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Articles from 2016 In October

Who is watching out for the independent producer?

Lean hog futures managed to stage a dramatic and impressive upside breakout, providing a near-perfect opportunity for hog producers to seek protection from a sharp downturn in prices.

Last week Smithfield Foods, the largest hog producer in the United States, announced third quarter profits above expectations. Smithfield reported increases in revenue and profits in their fresh pork division. Specifically, they cited sharply lower procurement prices for live hogs as the reason for enhanced profits in fresh pork.

Cash hog prices declined to 14-year lows during this period. Product prices, by the way, did not come close to a 14-year low during this same period. Smithfield also reported enhanced profits in the packaged pork division. Strangely, at least to me, Smithfield cited higher selling prices for pork as the reason for generating handsome profits in their packaged meat division.

So let’s summarize the above information. What we’re talking about here is the largest pork producer in the United States. This firm also packages and labels pork as well as sells wholesale pork on the domestic market and in the export market. Smithfield is also solely owned by a Chinese firm. Smithfield and the other major packers systematically broke cash hog prices to 14-year lows while at the same time selling pork at higher prices. Is there anything wrong with this picture? Does this sound like fair competition? I ask; who is looking out for the independent hog producer?

Moving to the hog market itself, on the backside of my column last week focusing on the positives in the hog market, lean hog futures managed to stage a dramatic and impressive upside breakout. A coincidence I’m sure. What this price rally does, however, is provide a near-perfect opportunity for hog producers to seek protection from a sharp downturn in prices. The use of put options is highly recommended. Such strategy provides a measure of downside protection in the form of a price floor, for a given premium paid, while leaving the upside to market prices open. This is the function of puts as applied to hedging in hog production.

Despite the impressive upside breakout, in the near term, serious challenges await the hog market. The possibility exists that slaughter capacity will be challenged and exceeded with butcher hog supplies before the end of the year. Historically, if a serious problem is going to develop it will occur on either side of Thanksgiving. When it happened in 1998, and yes I was a broker then and remember it clearly, packers cracked hog prices to below 10 cents per pound.

Perhaps not to this extreme, but there is no reason to believe this won’t or can’t happen again, at least for a short period. December lean hog options expire in the middle of December. This should provide ample time for protection against a sharp drop in cash hog prices in the event that slaughter capacity is exceeded and butcher hog supplies are slotted for kill.

Beyond and in addition to the threat of slaughter capacity being challenged is the market’s ability to process and digest record large production without seeing prices move sharply lower. This is where puts in the February and April timeframe will come into play. The recent cold storage report showed ham stocks at the end of September at nearly 250 million pounds. This is a record. It also confirmed a large in movement of hams during the month, suggesting that current price levels are not low enough to clear product. This is where my confusion lies. The cold storage demonstrates a massive build in ham stocks yet Smithfield reported higher selling prices for packaged pork during the same period?

In the meantime I’m still searching for answers and I’m still working hard to protect my clients from a possible downward spiral in prices. In addition, I’m still wondering who is looking out for the independent hog producer in the United States.

The opinions of Dennis Smith are not necessarily those of or Penton Agriculture.

Measuring antibiotic use – what is in the future?


Antibiotic resistance has reached a crisis in human medicine. Finding ways to combat resistance is a goal of almost all national and international groups concerned with infectious diseases.

Practices of antibiotic use in all settings (human, animal and agricultural) are being put under the microscope. As the swine industry braces to confront the practical hurdles, and likely animal health challenges, resulting from Food and Drug Administration Guidance 213 and the new Veterinary Feed Directive requirements in the new year, there are calls for further limits on the availability and oversight of antibiotics for food animals.

As in so many other areas of farming, the balance between trust and transparency is shifting. These mounting pressures are not going away, regardless of the uncertainty about the impact that antibiotics used in food animals have on resistant infections in people. That question remains unresolved after five or so decades of debate. But there is little doubt the impact is not “zero”, and therefore all industries have a responsibility to review their practices and embrace the concept of “as little as possible, as much as necessary”.

The Pork Quality Assurance and PQA-Plus programs have done a great job in helping the industry progress in avoiding antibiotic residues in pork products (common in the 1980s but now rare), and in educating the work force about the legal requirements surrounding antibiotic use. But the bar continues to be raised.

On this issue, food animal veterinarians are shifting to center stage as they assume responsibility for the oversight of all medically important antibiotics given in feed and water, as well as all extralabel use of antibiotics. The “Guidelines of Judicious Therapeutic Use of Antimicrobials in Pork Production” of the American Association of Swine Veterinarians lays out many of the accepted principles in relation to the legal and practical aspects of therapeutic decision-making in swine. But the term “stewardship” is taking over from “judicious” or “prudent” in discussions about reducing inappropriate antibiotic use. The key difference is that while judicious-use deferred to professional judgment in decisions on antibiotic use, stewardship programs have a more data-driven approach including measurement of antibiotic use, and evaluation of specific prescribing practices. That is, they operate beyond the individual judgment of prescribers.

Some stewardship initiatives for food animals in other countries include the development of “formularies” that dictate specific uses for some conditions, measurement and benchmarking of antibiotic use, and arbitrary targets for reduction in use. It is to be hoped that no precipitous changes will occur in the short-term in the United States before the industry has had reasonable time to adapt to the significant changes coming on Jan. 1. It is important that the concept of optimization (including consideration of animal health and well-being) does not get consumed by the goal or reduction.

A cornerstone of antibiotic stewardship is measurement of antibiotic use, and understanding how the products are being used. You can’t manage what you don’t measure! In the United States, gross sales of veterinary antibiotics are reported and published by the FDA, but do not provide accurate data on use in individual species. The National Action Plan for Combatting Antibiotic Resistant Bacteria calls for better surveillance of antibiotic use in food animals, which is echoed by consumer groups and politicians seeking stricter regulation of antibiotic use in food animals, and increasingly by downstream customers seeking to meet consumer demands for more transparency in the food supply.

Several northern European countries have implemented very detailed and expensive measurement systems, even at the level of the individual farm or veterinarian, and in some cases with penalties for high users. However, the European Surveillance of Veterinary Antimicrobial Consumption group states that collection of detailed data on consumption by species at a national level is challenging and less comprehensive approaches will be required for most countries.

The issue of antibiotic use generally, and measurement in particular, has been widely discussed within and among the major food animal industries over the last 12 months, and some initial projects based on voluntary participation are emerging. Perhaps the biggest step in developing any voluntary programs is definition of purpose, which must include some potential benefits for participation. An emerging consensus among industry groups is that measurement of antibiotic use should primarily be oriented toward understanding patterns of use to inform stewardship initiatives with the goal of reducing inappropriate use. Establishing industry norms for benchmarking and tracking trends over time could be achieved relatively efficiently with sample based approaches, rather than efforts to measure use by all producers. Preferably this will include metrics that more closely reflect actual administration and are therefore more meaningful with respect to stewardship efforts.

The National Pork Board has recently formed a task force to guide the development and implementation of a voluntary pilot project to obtain baseline data on antibiotic use in the industry. This raises obvious concerns about control and confidentiality of data, how data would be analyzed and reported, among others, which will take time to address and resolve. But given the importance and visibility of this issue in the public eye, doing nothing is arguably not an option.

USDA trade programs increase exports over $8 billion annually

Shipping containers on the dock

The USDA’s Foreign Market Development Program and Market Access Program added another $309.7 billion in sales revenue between 1977 and 2014 or $8.2 billion per year. This is according to a new study by the research firm Informa Economics along with Texas A&M, Oregon State University and Cornell University.

For every dollar invested in FMD and MAP, agricultural exports increased by $28. The study found the FMD and MAP programs resulted in average annual farm income being $2.1 billion higher, and annual average farm asset value was $1.1 billion higher over 2002-14. The programs increased average annual U.S. economic output by $39.9 billion, GDP by $16.9 billion and labor income by $9.8 billion over the same time period.

These programs created 239,000 new jobs, including 90,000 farm sector jobs. The FMD and MAP programs are public-private partnership in which nonprofit agricultural organizations that participate must provide matching dollars. FMD and MAP are the USDA’s main export development programs which are authorized in the farm bill. These programs are administered by USDA’s Foreign Agricultural Service, which is required to report to Congress periodically on program effectiveness.

House livestock committee disappointed in GIPSA rules
The leaders of the House Agriculture Subcommittee on Livestock and Foreign Agriculture, Congressmen David Rouzer (R-NC), chairman, and Jim Costa (D-CA), ranking member, are disappointed in the USDA’s decision to move forward on the “flawed” Grain Inspection, Packers and Stockyards Administration rules.

Rouzer says, “Many farmers, ranchers and producers across rural America are facing significant financial challenges. Despite these hardships, the USDA chose to ignore the will of Congress and the input of our agriculture community. These disastrous rules will result in a flood of litigation, a disruption to the established marketing system for cattle, pork and poultry, and millions of dollars in unanticipated costs.”

Costa says, “These proposed rules and interim final rule will negatively impact how cattle, poultry and pork are marketed, and will thus unduly harm America’s livestock producers. During a time that farmers around the country are suffering from depressed commodity prices we — Congress and the USDA — should be doing everything we can to support those who work every day to put the highest quality and healthiest food and fiber on our dinner tables every night.”

Rouzer and Costa are very concerned about the interim final rule regarding injury to competition. According to the Congressmen, this provision relieves plaintiffs from having to prove competitive injury to claim a violation of the Packers and Stockyards Act, further burdening the U.S. livestock industry by opening the door to a horde of harassing lawsuits. The rules are currently at the Office of Management and Budget for review.

Guessing game begins on next secretary of agriculture
With only eight days before the election, speculation has started on who will be the next secretary of agriculture. Recent press report indicates there are at least five individuals being considered by the Clinton campaign. They include Karen Ross, Blanche Lincoln, Kathleen Merrigan, John Hickenlooper and Steve Beshear.

Ross is the secretary of the California Department of Food and Agriculture. Prior to her appointment in 2011 as secretary, she served as chief of staff to current Secretary of Agriculture, Tom Vilsack. Lincoln is former chairman of the Senate Agriculture Committee. She was elected in 1998 to the Senate where she served two terms representing Arkansas. Prior to the Senate she served in the House of Representatives and was a member of the House Agriculture Committee. Merrigan served as deputy secretary of agriculture during President Obama’s first term. Previously she served as USDA’s administrator of the Agricultural Marketing Service and was a senior staff member of the Senate Agriculture Committee. Currently, she is the executive director of Sustainability at the George Washington University. Hickenlooper is the governor of Colorado and previously was elected in 2003 as mayor of Denver. Beshear is the former governor of Kentucky. He has also served in the Kentucky House of Representatives, Kentucky attorney general and lieutenant governor.

At this time there have not been any press reports on possible nominees by Donald Trump. 

7 Pork Month messages to digest

During National Pork Month, the National Hog Farmer staff sat down with pork leaders, discussing the real issues of the swine business.

As the month comes to an end, here is a wrap-up of 7 key takeaways from these forward-thinking leaders.

1. Expanding industry better than shrinking 
Pork Month 2016 comes as the U.S. swine industry is facing some financial challenges, but National Pork Board Chief Executive Officer, Bill Even, says the industry also has some opportunities for success. “The U.S. pork industry is growing, which presents some challenges along with new opportunities. There will be volatility in the market as people and business realign, but it’s much better to be in an expanding industry than in one that’s contracting,” says Even.

2. Pork demand is strong
Pork is the world’s most widely eaten meat, representing 36% of all meat consumed, according to the USDA Foreign Agricultural Service. Overall, demand for pork domestically and abroad is good.

“Consumers recognize the versatility of serving pork in their homes,” says Al Wulfekuhle, Iowa Pork Producers Association president. “That is what is so great about pork. It absorbs flavor well. It is a lean, nutritious and low-cost product.”

For the most part, the consumption of pork domestically is vigorous and stable. However, the true market growth potential is the export market. Twenty-five percent of the U.S. pork is exported.

The national recognition of pork in October is a good reminder to all pork producers to share his or her story with consumers locally and worldwide. He says, “We get a lot of questions from consumers, especially in the United States, about how the product is raised and if we care about the environment. I think the message we keep getting is we need to show that we do care.”

3. Global market access, eliminating trade barriers is essential for U.S. pork future
The large supply of hogs is unquestionably a combination of suitable production fundamentals — production efficiency picking up, low disease pressure and moderate expansion. That is exactly what is bringing extra pigs to the market, explains National Pork Producers Council President, John Weber. 

It will take efficiently raising pigs to feed a growing world population that craves the global favorite animal protein — pork. America’s pig farmers can provide safe, tasty pork for the world, however, gaining access to certain global marketplaces has it challenges.

Weber clearly explains that trade deals such as the Trans-Pacific Partnership are essential to growing global market access for U.S. pork.

“All 11 countries are pork-consuming countries in a big way. It is access to over half billion new consumers. These economies are progressive and growing. You cannot just ignore that,” Weber further explains. “I personally do not think you can isolate yourself away from that type of market. I think it would be a financial disaster not only for your own personal operation, but for the country in general.”

Since TPP is a legacy issue with the Obama administration, NPPC still thinks the vote will happen this year after the election.  

4. Pork message for the hog farmer
Though the current market situation casts a dark shadow over the swine industry, Minnesota Pork Board President, Kevin Estrem, is optimistic that there is a bright light at the end of the tunnel.

Estrem urges fellow pig farmers to keep a positive attitude. People are going to keep eating pork. Every time we are faced with challenges on the financial side, it brings us stronger into the industry to do a better job of raising our pigs to get the best quality hog out of the least amount of dollars to produce that pig.

To keep the next generation in the pig business, Estrem says you need to be honest about the swine business. He says, “You have to be upfront honest with them, that we don’t make a lot of money. We handle a lot of money, but you don’t make a lot of money. We’re in it for the enjoyment of actually producing food — people need food, there’s always going to be demand there. There are long hours and hard work, but I think just being your own boss and working with family members is great. You can’t paint a rosy picture because of the times we’re in now, but we have had some fantastic years.”

5. Hurricane couldn’t wash out high level of pig care
Preparation, dedication and cooperation.

Those three simple words are what make any successful hog operation, or farm in general, work smoothly. Jan Archer, president of the National Pork Board and a producer from Goldsboro, N.C., says those three words had a greater significance recently as her home area was hit hard by Hurricane Matthew.

We Care principles of ethical hog care were practiced to a “T,” despite hog producers in the southeastern U.S. having to battle Hurricane Matthew.

“I am really proud of the fact that the pork industry developed the six We Care principles, and I will tell you that over the past week, I have seen these ethical principles lived out in a way I never expected, a way I never hoped to see, but I am so gratified that I can really confidently talk about how pig farmers really live those six principles every day in everything they did. That included taking animals off the farms before the hurricane hit, staying with their animals during the storm, they always made sure their pigs had feed and water.”

6. Don’t skip the consumer connection
Many times over, Illinois pig farmers are reminded by their Chicagoan neighbors that the consumer wants to know how pork is brought to their tables. They are discussing activities on the farm and asking all farmers and ranchers to be more transparent.

Bob Frase, Illinois Pork Producers Association president, says “Connecting with consumers is not just about promoting pork but telling our story. We need to tell the consumers who and what we are and why we are doing this.”

Communicating with the consumer can be simple. Frase points out; it is just about telling a straight forward account of raising pigs in the state. Illinois pork producers are taking every opportunity to do just that by telling their story and bonding over delicious pork — not just during Pork Month but all year long.

7. It takes every pig farmer to tell the story
Consumers often receive misinformation about what actually happens in the pig barns. America’s Pig Farmer of the Year, Brad Greenway, firmly believes that efforts to keep pigs healthy and safe by imposing strict biosecurity measures also closes the barns off to the world. He says, “When we shut the doors, I think we shut the public off.”

Greenway encourages all pig farmers to tell their stories and have more conversations with the public. He advises the average consumer does not want to know all the finite details about pork production. They just want to know who is raising the pigs and producing pork for their plates.

“I am optimistic about this next generation coming back. They are more adapted to doing social media and taking a picture of their kids in the barns and on the combines. The next generation is going to get that message out so much faster than I ever did and definitely faster than my dad did. Going forward, that is a good thing,” Greenway concludes.

FFA Chapter Tribute - October 29, 2016: Jefferson C-123 - Conception Junction, Mo.

This Week in Agribusiness - October 29, 2016

Orion Samuelson, Max Armstrong and Greg Soulje offer up insight and commentary on This Week in Agribusiness. 


Max's Tractor Shed - October 29, 2016: 1965 John Deere 4020

Max tells the story of a 1965 John Deere 4020 owned by Chuck Myers, Lyons, Nebraska.


Midwest Digest - Midday October 28 2016

Midwest Digest - Morning October 28 2016

Keeping it simple with consumers

A new grant program offers Chicago fourth grade classrooms a nocost trip to Fair Oaks Farm in Fair Oaks Ind allowing the students to experience both the Pig and Crop Adventure
<p>A new grant program offers Chicago fourth grade classrooms a no-cost trip to Fair Oaks Farm in Fair Oaks, Ind., allowing the students to experience both the Pig and Crop Adventure.</p>

Livestock in Illinois is a vibrant industry, gleams Illinois Pork Producers Association President, Bob Frase. Although the Land of Lincoln is often associated with corn and soybean production, Illinois’ 2,800 pig farmers know the state’s local resources, and convenient location to processing plants makes it a great place to raise pigs.

Similar to all American pig farmers, Illinois hog farmers work around the clock to produce nutritional, safe pork for consumers around the globe. While the size of the hog farms in Illinois varies, the high level of care for the pig and providing a quality protein does not. After all, doing what’s right in the barns is a shared value among pig farmers and consumers.

Many times over, Illinois pig farmers are reminded by their Chicagoan neighbors that the consumer wants to know how pork is brought to their tables. They are discussing activities on the farm and asking all farmers and ranchers to be more transparent.

“Connecting with consumers is not just about promoting pork but telling our story,” Frase says. “We need to tell the consumers who and what we are and why we are doing this.”

Communicating with the consumer can be simple. Frase points out; it is just about telling a straight forward account of raising pigs in the state. Illinois pork producers are taking every opportunity to do just that by telling their story and bonding over delicious pork — not just during Pork Month but all year long.

Conversations with consumers have resulted in a positive movement for the pork industry. Swine industry audits came about to prevent every entity in the pork supply chain — hog farmers to packers to food companies — from “taking a black eye to misconceptions,” notes Frase.

As a result, Frase further explains, “They are asking us to verify what we are doing, and that is not unreasonable. Consumers need to have confidence in the food they buy and we need to back that up.”

Still, it does come down to who is actually the average pork consumer. Frase explains the majority of pork eaters quietly select the product based on price and quality.

Partnering with food retailers, such as Costco, HyVee and Sam’s Club, the organization can offer a chance to reintroduce pork to consumers. Personally, Frase enjoys the one-on-one dialogues stirred up on days the IPPA grills pork on-site at a food retailer. Handing out the samples and the recipes opens the door for consumers’ questions. Interestingly, the leading questions are about the different cuts of pork and the proper way to cook it. “The simple lonely pork burger is the most misunderstood cut of meat,” he jokes.

Often, pork is overdone, leaving a bad eating experience for the consumer. Properly cooking pork, including telling when it is done, is a common problem for consumers. Pork is lean and easy to overcook. Also, the old school rule was to cook it until the meat was no longer pink. However, the USDA recommends cooking pork to the internal temperature of 145 degrees F for medium-rare and up to 160 degrees F for medium doneness. This range of cooking will result in a flavorful, tender and juicy eating experience — an education lesson Frase enjoys teaching. “When you turn someone on to a good, juicy, and slightly pink pork chop then lights go on for them. “

Realizing properly cooking pork is a stumbling block, the IPPA is funding a grant for cooking classes in schools. The goal is to get pork into the schools and teaching the student the proper way to handle and cook pork.

Connecting the consumer with pig farming needs to start at an early age. That is why the IPPA teamed up with the Cook County Farm Bureau Foundation, Illinois Soybean Association Checkoff Program and the Illinois Corn Marketing Board to get kids back to the farm. This grant program offers Chicago fourth grade classrooms a no-cost trip to Fair Oaks Farm in Fair Oaks, Ind., allowing the students to experience both the Pig and Crop Adventure.

The first two tours were conducted on Sept. 23 and 30 with 300 students and teachers. It was an eye-opening experience for both students and teachers alike as, Diane Chathas, a teacher at Walker School in Bedford Park explains: “This was the best field trip we have ever been on. Especially for my students (who have never been exposed to farm life), the impact was incredible. The birth of the piglets was the most amazing experience for all of us.”

Each student walks away with a wealth of new information from learning what a pig eats, how sharp a piglet’s teeth can be, to how a farmer must shower before going into a barn to protect the pigs from disease. “It is a great opportunity for kids from Chicago to get out to the farm,” says Frase.

Even though there are anti-meat activists creating noise, Illinois pork producers will move forward openly showing and explaining how pork is brought to the market one consumer conversation at a time.