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Ethanol Study Projects More Hikes in Production Costs

A new study from Iowa State University's Center for Agricultural and Rural Development (CARD) says the rapid increase in corn-based ethanol production could cause corn prices to continue their escalation.

The CARD study assesses how large the U.S. biofuels sector could become and projects possible impacts on crops, livestock and poultry, exports and food prices.

Ethanol production since last August has sent hog production costs 30% higher, with similar increases for dairy, beef, eggs and poultry. Those cost hikes have boosted U.S. retail food prices by $14 billion annually.

The CARD study says food prices could rise by $20 billion under a scenario where crude oil prices range from $65 to $70 a barrel and U.S. corn prices reach $4.42/bu.

“Although production costs for pork producers have increased significantly since last summer,” says Neil Dierks, CEO of the National Pork Producers Council, “the most immediate concern remains physical availability of corn for livestock feed.”

The study also suggests U.S. ethanol production could reach 30 billion gallons by 2012, consuming more than half of U.S. corn, wheat and other coarse grain production. This could trigger higher meat prices for consumers, reduced livestock production across the board and even greater reductions in grain and meat exports.

Timing is Critical with Oral Vaccination

Producers must provide up to six hours to ensure that all nursery pigs receive ample time to visit a drinker when orally vaccinating for ileitis.

Studies at Iowa State University (ISU) showed that within six hours, 100% of 7-week-old nursery pigs had visited a bowl drinker at least once for a five-second bout.

In the study, 7-week-old PIC pigs weighing 24 lb. were assigned, by sex, to one of eight conventional nursery pens. Each pen of pigs was fed a balanced corn-soy ration and provided one metal nipple-cup bowl drinker.

Plywood sheets were used as dividers to prevent social interruptions between pigs in adjoining pens. Lights were turned off at 4 p.m. and turned on at 7 a.m.

One day prior to visually recording pig activities, all pigs were identified with an individual number placed between their shoulder blades.

Cameras were positioned over each drinker and drinking behaviors were recorded on two consecutive days in late March 2006. High and low temperatures and relative humidity were kept at 84.4° and 75.2° F and 66.6% and 31.9% humidity, respectively. A pig was considered to be drinking when its head was above the drinker for five seconds or longer.

Recordings showed from 79% to 100% of the pigs had visited the drinker within a two-hour window over two days. Within a four-hour window, the range was 96% to 100%.

However, 100% of the pigs visited the drinker at least once within six hours. Only one pen had 100% of the pigs visit the drinker within the first hour.

It's estimated that the loss of production from ileitis could be $98 million or more annually.

Providing adequate time for pigs to visit the drinker ensures they will receive oral vaccination (Enterisol Ileitis from Boehringer Ingelheim Vetmedica, Inc.) to protect them against ileitis through grow-finish production.

Researchers: Roy Edler, Tyler Holck and Brad Lawrence, Boehringer Ingelheim Vetmedica, Inc.; Robert Baker and Anna Johnson, Iowa State University. Contact Johnson by phone (515) 294-2098, fax (515) 294-4471 or e-mail Johnsona@iastate.edu.

Send research submissions to Joe Vansickle, Senior Editor (952) 851-4670; jvansickle@nationalhogfarmer.com

Food & Politics

Food — where it comes from, what it contains — has become a political hot potato.

Legislators and regulators are feeling the pressure of a seemingly endless list of concerns about the safety of food for man and beast.

You need only pick up the local newspaper, read your favorite news magazine (or web site), or flip on the TV. The chorus of concerns — sometimes fanned into an uproar — is all too often met with an emphatic and emotional knee-jerk defense from “our” side trumpeting the fact that the American public has the safest food supply in the world.

It's true. We do. But, more and more, the food and/or raw materials used to produce food and diet supplements in the United States originate in less-developed countries that do not have the same, stringent regulatory protections in place.

More than Melamine

The furor surrounding melamine in wheat gluten and rice protein used to make pet foods, and the massive recalls that ensued, serves as a good example. Chinese suppliers may have added melamine, a nitrogen-rich chemical used to make plastic and fertilizer, to fake higher protein contents of the ingredients suspected of causing sickness and death in cats and dogs.

The melamine concerns put China under a microscope and raised serious questions by the USDA and the Food & Drug Administration (FDA) as to the country's reliability as a food source. I was shocked to read in the May 22, 2007 edition of USA Today that China grows half of the world's vegetables and 15% of the fruit. Although most (90%) are eaten by the Chinese people, they still have a lot to sell.

The country's cheap labor and government policies have encouraged growth in this area, increasing their export value to $5.1 billion (all countries) by 2004, according to USDA data cited in the article.

A sidebar story explained that more than $2.3 billion in agricultural and food products arrived in the United States from China last year. Did you know that 45% of the apple juice and 19% of the honey consumed in the United States comes from China? Me neither.

That same week, USA Today (May 21, 2007) carried an opinion piece drafted by former FDA deputy commissioner Scott Gottlieb asking: “How safe is our food? FDA could do better.”

Gottlieb challenged: “Our system for inspecting food and drug imports into the USA is woefully outdated, designed to regulate a mostly domestic industry, not to deal with a globalized world.” He says the melamine-tainted pet foods incident is merely one in string of problems traced back to raw materials, food and drug products imported from developing countries — not just China.

It's the FDA's job to inspect shipments of drugs and most foods. Gottlieb, who worked at FDA in 2005-2007, says FDA processed a staggering 15 million shipments of goods in 2006 from more than 230 countries and from more than 300,000 manufacturers. A sidebar story points out that “in fiscal year 2006, nearly nine million FDA-regulated foods entered the USA” and the FDA inspected only about 1% of them.

How do you get your arms around that 1,000-lb. gorilla — and why bring it up here?

Because food safety is top of mind for most Americans today. We're bombarded with food source concerns and they aren't likely to go away. That means it should be top of mind for politicians (or the wanna-be's) at the fundraisers, community celebrations and parades they attend this summer to advance their political aspirations. It's your job to help them understand the impact of their actions on your business.

Speak Up

I believe we are entering a new era in agriculture production and regulation. The general public is more attuned to food safety issues than ever before. I used China to help illustrate the point, but next week the issue could be mangos from Mexico, bananas from Brazil, or the use of gestation stalls in Iowa.

Foreign sourcing of foods and some of the problems we've seen could be the final incentive to enact country of origin labeling. I'm still not convinced it's worth the cost — estimated at over $10/market hog with full traceback capabilities. Perhaps that money could be better spent beefing up the USDA and FDA inspections services. Of course, traceback requires enactment of a functional animal identification program.

As the actual writing of a new farm bill draws closer and the next election draws nearer, our elected officials want to be able to tell their constituents that the actions being taken, here and abroad, will help solve some of these challenges. Be sure they consider your side to those solutions.

Horizontal Composter Handles Mortalities

The medium-sized Biovator was tested for compliance with Canadian regulations at a 1,250-sow farrow-to-finish unit.

Handling the inevitable mortalities on any hog farm creates both a practical and a biosecurity challenge. In some herds and regions, the problem has been exacerbated by higher-than-normal mortalities caused by porcine circovirus associated disease (PCVAD).

Canada's third-largest pork producer, The Puratone Corp. of Niverville, Manitoba met those challenges by developing a horizontal, in-vessel composter known as the Biovator. The company wanted an alternative to traditional composting, incineration or commercial rendering and, more importantly, to comply with Canadian federal regulations administered by the Ministry of Agriculture.

Tested in Quebec

Puratone set up a test project at a 1,250-sow, farrow-to-finish site utilizing a medium-sized Biovator (30 ft. long and 4 ft. in diameter).

The mortality composter is basically a long, rotating stainless steel cylinder that turns mortalities and a carbon source, such as wood shavings, into harmless compost. Smaller, 18-ft. versions and larger, 42 ft. versions are also available.

The insulated cylinder has three openings. The first set of doors is for loading mortalities, wood shavings and recycled compost. The second set of doors allows operators to measure temperatures and compost mass. At the end is the effluent door, which spills into a recuperation basin for long-term storage.

The objective of the Quebec project was five-fold:

  • To develop the compost recipes and mortality-carbon source mixing ratios;

  • To establish optimum operating temperatures, moisture levels and drum rotation frequencies and speeds;

  • To validate effectiveness in summer and winter periods;

  • To monitor specific bacteria and pathogen levels in the end product, and

  • To comply with Quebec law and regulation for the disposal of swine mortalities.

Dead animals were added to the load cell with a tractor front-end loader, five days a week. Weekend mortalities were added on Mondays. Animal weights were verified. Wood shavings, serving as the carbon source, were added to cover mortalities with 6-8 in. (150-200 mm) of material. Therefore, the ratio was 2.2 lb. (1 kg) of mortality to 1.5 lb. (0.7 kg) of dry wood shavings. No water was added.

Compost bones collected at the end of the cylinder were recycled with mortalities and new wood shavings at a rate of 2.2 lb. of mortality to 0.55 lb. new wood shavings and 0.97 lb. of the recycled matter.

The goal was to reach temperature above 100.4° F (38° C)to initiate the composting process. In cool/cold weather (below freezing), a 60,000 Btu/hour heater was necessary to achieve the desired temperatures on start up.

Temperatures and humidity levels were obtained five days a week and agronomic and pathogenic samples were collected every 14 days for specific periods.

Continue reading on Next Page>

View both tables in a printable Word document

Internal Temperatures

Temperatures, measured at the three sets of doors for the month of September 2005 varied according to the number of large sows or mass of pigs added (see Table 1). When a 500-600-lb. sow was added, temperatures dropped for about four days. When piglets, finishing pigs and an occasional sow were added, the composting process tended to be fairly uniform, they reported. Compost exiting the effluent door was combed with a simple rake to separate bones to be recycled.

A second test period was conducted during the month of November 2005. The temperatures were considered to be ideal for rapid composting of mortalities. The sole temperature drop noted for the period occurred when a 530-lb. sow was added to the composter.

Composting temperatures were recorded in a third test period, Dec. 1-31, 2005, when outside temperature drops during two periods, Dec. 9-14 and Dec. 18-22, resulted in moderate temperature declines at the effluent door.

On average, temperatures inside the composter remained above 131° F and the quality of the compost was normal. The temperature drops during the two cold spells surprisingly resulted in the highest internal temperatures during testing.

“Generally, the composting process is capable of performing between temperatures from -13° F and 86° F,” the report stated, if the Biovator is exposed to the external climate. Composting will continue year round if the Biovator is sheltered from the environment in extreme climates.

Moisture Content

Four samples were collected at each opening, each week, and sent to a laboratory to test moisture content of the compost and processed material.

At door 1, the moisture content range was 47.6 to 71.3%, at door 2 it was 45.5 to 66.3%, and at door 3, moisture ranged from 30.8 to 56.5%. A fourth sample, collected at the basin before transferring the material to long-term storage, ranged from 31.8 to 61.1%.

Ministry Requirements

The Quebec Ministry of Agriculture required a list of physical and chemical parameters compiled from 15 samples collected between June and October 2005 (summer) and 12 samples collected between November 2005 and January 2006 (winter). Table 2 reinforces the wide variability resulting from the samplings, leading the company to note: “Only long-term averages of the product could be used as reliable data for estimation of fertilizer values of the compost.”

Noteworthy in this project, the compost had high total organic matter and high levels of nitrogen, phosphorus and potassium.

The ministry also required microbiological and pathogenic parameters to be measured, including salmonella, E. coli, enterococcus, clostridium perfringens, yersinia enterocolitica and cryptosporidium. Of the 15 summer samples, all recorded the presence of enterococcus, three contained clostridium perfringens and one had salmonella. In the dozen samples collected during the winter period, the presence of enterococcus was the only pathogen present.

In general, the report indicated the composting process was effective in the elimination of all microbiological and pathogenic parameters except enterococcus.

Weight:Compost Ratio

The long-term test results show the Biovator preferred compost-to-mortality weight ratio is 0.83. In other words, when the ingredient recipe is followed — mixing mortalities, wood shavings and recycled compost (including bones), the horizontal, in-vessel composter will convert 2.2 lb. (1 kg.) of mortalities into 1.83 lb. (0.83 kg) of compost after a 10-14-day process.

Naturally, the moisture content, the density of product and the outside temperatures influence the final compost product.

The company estimates that the capacity of the mid-sized Biovator in this study would be 154-176 lb. of mortalities mixed with 38-44 lb. of wood shavings/day, producing 128-146 lb. of compost in the summer (using the weight ratio of 0.83). In the winter, this unit could process 165-187 lb. of mortalities mixed with 46-53 lb. of wood shavings/day to yield 137-157 lb. of compost.

The driving mechanism for the Biovator consists of a 1-hp, 110-120 v. motor, two gear boxes with heavy-duty bearings, plus sprocket and chain. Prices start at US$25,000 and increase depending on capacity. Additional costs would include a concrete pad and cover for compost storage.

For additional information, contact The Puratone Corporation, Niverville, Manitoba at 800-340-4421, or 204-371-0115 (Canada) or Seven Star Enterprises at 507-381-1556 (U.S.)

View both tables in a printable Word document

Measuring the Risk

PRRS Risk Assessment Tool measures the level of risk that a PRRS outbreak will occur and provides a complete database featuring benchmarking and analysis.

While several methods have eliminated porcine reproductive and respiratory syndrome (PRRS) virus, success in applying biosecurity measures to keep the virus out following elimination has been inconsistent and unpredictable.

What is hoped, however, is that the PRRS Risk Assessment Tool program coordinated by Derald Holtkamp, DVM, Iowa State University (ISU), will distill down the increasing list of biosecurity practices into a handful that are truly significant for producers and veterinarians to focus on.

From trailer baking to work on insects, fomites and air filtration systems on hog barns, the pork industry has been prolific in turning out new biosecurity research for the industry to consider adding to its arsenal of tools to stop PRRS transmission.

But the challenge now is to eventually focus on what's really significant to stopping the spread of the PRRS virus. “This program is really about applying epidemiology to swine production and identifying the risk factors that contribute to PRRS breaks on hog farms,” he adds.

A pilot study using the PRRS Risk Assessment Tool “was very encouraging,” Holtkamp says. Farms that had a high risk of introduction of virus from an external source broke early with PRRS, while farms with low external risk stayed naïve for PRRS a lot longer.

Four PRRS Studies

That has led to four studies being funded to use the PRRS Risk Assessment tool to more accurately pinpoint the most important biosecurity risks for PRRS infection:

  • Quantifying risk and evaluating the relationship between risk score and PRRS-negative herd survival, as part of the USDA-funded PRRS Coordinated Agricultural Project, coordinated by researchers from Iowa State University and the University of Minnesota.

  • An industry education study for understanding the risk factors associated with PRRS virus breaks in negative or naïve breeding herds funded by the National Pork Board and coordinated by researchers from Iowa State University and the University of Minnesota.

    “Those two studies are basically survival analysis pig studies,” Holtkamp explains. “How long do negative or naïve herds survive without PRRS breaks?”

  • A cross-sectional study of PRRS virus positive swine breeding herd sites to evaluate associations between risk factors and a case definition-based number and severity of clinical PRRS episodes, funded by Boehringer Ingelheim Vetmedica, Inc (BIVI), led by Holtkamp.

    This third study seeks to help improve our understanding of what factors and conditions contribute to some farms having a large number of severe PRRS breaks while others have few, and therefore, provide insights on how to better manage and control PRRS, he says.

  • Developing PRRS control strategies by understanding how the virus is changing and moving in Ontario, funded by the Ontario Pork Industry Council. This study expands on earlier research on a PRRS regional eradication project started in the province.

Value of Biosecurity

“Biosecurity is more significant in trying to deal with PRRS than it has been for other diseases,” Holtkamp suggests. “The tools we have right now for biosecurity have got to be a big part of the arsenal if we decide to eradicate the disease.”

So far the risk assessment tool has focused on biosecurity for the breeding herd. In the future, its use will be expanded to other production phases and other diseases.

Use of the tool is limited to veterinarians who are members of the American Association of Swine Veterinarians (AASV) and who have successfully completed a training session. To date, 92 AASV members have been trained to use the tool and 454 breeding herd assessments have been completed.

The risk assessment is currently an Excel spreadsheet-based tool. A web-based version is expected to launch later this summer, says Holtkamp. The web-based version will provide risk benchmarking reports to veterinarians.

Development, Rollout

The risk assessment tool was developed by BIVI in mid-2003. In March 2005, BIVI offered to gift the tool to the AASV. In March 2006, the AASV, with support from the National Pork Board and USDA, accepted the gift. BIVI continues to provide in-kind support.

In September 2006, ISU's College of Veterinary Medicine entered into an agreement with AASV to establish a Disease Risk Assessment Program to develop, manage and promote disease risk assessment tools and databases of completed risk assessments held by AASV.

USDA Clears Swine To Be Processed

Testing has confirmed that meat from hogs fed rations supplemented with pet food scraps containing melamine and related compounds is safe for human consumption.

That development led the U.S. Department of Agriculture (USDA) to release swine held on farms and to approve the meat from those animals for processing.

Testing of meat from hogs exposed to the contaminated feed confirms that melamine and melamine compounds do not accumulate in pork and are filtered out of the body by the kidneys.

About 56,000 hogs that consumed the feed had been voluntarily held on farms in California, Illinois, Kansas, New York, North Carolina, South Carolina and Utah.

USDA is expected to provide compensation to producers for certain additional costs incurred as a result of holding the animals.

June 15, 2007

This Month's Focus: Biosecurity

Cheap Corn Makes Cheap Hogs

That's the adage and it has historically been very true. It's corollary is that high-priced corn makes high-priced hogs. That one is a bit shakier but we know that, in the long run, the cost of inputs must be captured in the price of the product.

The increases in the prices of both corn and soybeans that have been driven by subsidized biofuels appear at present to be permanent. That judgment is based on two factors that are not likely to wane or disappear over the next few years: high oil prices and the political popularity of ethanol.

Figure 1 shows crude oil futures on four different days since early March of this year. While there has been some movement in these prices, note that the most recent set of observations is by far the highest of the group. The June 5 prices do not represent the high for crude oil futures (that came back in mid-2006) but the fact that they are still in the upper-$60s and lower-$70s indicate that market conditions have not gotten much better if you are on the buying side of the oil market. There is still ample worldwide demand for oil, and the supplies of oil are still limited and risky. Those translate into what is likely to be persistent high prices.

If we had a graph of the political popularity of ethanol, it might look much like the oil price graph -- and that similarity is no accident. In addition, the rhetoric regarding ethanol is at a four-year high, and highly correlated with the presidential election cycle. The political parties are trying to "out-renewable-fuel" one another and a veritable army of presidential candidates have now invaded Iowa and nary a bad word about biofuels will be uttered in their speeches.

The bottom line is, we have probably seen another major shift in corn prices. Figure 2 shows annual averages since 1908. Note that two major shifts have taken place in that time. The first was during and after World War II when wartime shortages, pent-up demand and a booming post-war economy drove corn prices from the 1908-1942 average of 78¢/bu. to a whopping $1.26/bu. -- an increase of 62% -- for 1943-1972.

The second jump occurred in 1973 when the Russian grain deal ushered in a new era of world trade in grain and eventually other agricultural products. That price increase, to $2.37/bu., amounted to 88%.

Note that the first period was 35 years and the second was 30. Now, 34 years later, we see another sea-change in the price of corn. Technical analysts would put a lot of stock in the 30-35 year period. I'm more inclined to write it off to coincidence. Regardless, it certainly is interesting that the period is relatively consistent and that this shift was right on schedule.

The $64 million question for the pork industry is "How will we adjust?" Corn prices that could well be in the $3.50 to $4.00 range for the foreseeable future have some analysts predicting lean hog prices of $100/cwt. or more. And some are predicting those within a couple of years.

But prices don't just adjust automatically. Either supply or demand has to shift. When corn prices jumped in 1974, the pork industry was poised to come out of a liquidation phase. High corn prices continued that liquidation, driving 1975 hog slaughter to its lowest level in a decade and basically precluding one cyclical increase in output. Cyclical highs occurred in 1971 and 1980, with nothing in the way of a cyclical high in between.

But the reason for that action was that producers lost money and continued to reduce output. It doesn't look to me like the present situation is going to cause the kind of producer losses that lead to output reductions. Cash hog prices and CME Lean Hogs futures have kept producers in the black so far. History tells us that producers simply do not cut back unless they actually lose money.

The more likely scenario is that production will remain relatively stable over the next few years since there is no incentive to cut back and the much lower margins will provide little incentive to expand. That means demand must be the driver of higher margins. Pork demand grows each year due to domestic population growth and more access to larger numbers of people in export markets. That growth, though, is pretty slow, so it may take awhile to restore the margins to which we have become accustomed.

The key assumption, of course, is that producers do not expand while margins are so low. I think that is a safe assumption except for the fact that producers' balance sheets are in such terrific condition. Many are going to want to "Do Something!" Will they diversify or "dance with who brung them" by expanding hog output even though the returns aren't as attractive as they once were?




Click to view graphs.

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

U.S.-South Korea Trade Proposal Holds Promise

A fully implemented U.S.-South Korea Free Trade Agreement could add $10/head to the price of market hogs, according to the National Pork Producers Council (NPPC).

The trade pact is pending a vote by the U.S. Congress. The National Assembly of the Republic of Korea also must approve the pact, which was finalized on April 1.

“This is the single most important trade agreement ever for the U.S. pork industry, and it will generate hundreds of millions of dollars in new export sales,” says NPPC President Jill Appell, Altona, IL, pork producer. “U.S. pork producers will aggressively work for congressional passage of the U.S.-South Korea trade agreement,” she stated.

USDA Announces Five Pork Board Appointments

Agriculture Secretary Mike Johanns has announced five appointments to the 15-member National Pork Board.

The five were chosen from among eight candidates to serve three-year terms.

Appointed were: Tim Bierman, Larabee, IA; Henry Moore, Clinton, NC; G. Steven Weaver, Elk Grove, CA; Bruce Samson, Three Forks, MT; and Everett Forkner, Richards, MO.

The National Pork Board was established under the Pork Promotion, Research and Consumer Information Act of 1985 to strengthen pork’s position in the marketplace.