Pork Exports Gain More Strength

Let’s start with some good, good news: U.S. pork exports are smoking thus far in 2008! USDA’s Foreign Agricultural Service data released Thursday indicate that pork exports set an all-time monthly record of 129.193 MT (million metric tons) or 142.112 million tons in February. That number is 55.3% larger than February 2007. That puts year-to-date pork exports at 246.575 MT or 271.232 tons, 39.8% higher than the same period last year.

Figure 1 shows total pork exports year-to-date as well as exports to major U.S. pork markets. As has been the case since mid-2007, China-Hong Kong is the biggest driver of these higher export levels, growing an astounding 433% year-to-date. Shipments to China-Hong Kong so far in 2008 are only 8.1% smaller than shipments to Japan, our long-standing largest export customer.

Shipments in February were also larger, year-over-year, to Canada (+40%) and Russia (+185%), meaning that year-to-date shipments to those countries are 34% and 195% larger, respectively, than in 2007.

Shipments to Mexico were again lower than one year ago, but February’s -2.8% was the smallest year-over-year reduction since December 2006, which saw 1.3% year-over-year growth. Pork trade with Mexico is still 7.1% smaller thus far in 2008, but that compares to -16.1% at this time last year, and -27.8% for all of 2007. So while we have not caught up to year-earlier levels in our pork trade with Mexico, the situation appears to be improving.

Perhaps even better news is that all of this pork is moving out of the United States at prices very near those of one year ago. Figure 2 shows the value of U.S. pork exports, year-to-date. Total export value is up 36.2%, driven largely by a more than six-fold increase in the value of exports to China-Hong Kong. The value of February shipments was $308.576 million, 46.1% larger than one year ago.

Export Value to Hogs
February pork exports amounted to $32.90/head for each hog slaughtered in the month. I realize that not all pork product exported in February came from hogs slaughtered in February, but, over time, this number is very important to U.S. producers since it represents the value provided by export sales.

Packers can only bid as much for hogs as the value of the products from those hogs will allow. There is never a guarantee that increased product values will in fact be bid into hog prices, especially in the short run. But the level of hog prices thus far in 2008 relative to the huge slaughter runs we have seen strongly suggest strongly that these export values have been bid back into hog prices quite efficiently this year.

Exports of pork variety meats have added to this year’s export success story as well. Variety meat shipments were 57.4% larger this February vs. last February, and stood at 50.2% larger year-to-date through February. The value of those exports was 54.5% higher in February and stood at 49.6% higher for the year through the end of February. Pork variety meat export sales amounted to $3.17/head slaughtered in February, 27% higher than last year’s $2.50/head slaughtered.

Setting Another Record
Will this kind of performance last? It is difficult to imagine that these kinds of year-over-year increases will last through all of 2008, but that doesn’t mean this will not be a banner year for U.S. pork exports. While high feed prices hurt, producers in the European Union (EU) and Canada have it much worse. In addition, the weak U.S. dollar makes U.S pork products very competitive vs. those of Canada, the EU and Brazil, our major competitors in world markets. I have seen no forecasts of a major strengthening for the greenback this year, so that factor should remain in our favor.

In my opinion, only a major trade disruption would prevent the United States from setting its 17th-consecutive record year for pork exports – and from doing so by a wide margin!

That’s a very good thing, too, given where feed costs are and might go. USDA’s April World Agricultural Supply and Demand Estimates, released on Tuesday, took 155 million bushels off projected year-end corn inventories to drop the projected ratio of year-end stocks for total usage to 9.8%. That would be the fourth-lowest inventory since 1970, when my data begin, and the lowest since the 9.4% of 2003/2004.

It’s a Different World
But this is a different world from the bucolic, “we feed corn to critters and people” days of ‘03/’04, and corn demand is much higher, thanks to ethanol usage and record exports (which, by the way, USDA increased by 50 million bushels this month).

In fairness, I must also point out that USDA reduced the projected usage of corn for ethanol by 100 million bushels to 3.1 billion to reflect the unfavorable economics that $5-plus corn presents for ethanol plants as well as livestock feeders.

That different world is reflected by USDA’s new season-average price forecast of $4.10 to $4.50/bu. (up from $3.75 to $4.25 in April). That compares to a season average price of $2.42/bu. in ‘03/’04.

It looks more and more as though the chances of corn over $6/bu. are higher – and perhaps significantly so – than the chances of corn under $5/bu., especially given recent weather patterns.

Excuse me for a bit, I have to go put my lawn mower away and find that snow shovel again.

Click to view graphs.

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

Iowa Pork Group Kicks Off Aggressive Effort

The economic downturn in the U.S. pork industry has led the Iowa Pork Producers Association (IPPA) to ramp up efforts in the United States and abroad to keep pork on the table.

IPPA has launched an aggressive campaign to promote pork sales at home and boost pork exports to a number of key countries abroad.

“We want producers to know the association will continue to do all it can to help move as much pork as possible on the supply side during these challenging times,” says Nevada, IA, pork producer and IPPA President Dave Moody.

Seventeen Iowa pork producers and IPPA staff traveled to Miami, FL, in March to promote pork at 10 Hispanic grocery stores and at the largest Hispanic festival in the country. More than 16,000 pork chop sandwiches were grilled and handed out in one day at the event, attended by an estimated 1.4 million people.

IPPA will also be partnering with Culver’s restaurant to serve ground pork and bacon burgers at each of the nine racing events at the Iowa Speedway in Newton, IA, from April through September.

Iowa producers will also be participating in the National Pork Board’s new mobile marketing tour this year. IPPA will promote pork at 15 of the events on “The Other White Meat Tour” from Washington, D.C. to Albuquerque, NM, between June and October.
IPPA leaders have teamed with the Iowa Department of Economic Development on missions to Japan, Taiwan, the Philippines and Mexico in the past two months to boost sales of U.S. pork to those countries.

Those efforts couldn’t come too soon. Following three-plus years of profits, the pork industry now faces its most difficult period in the past decade. Hog farmers have been losing an average of $30/hog since last fall, and prices aren’t expected to rebound anytime soon.

Combining low prices with record fuel and grain costs have made it difficult for many producers to continue raising hogs.

“The situation is not good, and with recent reports on pork inventories and forecast crop plantings this spring, no one is being led to believe the market is heading in a direction to make things better,” Moody says.

Contributing to the current challenges are record numbers of hogs going to market. Most agricultural analysts predict the herd reductions needed to reverse the current economic downturn won’t occur until sometime next year.

In response to this crisis, the American Farm Bureau Federation (AFBF) sent a letter this week to Agriculture Department Secretary Ed Schafer, asking for additional Section 32 purchases of pork to help provide some stability for the pork sector, and supply the protein source to users of the nation’s nutrition programs.

“Additional Section 32 purchases would help the pork industry at this critical time,” says AFBF President Bob Stallman. “We request that you evaluate such a purchase for the benefits that it would provide both producers and consumers.”

Section 32 is a fixed emergency fund that could help pork producers during this critical time, while enhancing nutrition programs.

What’s Up with Sow Prices?

Just how fast are producers responding to the worst economic conditions since price collapse of the ’98-99 – or perhaps ever? That has been a topic of widespread discussion these past few weeks.

For the first part of the ’98-99 time period, no one could give a definitive answer, because it was impossible to know exactly what was going on in Canada due to problems with the weekly import data. Those data are now better. Not perfect, but definitely better. And, they are probably good enough for us to conclude that Canada is indeed reducing their herd at a rather quick pace.

U.S. sow slaughter jumped to 73,000 head last week, 11.5% higher than one year ago (see Figure 1). At least one major sow-slaughtering firm worked Saturday.

Canadian slaughter has lagged with the week ending March 22 (the latest week for which data is available), down 22.6% from last year. It should be noted that the 22.65% drop involved only 700 fewer sows than last year, however. Canada just doesn’t process many sows. While the entire industry needs sow plants on both sides of the border to be operating at high throughput rates, the Canadian plants may not help much. The strong Canadian dollar has hurt their competitive position as well.

As slaughter has jumped, sow prices have plummeted in much the same fashion they did in January (see Figure 2). Light sows were quoted below $20/cwt., live, last week and there are reports of bids as low as $10/cwt. this week. Light sows are certainly not the choice of sausage manufacturers, as they generally do not carry enough fat to yield high quality product. Big sows – those at 500-lb. and over – are faring somewhat better with bids of just under $25/cwt., live, last week. But that price is $10/cwt. lower that just four weeks ago.

Why are sow prices tanking so quickly when offerings increase? There have been rumors that we just can’t handle the large number of sows coming to plants right now. The statement is reminiscent of the fall of 1998, when butcher hog plants were operating at maximum rates and hog prices were falling to record lows. Hog offerings were huge, packers simply could not push more through the plants and they could basically choose the price they wanted to pay for hogs that had to move off farms.

Though producers are almost desperate to get culled sows off the farm due to high feed costs, the situation in the sow market is somewhat different than the ’98 scenario. Figure 3 shows the results of my phone survey last fall regarding daily slaughter capacity of plants that process cull sows and boars. Note that USA Pork Products’ Hazellton, PA plant is generally not used for sow processing, so the capacity of sow plants is roughly 17,000/day.

A full, five-day week could handle 85,000 sows and any Saturday shifts would add to that weekly total. Therefore, I don’t think slaughter capacity has anything to do with the rapid declines in sow prices that we saw last week and back in January.

The better explanation is a mismatch between the pace of product movement and sow offerings. Pork sausage sales volume is relatively stable. It seems that people who eat sausage tend to eat it regularly, so there are not large ebbs and flows of sausage sales. Sales of dinner sausages, such as smoked sausage and bratwurst, tend to be more seasonal and really do not pick up until the weather warms and grills get fired up. This year’s cool, damp spring has delayed avid barbecuers and, thus, has also delayed dinner sausage and bratwurst sales. If product is not moving, sow processors are not very interested in processing more sows.

In addition, one must consider the nature of these sausage products. They are not fresh, generic pork products that we put on sale at attractive prices in order to move large volumes through retail outlets. Most of these sausage products are branded. The companies have invested years to build a quality image for these brands and price is one facet of quality in many consumers’ minds. Does it make sense to cut prices in order to slaughter a few more sows? What might such a move say about the quality image of the product?

It appears to me that sausage companies are going to buy just as many sows as they can efficiently process and sell as product. Some may take a chance on putting product in the freezer in anticipation of warmer weather at any time, but don’t expect much of that. Many of these sows are hot-boned in order to make plants more efficient and yield a product with proper texture for premium sausage products. Sow packers generally avoid putting product in freezers and certainly do not want large quantities of this product frozen.

The pace at which we can slaughter cull sows will be a key factor in determining how long these large supplies and low market hog prices will last. The introduction of circovirus vaccines created, almost overnight, something in the neighborhood of 6-8% too many sows in North America.

The only way to get back to profitability in the face of high costs is to reduce supplies, which can only be done by reducing the sow herd. Let’s hope spring weather arrives soon so sausage movement will increase and sausage manufacturers can ramp up their plants to full capacity.

Click to view graphs.

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

U.S. Hog Inventory Continues to Climb

Nearly all of the hog inventory numbers in the latest USDA Hogs and Pigs report broke records for March, but a slight drop in farrowing intentions offers some hope.

“This is an interesting report and probably one of the most significant we’ve seen in a few years,” observes Daniel Bluntzer, director of research for Frontier Risk Management, Corpus Christi, TX, a participant in a recent pork checkoff-sponsored media teleconference.

The inventory of all U.S. hogs and pigs on March 1, 2008 of 65.9 million head was up 7% from the previous year. The 6.14 million-head breeding inventory rose less than 1% from last year, but was down slightly from the previous quarter.

The market hog inventory, at 59.8 million head, was up 7% from last year, but down 2% from last quarter.
“We’re looking at no void in market supplies through at least Labor Day of 2008,” says Bluntzer.

The December-February pig crop, estimated at 28.1 million head, was up 6% from 2007. Intentions are for 3.05 million sows to farrow in the March-May quarter, up slightly from actual farrowings for the same period in 2007.

However, farrowing intentions for June-August 2008, at 3.04 million sows, are down 2% from last year.

“We’re starting to see some response, although it’s pretty slow and pretty small,” reports James Mintert, agricultural economist at Kansas State University.

As expansion slows in the U.S. pork industry, supplies might tighten by the fourth quarter of 2008, says John Nalivka, president of Sterling Marketing in Vale, OR.

Meanwhile, larger cattle numbers and increased poultry production are creating large supplies of competing animal protein.

“I think it will be 2009 before this slows down,” adds Mintert. He’s projecting second-quarter prices (based on the national weighted average base prices) at $59-60; third-quarter prices in the high $50s to low $60s; and fourth-quarter prices averaging in the low $50s.

“On the positive side, agricultural exports continue to benefit from the weak U.S. dollar. Without a doubt, pork exports are helping the industry immensely,” says Bluntzer, noting a significant increase in U.S. pork sales to China.

Computer Spreadsheet Aids in DDGS Decision

An Excel spreadsheet developed at the University of Illinois helps pork producers determine the value of feeding distiller’s dried grains with solubles (DDGS) to their pigs.

University of Illinois Extension Swine Specialist Hans Stein and his postdoctoral student, Beob Kim, developed the new spreadsheet. “Producers can use their own costs for corn, soybean meal, DDGS, and other ingredients, and then calculate how much their diets cost without and with DDGS,” Stein explains.

The spreadsheet can be downloaded at the Illinois Pork Producers Association (IPPA) Web site, http://www.ilpork.com.

Stein says the spreadsheet resulted from producers’ questions about the economics of feeding DDGS to swine. “The answer to that question is not universal because producers have different costs.”

IPPA President Phil Borgic from Nokomis, IL, praised the work of Kim and Stein, adding, “We are proud of the fact that IPPA helped fund the swine Extension specialist position that brought Hans to Illinois.

“IPPA realized the serious financial situation facing pork producers, and we are doing everything we can to help producers deal with higher feed prices. The DDGS calculator gives producers another tool in making management decisions related to utilizing DDGS in swine diets and reducing the cost of feed rations.”

Stein has been active in numerous research efforts related to DDGS in swine diets. His research has received funding from the National Research Efficiency Consortium coordinated by the National Pork Board.

Spring Manure Application Enhances Yields, Cuts Costs

Sidedressing pre-emergent corn in the spring with swine manure produces yields comparable to applying commercial fertilizer, says Ohio State University (OSU) Extension research.

Following several years of research that showed applying swine manure to post-emergent corn produced comparable or higher yields than commercial nitrogen, OSU Extension educators in Putnam and Hancock counties hoped to find the same results in treating pre-emergent corn.

“We want to find out if a farmer could plant corn and then use a dragline manure application system to side dress before the corn even comes up out of the ground,” says Glen Arnold, an OSU Extension educator in Putnam County.

“In 2007, we completed research on three pre-emergence corn plots using liquid swine manure as the primary nitrogen source. Two of three plots yielded the same or higher compared to urea,” he adds.

Arnold says his goal is to show farmers that manure application, mostly practiced in the fall, can be just as valuable in the spring, and it can save farmers money as well.

“At today’s fertilizer prices, using manure from livestock could easily save farmers $75 to $100/acre in purchased fertilizer,” declares Arnold.

Spring manure application can also benefit the environment. “There is less chance for nutrient loss in the spring as opposed to the fall, because the manure is actually going to a growing crop that will utilize its nutrients,” he explains. “We’ve always known that manure provides good nutrients for the soil. The idea is to find a way to make better use of it than applying it to bare fields in the fall.”

Arnold stresses farmers could potentially be losing a valuable resource by not considering a spring or early summer manure application to growing crops.

For example, in Putnam County, OH, farmers fully utilizing the ammonia nitrogen in their liquid swine manure could save over $500,000 in lieu of purchasing commercial fertilizer, he estimates. Putnam County is the fourth-largest swine-producing county in Ohio.

Arnold, who started this research work in 2004, will continue his efforts, thanks to a $10,000 grant from the Ohio Pork Producers Council.

Arnold will present his findings at the Great Lakes Manure Handling Expo on July 9 at the Molly Caren Agricultural Center in London, OH. To learn more, log onto http://ohio-environmental.org or contact Tami Combs at (614) 292-6625 or combs.155@osu.edu or Jon Rausch at (614) 292-4504 or Mary Wicks at (330) 202-3533.

Other Expo talks cover calculating the value of manure nutrients, learning the benefits of proper equipment calibration, thoughts on keeping adequate records and practicing safety in manure application and storage.

Educational demonstrations are also scheduled on a variety of manure application practices.

Company Web Site Offers Tips on Circovirus Control

A new online resource has been launched to help pork producers and their veterinarians understand, manage and prevent problems due to porcine circovirus type 2 (PCV2), which has increased pig mortality and production losses around the globe.

The Web site, www.stopcircovirus.com, was created by Fort Dodge Animal Health, as a one-stop collection point for current information and management advice about porcine circovirus-associated disease (PCVAD).

“We are pleased to offer this valuable resource to the pork industry, as all of us contend with the effects of porcine circovirus,” comments Dan Ellsworth, senior product manager, Fort Dodge Animal Health. “The Web site contains a wealth of information about PCVAD and how it can be managed. Over time, we will add technical data, links and other information to help both veterinarians and pork producers.”

The site provides basic information about the virus, history of the disease, prevalence information, disease costs and clinical signs and diagnosis.

Management tips cover control measures, information to identify and control potential co-infections, stringent management protocols and effective vaccination programs. Technical resource materials are provided for more in-depth study.

Another section describes vaccination protocols using Suvaxyn PCV2 One Dose vaccine from Fort Dodge. The vaccine is labeled for use in pigs 4 weeks of age and older to aid in the prevention of PCV2 and control of lymphoid (immune system) depletion caused by PCV2.

Data approved by the U.S. Department of Agriculture suggest Suvaxyn PCV2 One Dose provides four months of protection against PCVAD. The vaccine has also shown effectiveness in the face of high levels of maternal antibodies, according to other studies.

The Web site also includes links to primary PCVAD and pork industry experts and resources worldwide. Site visitors can contact an expert for a direct response to their questions.

South Dakota Scientists Pursue Next-Generation PRRS Vaccine

South Dakota State University (SDSU) researchers are working on an improved vaccine for porcine reproductive and respiratory syndrome (PRRS), still the most economically significant swine disease worldwide.

“We are trying to make the next generation of the PRRS vaccine,” explains research assistant and professor Ying Fang. “It will be a genetically engineered PRRS virus vaccine.”

PRRS is estimated to cost the U.S. swine industry $560 million due to respiratory problems in pigs and reproductive failure in sows.

SDSU researchers, University of Minnesota diagnosticians and vaccine companies collaborated to first isolate the PRRS virus in North America in 1992.

SDSU and the University of Minnesota joined forces again to develop a patented PRRS vaccine that has been licensed to Boehringer Ingelheim Vetmedica, Inc. SDSU has also developed a PRRS virus diagnostic test.

Much of SDSU’s PRRS work now funnels through the school’s Center for Infectious Disease Research & Vaccinology, formed in 2004.

SDSU’s Fang is a molecular biologist who led a U.S. team of researchers to China in December 2007 to study a severe PRRS outbreak.

One aspect of SDSU research is on how the PRRS virus sabotages the animal’s defense systems.

“We want to identify which genes are responsible for shutting down the host’s protective immunity,” she says, adding that the information will help build a better vaccine against the PRRS virus.

One promising technique the SDSU research team is implementing uses “reverse genetics.” In this process, the team clones the virus and uses that clone to manipulate the viral genomes.

Bilingual Production Conference Scheduled

A swine production conference presented in both English and Spanish, targeted for Spanish-speaking workers and their employers, is planned for May 15 in Sycamore, IL, at the DeKalb County Center for Agriculture building.

“We have had requests from swine producers to offer this program in Spanish because that is the first language of many of their employees,” says Rob Knox, University of Illinois Extension swine reproduction specialist. “This program is intended for Spanish-speaking workers and those who have Spanish-speaking employees involved or interested in pork production.

“The program is open to all levels of experience and will include the foundations and the application of breeding principles and breeding herd management, as well as health,” he explains.

The program features a number of leading reproductive specialists from Purdue University and Michigan State University, a swine veterinarian from Carthage (IL) Veterinary Service, and Extension swine specialists from the University of Illinois. Angela DeMirjyn of the National Pork Board will serve as translator.

Following the main conference is an optional Pork Quality Plus certification program offered in both English and Spanish.

To register, exhibit or obtain further information, contact Lois Welch at (217) 333-2626, e-mail llwelch@uiuc.edu or Knox at (217) 244-5177 or rknox@uiuc.edu.

Spreadsheet Helps Decide Best Hog Slaughter Weight

To help pork producers become as efficient as possible when dealing with record-high grain prices, Kansas State University Research and Extension officials have developed a spreadsheet to gauge the best possible sale weight for market hogs.

The spreadsheet can be found on the Web at www.KSUswine.org. Click on the “Marketing Tools” link.

The spreadsheet can be customized for a producer’s specific marketing situation.