbourne (Australia) will explain new developments in swine nutrition, followed by Hans Stein of the University of Illinois, who will discuss nutrient and energy utilization by swine.

Siddhartha Thakur of North Carolina State University will expound on what is known, unknown and the future direction for the antimicrobial resistance paradox.

Eugeni Roura of the University of Queensland (Australia) will discuss nutrient sensing, taste and feed in pigs.

Finally, Jack Odle of North Carolina State University will present correlations between infant and piglet health and nutrition.

A reception follows the adjournment of the program. Hotel reservations can be made by calling (919) 941-5050. For more program information, go to www.cfia.org.

Click here to view more upcoming events on our calendar page

Missouri Mobilizes Against Proposition B

Missourians for Animal Care Coalition is mobilizing their forces to build opposition against Proposition B on the ballot in the upcoming Nov. 2 election.

The coalition was organized to inform the public about this ballot initiative that is backed by the Humane Society of the United States (HSUS) to regulate dog kennels in Missouri and to address all animal care issues from companion animals to livestock.

Proposition B or the Puppy Mill Cruelty Prevention Act is grossly misleading the public about the regulation of dog kennels in Missouri today, the coalition states. In fact, Missouri already has strict dog kennel laws and was one of the first states in the nation to pass such a law in 1992.

It is estimated that the HSUS and related groups have spent over $3.5 million to support this measure.

The coalition has set up phone banks across Missouri to help inform citizens about the negative effects of Proposition B. Missouri pork producers are urged to volunteer their time to help in this cause. Please contact the Missouri Pork Association office for more information at (573) 445-8375 or go online at http://www.mopork.com.

Feedmill Explosion Hits The Maschhoffs’ Plant

Feedmill Explosion Hits The Maschhoffs’ Plant An early morning explosion Tuesday at The Maschhoffs’ Carlyle (IL) feedmill on Hwy. 127 was apparently due to an electrical problem and recent storms in the area.

Fortunately, no serious human injuries occurred.

“Five people were present at the time of the incident,” says Jason Logsdon, executive vice president of Product Supply & Operations and chief financial officer for The Maschhoffs.

The Maschhoffs plan to direct their attention to operations to ensure pigs continue to have a safe feed supply from other feedmills in the surrounding area. The Maschhoffs also plan to work directly with area farmers to coordinate grain receiving in order to honor all purchase commitments.

At this time, the extent of the damage and downtime of the mill are unknown. The mill is expected to be repaired once the extent of the damages from the fire have been assessed.

The Carlyle mill produces feed for Maschhoff Production Partners in southern Illinois. The feedmill produces approximately 20% of The Maschhoffs’ feed requirements.

The Maschhoffs, headquartered in Carlyle, IL, is one of the largest family-owned pork production networks in North America, owned by Dave and Karen Maschhoff and Ken and Julie Maschhoff.

The Maschhoffs partner with a network of 300 family farmers across the Midwest, known as Production Partners, who work with The Maschhoffs to collectively produce enough pork to feed eight million consumers annually.

Compost Workshop Set for Nov. 4 in Springfield, IL

A free compost workshop is scheduled for Nov. 4, 2010 in Building 30 on the Illinois State Fairgrounds in Springfield, IL. The workshop is hosted by University of Illinois Extension, Illinois State University and the Illinois Department of Agriculture, with support from the Illinois Natural Resource Conservation Service. The workshop runs from 9 a.m. to 1:30 p.m.

Anyone interested in the composting process should attend, according to Randy Fonner, Extension specialist with the Department of Agricultural and Biological Engineering at the University of Illinois. That includes backyard composters, livestock producers, landscape waste composters or horse stable operators. This workshop will address a variety of topics of interest to everyone,” he says.

Topics include Characteristics of Good Compost; Composting Do’s and Don’t’s; Uses for Compost; Composting in the Backyard; Compost Regulations and Permitting; and Compost Networking. The topic of compost networking will cover matching manure generators with compost producers, and provide online resources on the production and management of livestock manure as well as composting manure, food scraps and yard waste.

There will be a tour of the Illinois State Fairground composting facility to view the fairground’s compost monitoring process and examples of bin composting and windrow composting.

For more information, contact Fonner at refonner@illinois.edu or Mike Rahe at mrahe@agr.state.il.us.

Why Hog Slaughter Weights, Rates are Climbing

One of my major concerns all summer was what was going to happen to the flow of pigs from farm to harvest when new-crop corn became available this fall. The past few weeks have validated those concerns as slaughter rates and weights have risen sharply.

The question now is just the opposite of last summer. Recall that in July we were asking whether hogs were backed up or were they simply not out there to the degree indicated by USDA’s March and June Hogs and Pigs reports? Now we are asking, “Are the hogs being pulled forward or did USDA undercount inventories on Sept. 1?”

Let’s look at the data. Figure 1 shows that weekly slaughter exceeded the year-ago level last week for the first time since July 17, marking only the sixth time that has happened this year. It also marks the third straight week that slaughter has been above the level suggested by the September Hogs and Pigs Report. The difference between “actual” and “predicted” weekly slaughter has grown sharply over that three-week period with last week’s deviation amounting to 87,000 head.

At the same time, average slaughter weights have risen quickly. Figure 2 shows the average carcass weights of the barrows and gilts reported under the mandatory price reporting (MPR) system. Last week’s carcass average of 206.3 lb. is the second highest ever and is nearly 6 lb. heavier than just eight weeks ago. It appears the rate of growth is slowing, but the record high of 206.7 lb. set the first week of 2006 is definitely in some danger of being eclipsed.

Let’s consider these data for a moment. As Table 1 shows, the MPR data include only “top hogs” or barrows and gilts that generally weigh between 230 and 320 lb. or so. The MPR data represent about 95% of the total number of these animals slaughtered each week. The USDA barrow and gilt data published with a two-week delay include the MPR barrows and gilts, plus the 5% not covered by MPR, a portion of which is comprised of “off hogs,” roaster pigs, etc., that are generally lighter (sometimes much lighter) than top barrows and gilts. Thus, the weights of all barrows and gilts are usually much lower than the MPR data. Finally, USDA hog slaughter weights (Figure 3), which are estimated each week and then finalized two weeks later, include both of those groups, as well as cull sows and boars. These weights tend to be slightly lower than the MPR data.

Click here to view hog weight data chart.

The different data series are useful for different things. If one wants to look at total pork supply, the “hog weights” series, that includes all slaughter, is probably the best. The challenge there is that the most recent two weeks’ data are estimates that can get revised – sometimes significantly – when the actual data are published two weeks after the fact. Such has been the case this fall.

If one is judging whether marketings are current, I think the MPR data is by far the best for a couple of reasons. First, it is almost real time. We get the data daily for the prior day and the weekly data are, in my opinion, the best estimate for top barrow and gilt weights. In addition, it represents the vast majority of the hogs whose feeding period can be variable as well as the vast majority of total pork production.

Credit the Corn
So do these high weights mean we are not current? Not in my opinion in this situation. While smaller than expected, this corn crop is light years better in terms of quality. Feed consumption and, consequently, growth rates have improved dramatically over the past month, pushing market weights up quickly. One producer related to me that they were sick and tired of using poor quality corn, but now they can hardly keep the feed bins full. It’s a nice problem to have compared to last year! I believe these higher weights are simply a function of outstanding growth rates and the higher slaughter runs are the result of producers trying to keep marketings as current as possible – especially as they see hog bids falling.

That brings us back to the question posed in the second paragraph: Are we pulling hogs forward or are there more hogs available than USDA thought? I think the evidence at present supports the former. Pigs are performing very well. Producers are marketing them as quickly as they can and are still not keeping up with the higher growth rates. The push to move hogs to town has pressured prices sharply lower.

But the real question is this: “Will the ‘pulling forward’ stop?” Without some extreme cold weather, some problem with nutrient content, or some widespread disease challenge, we may simply see this performance continue. We may see a slow-down and a slight dip in hog numbers later in the year, but those changes will very likely be subtle and not sharp enough to cause a shortage that would drive prices sharply higher.

I expect numbers to move back toward expected levels, but I don’t expect any big shortfalls. Good corn and cool temperatures will keep hogs heavy and coming to market at a good clip for the foreseeable future.

Click to view graphs.

Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
e-mail: steve@paragoneconomics.com

My How Quickly Things Can Change

Just a month ago, I wrote about producers were finally having a nice six-month run of profits. The USDA’s Hogs and Pigs report came in at about what the trade expected, so things were looking positive for the pork industry going in to 2011. On Friday Oct. 8, when USDA reported that the U.S. corn crop would only average 155.8 bu./acre, the world changed for any pork producer reliant on buying the corn they needed. Since then, the price of corn has shot up over $1/bu. and other feed ingredients have followed. Producers’ breakevens that were $135-140/market hog are now at $145-150/market hog (over $75/carcass cwt.). This happened in a short span of about 72 hours of trading. The cash market has dropped over $20/head since I wrote last month’s column, adding more agony. Unfortunately, some producers will lose money in October. U.S. pork producers are far from being in a position to handle a period of losses again.

There Were Opportunities to Lock Up Margins – I don’t remember how many times I have written articles stressing margin management, but I’ll say it again – “It is critical for every pork producer to manage their margins.” Figure 1 illustrates some of the opportunities that were available over the last six months to lock up profits for a considerable period of time. The chart shows the average profit-per-head potential from the end of March until last week. You can see there were opportunities to lock up over $20/head profit for a year. This is based on locking up the price for your hogs and your feed – the crush margin. Of course, these are averages and there are many factors that play into the data in this chart, but the point is there were opportunities for pork producers to lock up good profits for a period of time. The chart was provided by Pat Von Tersch, Professional Ag Marketing, and I appreciate him putting the chart together.

Packer Margins – Spread Between Cutout and Cash – The spread between cash hogs and pork cutout has been wide for quite some time. David Ward from Commodity & Ingredient Hedging, LLC put Figure 2 together. We are at historical highs and it has been this way for quite some time. My concern is that the spread is too wide. Over the last month or two, the difference between cash and cutout has been below 85%; at times it has been below 80%. If this spread continues and cutout drops much further, it will create losses for many producers who can ill afford them, while packers are enjoying record processing margins. If this spread continues, more pork companies will look at integration or owning a packing plant. When one side gets too much of the pie, others want to take a piece of that pie. This is part of business and must be understood.

GIPSA Comments need to be in by Nov. 22 - I urge everyone involved in the pork industry to go the National Pork Producers Council (NPPC) Web site, www.nppc.org/, to read the rule that the USDA’s Grain Inspection and Packers and Stockyards Administration (GIPSA) has proposed. The 2008 Farm Bill authorized GIPSA to promulgate regulations related to livestock and poultry contracts. It’s important to fully understand what is being proposed and to file your opinion by Nov. 22. From a lender's viewpoint, there are many concerns on what could potentially happen if this rule is implemented. I believe the proposed rule will speed up integration. I also understand and support that all pork producers should be treated fairly. My concern is that when it comes to access to capital, the limitations placed on risk management plans formed between producers (of all sizes) and packers could be taken away. This will make it more difficult for producers to get the capital they need. The pork industry lost almost $6 billion in equity from 2008 to early 2010. Clearly, risk management tools are essential to getting access to capital. This ramification needs to be fully understood before implementation of this rule. It is imperative that everyone in the pork industry file their thoughts on the GIPSA rule before Nov. 22.

Click to view graphs.

Mark Greenwood
Swine Industry Consultant
Contact Greenwood at mgreenw@agstar.com

GIPSA Rule Threatens Over 100,000 Jobs

GIPSA Rule Threatens Over 100,000 Jobs

The proposed Grain Inspection and Packers and Stockyards Administration (GIPSA) rule would cost the economy an estimated 104,000 jobs, including 21,274 livestock producer jobs, according to a study conducted by New York-based John Dunham and Associates. The study found that the disruption and resulting inefficiencies in the market should the proposed rule be implemented would increase retail meat prices by 3.33% at a national level, causing a 1.65% decrease in consumer demand for “potentially lower quality” meat and products. The loss of jobs would reduce national gross domestic product (GDP) by $14 billion and would cost a total of $1.36 billion in lost revenues to the federal, state and local governments. The American Meat Institute (AMI), which commissioned the study, stated, “At a time of record unemployment, slow economic recovery and rising poverty levels, it is unfathomable that the administration would propose a rule that could cost one American job, let alone 104,000. As the analysis shows, these are not just jobs in meat packing or livestock production, but in nearly every sector of the American economy.” The complete study can be found at www.MeatFuelsAmerica.com/GIPSA.

Request for Economic Analysis of GIPSA Rule Denied — Secretary of Agriculture Tom Vilsack rejected the request by the 115 congressmen that USDA conduct a comprehensive economic study of livestock and poultry marketing reforms proposed by the Grain Inspection and Packers and Stockyards Administration (GIPSA). The Secretary said in a letter to the members, “You requested a comprehensive economic study of the proposed rule. Beyond the cost-benefit analysis we have conducted for the proposed rule, we look forward to reviewing the public comments to inform the department if all factors have been properly considered, if or how changes should be incorporated, and to aid more rigorous cost-benefit and related analyses pursuant to the rulemaking process.” The National Cattlemen’s Beef Association (NCBA) said, “The GIPSA rule will further inject the federal government into the market and could very likely result in financial devastation to a critical part of our country’s economy” and “it is irresponsible governing on the administration’s part to advance this rule without providing all stakeholders, including those supporting this proposal, a clear and comprehensive analysis defining how it would affect the marketplace.” R-CALF indicated their strong support of Secretary Vilsack’s decision. According to R-CALF, it is “pure and simple, an effort to delay – if not completely derail – the long-awaited GIPSA rule.”

USDA Announces Renewable Energy Initiatives — Secretary of Agriculture Tom Vilsack announced a series of measures as part of the administration’s effort to promote production of fuel from renewable sources. USDA is publishing the final rule to implement the Biomass Crop Assistance Program (BCAP). This program was authorized in the 2008 farm bill to provide for that large base of new, non-food, non-feed biomass crops is established to meet demand for renewable energy consumption. BCAP provides assistance for the establishment and production of eligible renewable biomass crops within specified crop areas. Producers who enter into BCAP contracts may receive payments of up to 75% of the cost of establishing eligible perennial crops. Vilsack also announced that USDA and the Federal Aviation Administration (FAA) were entering into a five-year agreement to develop aviation fuel from forest and crop residues and other “green” feedstocks in order to decrease dependence on foreign oil and stabilize aviation fuel costs. An Economic Research Service (ERS) study was released that found replacing more petroleum with cost-competitive domestic biofuels reduces crude oil imports, thereby lowering prices for energy and benefiting the U.S economy. The report includes the following findings:

• The biofuels industry becomes more productive as cost-reducing technology is applied, which results in higher wages for workers.

• Gains in Gross Domestic Product (GDP) and real income are driven largely from the contribution from technological progress in biofuels, which increases the productivity of the economy.

• Next generation biofuels are considered to be a decreasing cost industry. This means that the cost of producing ethanol will decline as output increases.
P. Scott Shearer
Vice President
Bockorny Group
Washington, D.C.

Congressman Pressures USDA To Reconsider GIPSA Study

Rep. Ike Skelton (R-MO) has asked the U.S. Department of Agriculture (USDA) to reconsider conducting a comprehensive economic study of the Grain Inspection, Packers and Stockyards Administration (GIPSA) proposed livestock procurement rule.

USDA’s recent denial of a request by more than one-quarter of the House of Representatives was deemed inadequate.

“While I appreciate receiving the department’s prompt response, the correspondence does not adequately address our primary request to USDA. Rather, it indicates that the department has already conducted, in its view, a sufficient cost-benefit analysis…” Skelton wrote in a letter to Agriculture Secretary Tom Vilsack.

In his review of the proposal, Skelton says he did not believe that the cost-benefit analysis in the Federal Register provided producers with enough information to evaluate the potential impacts of the proposed rule.

“On at least nine occasions…GIPSA sets forth a nominal cost-benefit analysis, then proceeded to invite farmers and other stakeholders to provide ‘specific comments on additional categories of cost and benefit items as well as their magnitudes.’ In essence, the department has asked producers to do its homework,” Skelton says.

“It is not fair to ask American farmers to run complex and potentially very costly calculations about GIPSA’s proposed rule when the department’s economists and lawyers should have done that before soliciting public comment in the Federal Register. That is why I again ask the department to examine GIPSA’s proposal and provide American farmers and their elected representatives in Congress with more precise economic data about it,” Skelton concludes.