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Illinois Pork Seminars Set for June 12-13

Two seminars on “Managing Feed Costs with High Prices,” will be held June 12 at the Bureau County Metro Center in Princeton, IL, and June 13 at the Decatur Conference Center in Decatur, IL. Both sessions start at 9 a.m. and conclude by 4 p.m.

Registration and a complete agenda are available at www.ilpork.com or by calling the Illinois Pork Producers Association office at (217) 529-3100.

Seminar topics include ways of lowering feed costs, recommendations for feeding dried distiller’s grains with solubles and improving feed conversion rates.

Mike Brumm of Brumm Swine Consultancy, North Mankato, MN, will address the importance of feeder choice, feeder management and feed and water intake patterns on feed conversion and pig productivity.
Purdue University agricultural economist Chris Hurt will discuss the impact of feed price on profitability.

University of Illinois speakers include Rob Knox, Mike Ellis, Jim Pettigrew and Hans Stein.

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George Young Swine Conference is Aug. 16

The 48th annual George Young Swine Health & Management Conference is slated for Aug. 16 at the Marina Inn in South Sioux City, NE.

The conference features talks on the cost of porcine circovirus-associated disease, a risk assessment tool for porcine reproductive and respiratory syndrome (PRRS), a pilot project on regional eradication of PRRS, an air filtration system for disease control and a swine practitioner’s perspective on practical approaches to biosecurity.

For more information, contact Sharon Clowser at the University of Nebraska-Lincoln at (402) 472-8550 or <a href="mailto:sclowser2@unl.edu>sclowser2@unl.edu.

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Animal Identification Program is Aug. 28-30

The National Institute for Animal Agriculture’s (NIAA) annual ID-INFO EXPO 2007 will be held Aug. 28-30 at the Westin Crown Center in Kansas City, MO.

The scope of the conference is being expanded beyond the U.S. Department of Agriculture’s National Animal Identification System. Also discussed will be other areas of livestock identification and traceability to include source verification, quality assurance and branding of products that have increased in importance.

A trade show will feature the latest technologies, practical solutions and services.
The program will also include a North American perspective on livestock and food traceability.

Registration, trade show, sponsorship and hotel information will soon be available at the NIAA web site, www.animalagriculture.org.

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Midwest Pork Conference Moves to New Location

The Midwest Pork Conference, set for Sept. 11, is moving to the new Hendricks County Conference Complex, a 33,000-sq.-ft. facility in Danville, IN.

This year’s conference will again be divided into three tracks: management and herd health, marketing and economics, and legal and regulatory issues. Timely topics, ranging from the latest in production technology to updates in the legislative and regulatory arena, will be covered.

Indiana Pork Producers Association, in cooperation with the Illinois, Kentucky, Michigan and Ohio pork producer organizations, sponsors the event.

For more information contact Indiana Pork’s Sarah Sargent at ssargent@inpork.org.

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Brazil Company Buys Swift & Co.

A Brazil company is buying U.S.-based Swift & Co. for $225 million and assumption of $1.2 billion in debt.

Purchaser JBS SA controls Brazil’s leading beef exporter, Friboi. The acquisition will make JBS the world’s-largest beef company and Brazil’s biggest food company.

The deal should close by July.

Swift, the third-largest U.S. processor of beef and pork, has been operated by private equity firm, HM Capital, which acquired Swift from ConAgra Foods, Inc. in 2002.

DDGS Fact Sheet Offered by Iowa State

Iowa State University has released the first in a series of fact sheets on corn co-products from the ethanol-making process.

John Mabry, Iowa Pork Industry Center (IPIC) director, says the new fact sheet will provide some much-desired information.
“Distiller’s Dried Grains with Solubles (DDGS) is the first in a planned series called ‘Feeding Bioenergy Co-products to Swine,’” he says. “The series will be available in pdf form on the IPIC Web site only, starting with this DDGS fact sheet numbered IPIC 11a.”

The publication includes current ethanol production facts and figures, DDGS composition, quality, and variability and nutrient availability. It also provides strategies for producers considering the use of DDGS in swine diets.

Animal science professor Mark Honeyman and research assistant Pete Lammers prepared the fact sheet and are developing additional topics for publication in the series.

To read and download this publication, go to http://www.ipic.iastate.edu/publications/IPIC11a.pdf.

Iowa Groups Join Forces To Protect Pheasants

The Iowa chapter of Pheasants Forever and the Iowa Pork Producers Association (IPPA) have formed a new joint project to promote the creation of pheasant nesting habitat near hog farms and to protect water quality.

“This is a win-win,” says Scott Tapper, IPPA president and pork producer from Webster City, IA. “It will help producers beautify their farm sites while making them more environmentally acceptable.”

Habitat projects are being developed at 10 pilot farms. Sites must include at least two acres of land.

Producer participants will receive financial contributions from both Pheasants Forever and IPPA. Pheasants Forever will also provide the technical assistance in planning, maintenance and follow-up work on each farm.

“The goal of this project is to create some additional habitat around swine barns without disrupting the operation of the facility,” explains Dave Van Waus, a regional wildlife biologist for Pheasants Forever. “We are excited to form this new partnership with farms throughout Iowa.”

Firm Awarded PIC Transportation Contract

NationaLease has been awarded a $12 million contract to provide Integrated Transportation Logistics Services to PIC USA of Hendersonville, TN.

Under the terms of the contract with the breeding stock supplier, NationaLease and member West Brother’s Transportation Services of Raleigh-Durham, NC, will provide Trucker Quality Assurance-certified drivers, full-service leasing, customized maintenance, finance leasing, asset services, distribution routing and analysis technology, business management and fuel and fleet support.

Also, a proprietary automated biosecurity system is being customized to meet PIC’s unique needs, ensuring that the health and welfare of the animals is not compromised from source farm to customer farm. West Brother’s will transport 170,000 live animals annually, utilizing a dedicated fleet of 14 trucks and 22 specialized trailers.

“The top priority of this partnership with NationaLease is to improve efficiencies while maintaining the exceptional biosecurity and reliability our customers have come to expect,” says Mark Engle, DVM, director of Health Assurance and Transportation for PIC USA North America.

“Transportation is an expensive and critical component of our business. We are moving breeding stock that are high-value live animals, making biosecurity during transport extremely important for the protection of our customers on the other end. In addition, the well-being and quality of the animal upon arrival is paramount,” he says.

Packers' Status Remains Unsettled

It was a tumultuous week for the North American pork industry's packers. The culmination of the Swift & Company derby and the closure of the Mitchell's plant in Saskatoon (owned by Maple Leaf) do not mark the end of change, however. They merely serve as signposts on the path that the U.S. and Canadian pork sectors will take to an always-uncertain future.

If you are a horse racing fan, you were likely thrilled by the charge that Street Sense made from 19th on the Churchill Downs backstretch to win the Kentucky Derby by two lengths a few weeks ago. Likewise, the stretch run by Curlin to run down the Derby winner at the Preakness was something to behold.

Neither of those charges from the back of the pack have anything on the upset win by JSB, S.A., South America's largest beef processor, in the race to acquire Swift. JSB's parent company, J&F Participações, purchased the third-largest U.S. processor of both beef and pork for a reported $225 million in cash and the assumption of $1.16 billion in debt. The acquisition makes JSB the world's-largest beef producer and gives them large capabilities in both grass-fed and grain-fed beef.

Here are what I see as key issues regarding this acquisition:

  • It leaves Smithfield Foods in somewhat of a quandary regarding the U.S. beef business. They have announced plans to build a major beef slaughter facility in the Oklahoma panhandle and will probably move forward with those plans now that their bid for Swift has failed. There is little indication that JSB will sell any beef assets, though at least one analyst colleague thinks JSB may have really been more interested in Swift's Australian operations. Still, any sale of a beef plant is a long shot, in my opinion, and a new Smithfield plant will add capacity to a sector that already has too much. That's not a good harbinger for beef slaughter firms, especially since Smithfield has more than enough fed cattle available from their joint venture with Conti to feed a new plant. That means Smithfield will be buying corn and hay and selling beef while their competitors will, for the most part, be buying cattle and selling beef in a world in which most of Smithfield's 1.7 to 1.9 million head/year are unavailable. That should mean fed cattle prices would be higher.

  • While the dust may have settled a bit on the Swift pork business, it may yet be in play. JSB made clear that it is not a "pork company" and said it would review the pork plants in six months. Whether they will be sold will likely depend on whether they are contributing any cash to service the acquired debt. The pork plants may well be contributing more cash than any of the other assets! I still think it will be difficult for Smithfield to buy the two Midwestern Swift plants (Marshalltown, IA and Worthington, MN) on antitrust grounds, but what about one of them? That's a different ballgame. These two plants are considered by industry insiders to be among the most efficient kill-cut operations in the country, so there will be plenty of interest should JSB decide to unload them. Both Cargill and Seaboard were reported to be suitors (partnered with Smithfield and National Beef, respectively) on this go-round and I can see little that would stop them from doing the same in the future -- if the price is right.

  • I was never terribly concerned about the impacts that a Cargill or Seaboard acquisition of the Swift plants might have on competition in the hog or pork markets, but Swift's remaining an independent company is the best outcome from a competitive markets standpoint. It is difficult to quantify by how much this is the "best solution," but it no doubt is, provided that Swift's pork business remains viable and there is not much concern about that.

  • Finally, this acquisition drives home the point I made last week about exchange rates. One year ago this week, the Brazilian real was worth $0.4355 US. It is worth $0.5144 this week, meaning that in terms of reals, the purchase cost JSB 18% less than it would have cost them one year ago. That's assuming, of course, that the price in U.S. dollars would have been the same. In addition, this purchase gives JSB the ability to sell beef from the United States or Australia to any market where the U.S. or Australian dollar will give it an advantage over the real. That difference is substantial at present since the U.S. dollar is lower than the real vs. most world currencies.
I'll provide some analysis of the Mitchell's closure in next week's North American Preview.

Tracking Feed Costs
Feed costs have been inching higher, again, driven by increases in soybean meal and corn prices. Cash meal is up more than $20/ton since April and cash corn has gained about 30¢/bu. Chicago Board of Trade (CBOT) soybean meal and corn futures have risen by about the same amounts. My feed cost index (see Figure 1) has not reached the high levels we saw in March, but it is inching upward again.

The market's biggest concern right now appears to be soybean meal. This week's Crop Progress Report shows corn planting and emergence and soybean planting and emergence all higher than both year-ago levels and the five-year averages. So what's the concern?

There are really two -- weather and Brazil.

As we have pointed out many times, this is a big-time weather market and prices will swing with it at least until we get some clear idea of yields in July and August. The issue with Brazil mainly affects soybeans and is directly tied to the real. While lower U.S. soybean acres will reduce record-high soybean stocks and should spell opportunity for Brazil's soybean growers, the stronger real will make them less competitive in world markets and depress domestic soybean prices. Which of those forces will win? We'll probably have to wait for Brazil's planting season this fall to determine the answer.




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