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Articles from 2008 In February


Canada Launches Culling Program

The government of Canada announced a Cull Breeding Swine Program this week that it is hoped will remove 10% of Canada's breeding herd from production. Here is what we know:

  • Can$50 million is the proposed budget;

  • The proposed program will pay $225 plus costs of slaughter and disposal per sow or boar slaughtered;

  • Producers must empty at least one complete barn and agree not to re-stock that barn for three years;

  • Sows and boars culled since Nov. 1 will receive $225 less the actual sale proceeds, provided the farm meets the other requirements of the program;

  • The animals must not enter the human food chain. They may be rendered for pet food or other purposes or disposed of on-farm in compliance with regional environmental standards.
The program is to be delivered through the Canadian Pork Council (CPC). Funding has not yet been approved by Canada's Treasury Board, but a release from CPC said that approval was expected soon, and then precise funding and participation details would be announced. No timetables for program implementation or animal removal were discussed.

Many Program Questions
Many questions remain. Is any barn a "barn" for the "empty the barn" requirement? Do sows and boars sold since Nov. 1 have to meet the "not enter the human food chain" requirement? (That seems very doubtful, doesn't it?) What is the time frame? These are not meant to be indictments, just recognition that specifics are very important and we do not have many at this time.

Winners and Losers
As with virtually all things economic and all things government, there are winners and losers in this idea. The winners in the short run will be those farms that are planning to exit the business anyway and will gain a windfall in sales revenue. Of course, the extra payment will quite likely entice some producers who had a "stick it out" mindset to liquidate breeding stock and that will be a net gain for the marketplace. In the long run, all Canadian and U.S. producers should benefit from the program due to larger and, perhaps, quicker reductions of hog supplies.

The biggest short-run losers will be sow/boar slaughterers, mainly in the United States, that will see the available supply of slaughter sows/boars fall by roughly 150,000 head over some yet unknown time period. Consumers will also lose as the price of sausage and other products made from cull breeding animals will be higher. Finally, Canadian taxpayers lose (depending, of course, on their view of the role of government) as their tax dollars go to pork producers.

Can It Make a Difference?
Is the program enough to make a difference? A reduction of 10% of Canada's sow herd will result in about 150,000 fewer sows and roughly three million fewer market hogs in the second year after the reduction begins. Some of that reduction would have occurred without the program. Perhaps all of it would have occurred eventually, but the program will speed up the process.

The net "gain" in output reduction may be around two million head. Barrow and gilt slaughter in the two countries totaled 124.551 million head last year. Will it help? Yes. Will it be sufficient to push hog prices high enough to cover 25% higher production costs? Definitely not.

Reviewing U.S. Predictions
Lest anyone think that I am being unduly critical of Statistics Canada regarding their Jan. 1 hog count, let's review the performance of USDA's December Hogs and Pigs Report. Figure 1 shows actual 2007 and 2008 weekly slaughter totals and the levels predicted by the Dec. 1 weight-class inventories. December slaughter ended up only 1.8% larger than was predicted by USDA's 180-lb. and over inventory, thanks in part to Christmas falling on Tuesday and reducing slaughter the last week of the year relative to one year earlier.

The real problem is this year, though. Actual slaughter since Jan. 1 has been 7.3% higher than the level predicted by the December report, and 6.8% higher than the Pred '08 line in Figure 1, which includes a 0.5% allowance for higher Canadian market hog inventories. Those in-shipments have been even larger than that level, though I believe the data we have is high due to the problems in the weekly border-crossing data. Even with the possibly-inflated figures, additional Canadian market hogs still account for only 160,343 head (13.9%) of the "extra" 1,152,100 head slaughtered thus far in '08.

Numbers Missed the Mark
How was USDA so far off in its Dec. 1 inventory of market hogs? We don't know the answer to that. Circovirus vaccine may have played a role, but we need to remember that circovirus vaccine impacts the survival of pigs to market weight, not the number of pigs born. So it should impact the number of heavy-weight pigs that were in the market herd at any point in time, and it doesn't appear that USDA got nearly enough of those counted in December.

Is there a structural change going on that would cause errors? Nothing like the big shift of ownership and farm size of the 1990's is occurring today -- but there are more pigs coming from Canada to be fed in the United States, and I think a growing proportion of those remain under Canadian ownership.

USDA ran into big trouble in the '80s and '90s when contract production started putting pigs on farms not owned by the pig owner. The result was double-counting. USDA's appropriate response was to quit worrying about sites so much and be concerned with owners. Are they tracking down the Canadian owners of these pigs?

Report Production Accurately
But there is something that U.S. producers can do right now to help: Answer USDA's March Hogs and Pigs survey with the most accurate data you can muster. USDA's statisticians cannot make a "silk purse" report from "sow's ear" responses.




Click to view graphs.

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

Humane Society Submits Signatures for California Ballot

The Humane Society of the United States (HSUS) in an announcement released on. Feb. 28, that it has submitted the number of signatures necessary to bring an anti-animal cruelty ballot initiative before California voters in November.

Since October, 790,486 petitions have been signed and delivered to county election offices.

A total of 433,971 valid signatures are required for a measure to qualify for California’s November 2008 ballot.

The Prevention of Farm Animal Cruelty Act would prevent California farms from confining animals in crates or cages, specifically, veal crates for calves, battery cages for egg-laying hens and gestation stalls for breeding sows. The new law would take effect in 2015.

The bill was supported by Californians for Humane Farms, the HSUS, Farm Sanctuary and other animal rights groups.

Californians for Sound Farm Animal Agriculture commented that this measure threatens science-based farm practices.

The farm coalition said animal welfare policies belong in the hands of experienced scientists, veterinarians and farmers who are best qualified to protect farm animals and the food they provide to California families.

The California secretary of state’s office is expected to take about 30 days to determine whether there are enough valid signatures to place the matter on the November ballot.

Ohio Pork Producers Launch Media Effort

The Ohio Pork Producers Council (OPPC) has launched a statewide multimedia campaign including radio and Web site advertisements, plus a new consumer education Web site.

The campaign is part of ongoing efforts to educate consumers about modern pork production.

“Our industry recognizes that there are a number of misconceptions and misunderstandings about how large farms are operated, how livestock is cared for and how Ohio’s farmers provide us with a safe, wholesome supply of affordable food,” says Jennifer Keller, director of marketing and education for the OPPC. “It is our hope that this new campaign will help engage Ohioans on our industry and build understanding about modern pork production.”

Created through a partnership between the OPPC and the Ohio Soybean Council, OhioPorkTour.com highlights animal care, environmental and social issues that affect hog farms. The site features two- to four-minute videos of different hog farms. The videos, which were launched last October, will continue on a monthly basis through September. Individuals can sign up to receive a link to updated videos via e-mail.

“Even though this is an Ohio-based campaign, we hope the materials present on this Web site will be viewed nationwide,” says Tony Bornhorst, a pork producer who is featured in one of the online videos. “Ohio pork producers are no different than other pork producers in the way they care for their animals and the environment.”

The Web site also includes a “meet the farmers” section and frequently asked questions page for consumers to learn more about the pork industry. Lessons and activities developed to accompany the videos will serve as important tools for teachers and students.

Canadian Report No Hit, Possibly a Miss

Last week's Canadian Hog Statistics report has been a topic of discussion in many quarters this week. It appears that virtually everyone, including Canadian producers and industry analysts, believe that Statistics Canada has missed the count -- perhaps quite badly -- on the high side. I hope that's the case and that the Canadian data agency will do its best to revise the numbers if they are, in fact, wrong. I doubt, however, that will happen before they issue the next quarterly report in April.

I have talked to several people who believe that the Canadian herd was down significantly more than the published 1.9% and that the real reduction would result in fewer farrowings than were indicated in the report. Larger reductions would no doubt fit better with the economic situation in Canada and certainly would sit better with U.S. producers who are seeing a flood of Canadian pigs into the U.S. market.

It is my impression that U.S. producers can accept that flood of pigs if it is part of a liquidation and adjustment by Canadian producers. Continuing large imports and little or no reduction in Canada's herd, however, will begin to strain producers' patience quickly, especially if government payments, loans and other assistance grow.

Meanwhile, USDA's Livestock Market News is struggling to acquire and publish accurate data regarding imports of cull Canadian breeding animals into the United States. Figure 1 shows the data as they stand today. Last week, USDA tried a different categorization method that resulted in cull breeding stock imports for the week being roughly 15,000 head as opposed to the 6,836 head shown in the graph. The numbers for this year still defy logic and anecdotal evidence from sow buyers in Canada. The data shown in Figure 1 indicate that imports of cull breeding animals have been 11% smaller than one year ago thus far in 2008.

The bottom line: We are currently flying blind on the size of the Canadian breeding herd and the changes that are occurring. It appears that data agencies on both sides of the border have provided us with less than accurate information. That makes it very difficult, if not impossible, to make optimal decisions. I hope all of the agencies involved improve their efforts and their results and I urge producers to give them a little time to do so.

Exports Shine
Lost amid my disappointment with the Canadian inventory numbers last week was news that U.S. pork exports had indeed set another record in 2007! This marks the 16th straight year of record export volume for the U.S. pork industry (see Figure 2).

This achievement was, perhaps, more satisfying than those of years past since it was definitely in doubt as late as July. Exceptional performance the second half of 2007, buoyed by surging shipments to China and Hong Kong, pushed carcass equivalent shipments 4.8% higher for the year. Product weight exports were 3.1% higher for the year and pork by-product exports were 11.7% higher.

When it comes to hog demand, though, the more important data are the values of exports, since it is dollars that speak in deriving demand back upstream. The values of U.S. exports were higher than in 2006 virtually all year and closed the year 9.6% higher for pork and 6.1% higher for pork variety meats.

The December data contained a couple of very interesting individual observations (see Figure 3). Shipments of pork to China were 32.4 million pounds carcass weight (73%) smaller than in November. A portion of that reduction was offset by 4.6 million pounds more product being shipped to Hong Kong, but I think it serves as notice of how fickle the Chinese market can be. While huge, the Chinese market is still subject to considerable central control that may or may not behave according to the normal forces of economics.

The data for Mexico was also interesting. Shipments to Mexico grew by 8 million pounds from November to December. And, December shipments were within 10% of the 2006 levels for the first time since April. Exports to Mexico were still quite disappointing, ending the year 26% smaller than last year, but the December surge was encouraging.




Click to view graphs.

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

National Animal Identification Workshop Slated for April 3

Discussion of the USDA-generated “A Business Plan to Advance Animal Disease Traceability” and pending implementation of Country-of-Origin Labeling (COOL) are two key topics for the 2008 ID-INFO Workshop set for April 3 in Indianapolis, IN.

This year’s one-day workshop will be held in conjunction with the National Institute for Animal Agriculture’s (NIAA) annual meeting.

USDA’s Business Plan to Advance Animal Disease Traceability headlines the morning session with National Animal Identification System (NAIS) coordinator Neil Hammerschmidt providing a plan update. Following will be a discussion on the plan’s challenges and opportunities from three perspectives: state, industry and information systems.

Attendees will then hear a 30-minute review of the COOL program.

After lunch, workshop participants will divide up into groups of 20 or less to address six questions related to NAIS and COOL. Key findings of each group will be summarized at the end of the afternoon and be submitted to USDA as important industry consensus points.

Registration for the one-day ID-INFO Workshop is $150/person.

To learn more about the workshop on April 3 or NIAA’s annual meeting April 1-3, visit NIAA’s Web site at www.animalagriculture.org or call NIAA at (270) 782-9798.

Veterinarians Hold Annual Gathering in San Diego

The 39th annual meeting of the American Association of Swine Veterinarians (AASV) is set for March 8-11 in San Diego, CA, at the Sheraton San Diego Hotel & Marina.

To register, call the AASV at (515) 465-5255, e-mail aasv@aasv.org or log onto the Web site, www.aasv.org.

Pre-conference workshops March 8 cover air filtration of hog barns; clinical disease and pathology, evidence-based decisions for quality improvement; pigs, politics and public health; PRRS risk assessment training; and PQA-Plus advisor training.

Morning pre-conference sessions March 9 include reproduction, foreign animal diseases, managing sick pigs, practice tips and swine production medicine for veterinary students.
The afternoon program features the student seminar, research topics, industrial partners and poster sessions.

The theme of this year’s meeting is “Building on Our Strengths.” Tim Loula, DVM, St. Peter, MN, is presenting the Howard Dunne Memorial Lecture. Mike Terrill of Snowflake, AZ, is presenting the Alex Hogg Memorial Lecture.

Sessions on swine influenza virus, porcine reproductive and respiratory syndrome (PRRS) and porcine circovirus-associated disease round out the morning’s program.

In the afternoon, sessions cover respiratory disease, controlling feed costs and PRRS and porcine circovirus type 2.

Sessions March 11 include enteric disease, sow gestation housing and influenza.

Alternative Farrowing Course Scheduled

The Alternative Farrowing Management Course is a two-day, intensive program designed to increase knowledge of pre- and post-farrowing, and piglet care from birth to weaning, in an alternative production system.

The program runs March 6-7, 2008 at the West Central Research and Outreach Center, Morris, MN. Registration deadline is Feb. 27. Enrollment is limited. To register, go to http://www.mnpork.com/producer/STP/regformstp.php.

Classroom instruction will be from 10 a.m. to 7 p.m. on the first day, and hands-on instruction in the swine research facilities will be from 8 a.m. to noon on the second day.

The first registration from a farm costs $100; additional participants may register for $50 each.

Individuals wishing to participate in multiple courses should call the Minnesota Pork Board (507-345-8814) for a reduced fee schedule.

The fee includes learning materials, lunches, breaks, instructor fees and biosecurity clothing for hands-on training sessions.

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Smithfield Foods Announces Major Sow Herd Reduction

The nation’s largest pork producer, Smithfield Foods, headquartered in Smithfield, VA, announced plans to reduce its sow herd by 4-5%, beginning immediately.

The Feb. 19-announcement will account for a 40,000-50,000-sow reduction and ultimately reduce the company’s output of market hogs by 800,000 to one million head.

“Given the economics for raising hogs today, we cannot continue on the current path; something has to change,” stated C. Larry Pope, Smithfield’s president and chief operating officer.

“Grain costs continue at record levels, with the potential of escalating, given the current U.S. government policy favoring corn for ethanol. Today, the economics are very challenging and we believe that these increased costs will translate eventually into still higher food costs for the American consumer,” he added.

Pork Exports Set New Growth Record

The U.S. pork industry achieved its 16th consecutive year of record-setting growth in exports in 2007, according to statistics released by the U.S. Meat Export Federation (USMEF).

Overall, pork exports climbed 3% in volume over 2006, representing nearly 2.9 billion lb. The value of those exports jumped 10% over 2006, exceeding $3.15 billion.

Pork muscle cut exports also increased 3% in volume and 10% in value, while pork variety meat exports increased 5% in volume and 14% in value.

Japan remains the leading market for U.S. pork, accounting for 36% of the value of all U.S. pork exports. Japan imported more than 790 million lb. of U.S. pork in 2007 – 6% more than the previous year. Those imports were valued at $1.2 billion, 11% more than in ’06.

Mexico retains the number two ranking for U.S. pork exports despite a 22% decline last year. Even with some erosion in U.S. pork gains, due to increased domestic poultry, beef and pork production, the United States still dominates Mexico’s import trade with an 85% share, according to Erin Daley, USMEF manager of research and analysis.

China/Hong Kong was the largest growth market for U.S. pork exports in 2007, advancing 91% to nearly 373 million lb., valued at almost $271 million.

Exports to China/Hong Kong exceeded exports to Canada in volume, at 327.5 million lb. But Canada remains the number three market in value of pork exports at $491.6 million, a 12% increase over 2006.

“The strong Canadian dollar and high feed and labor costs will continue to influence meat and livestock trade with our northern neighbor,” comments Daley.

Pork exports to Russia doubled in 2006 and continued to grow in 2007. A new record increase of 21% pushed exports to 220.2 million lb., valued at nearly $207 million, a 26% increase in value over the previous year.

In other key U.S. pork trade news:
· Sales to South Korea dipped 9% to 220.1 million lb., but product value was essentially unchanged at $231 million.
· Australia and New Zealand increased 22% to 82.5 million lb., worth nearly $100 million.
· Central and South America increased 22% to 73 million lb., valued at $70.9 million.
· Pork exports to the European Union increased 55% to nearly 43.5 million lb., with a 70% increase in value to $57.8 million.
· Exports to the Association of Southeast Asian Nations climbed 62% to 34.5 million lb. valued at $30.5 million.
· The Dominican Republic increased 39% to 12.6 million lb., valued at $10.8 million, while exports to other Caribbean countries fell 12% to 32.9 million lb.

Exports to Taiwan fell 37% to 35.2 million lb., due mainly to market access issues.

Minnesota Offers Advanced Margin Management Workshop

In an effort to help pork producers buffeted by high feed costs and unpredictable hog prices, the Minnesota Pork Board is hosting “Advanced Margin Management for Pork Producers” from 9 a.m. to 3 p.m. on Feb. 26 at the Minnesota Pork Board Office Building in Mankato, MN.

To attend this free workshop, pre-registration is required by Feb. 22. Call the Minnesota Pork Board at (507) 345-8814 or e-mail colleen@mnpork.com.

Using a Web-based price management simulation, producers will review an actual market case study to reinforce feed cost and hog marketing decisions. Participants will define and share hedging alternatives and strategies for managing feed and hog revenue as a single unit of risk.

Pork producers will learn how to strengthen their marketing plan by complementing physical contracts with futures and options contracts.

This session will also address the practice of using futures spreads to manage basis risk from both the feed buyer and hog seller perspectives.

Presenter is Chip Whalen, Commodity & Ingredient Hedging, LLC, a full-service agricultural commodity price management company headquartered in the Chicago Board of Trade.