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Strong Demand Props Up Pork Prices

Wholesale pork demand has shown some improvement in the second quarter of 2013

As the second quarter of 2013 comes to a close, pork demand at the wholesale level has marked significant improvement and provided much needed margins for pork production operations.  Although wholesale prices were expected to improve seasonally in June, prices have increased significantly over year-ago values in all pork primals with the exception of loins and spareribs, increasing the composite cutout value by nearly 15% compared to June 2012.  The increase in pork belly prices has been nothing short of phenomenal.  Belly primal value in late June equated to $58.07/head compared to $39.04/head a year ago, adding $19.03/head to the wholesale value of pork carcasses, year over year.

Live hog prices have rallied through late June, bringing $214/head and improving margins to $20 to $30/head – the first positive margins for open market hogs in 2013.  Costs remain very high at $185 to $195/head, and most likely will not improve much until a new corn crop is in the bin.

Pork Supply Outlook– The quarterly USDA Hogs and Pigs report will be released on Friday, June 28.  I expect it to show a small increase in the breeding herd over a year ago, in spite of high feed costs and negative margins from August 2012 to May 2013.  The impact of porcine epidemic diarrhea (PED) virus on pork supply is unclear.  The disease has spread rapidly and continues to be a concern with new outbreaks every week, causing high mortality rates among very young pigs.  The ability to contain the spread of PED virus in the coming weeks will determine its impact on supply, which will begin to show up in late November. 

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Keep an Eye on Chicken– The broiler industry is also worth watching as they have expanded rapidly in response to higher prices recently.  April chicken production was up 7% over the prior year and will most likely continue to rise as anticipated broiler prices remain high.

Corn Outlook– Corn supply through new harvest remains the biggest concern that livestock producers face.  Use of the current supply has increase recently with higher poultry numbers and as ethanol margins have improved.  The harvest in the Upper Midwest will be later this year than last – probably later than most years – which will increase the need to ration the 2012 corn crop.  Current corn prices in southern Minnesota are $6.84/bu. It remains to be seen what it will take to ration remaining corn supplies as feed and ethanol demands increase. Basis management will also be challenging as hedgers try to manage margins with a current basis of $1.03.  Corn basis will likely continue to widen, particularly after the July contract ends.

Overall, it is great to see strong demand for pork as evidenced by high cutout values. Pork export data lags, but it seems clear that domestic demand is strong and that is very positive to the industry in the long-term.  This rally has also provided additional opportunities to hedge for some decent margins.

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Reaction to the Defeat of the Farm Bill

Reaction to the Defeat of the Farm Bill

Congressman Frank Lucas (R-OK), chairman of the House Agriculture Committee, stated: “On this day, on this vote, the House worked its will.  I’m obviously disappointed, but the reforms in H.R. 1947 – $40 billion in deficit reduction, elimination of direct payments and the first reforms to SNAP since 1996 – are so important that we must continue to pursue them.  We are assessing all of our options, but I have no doubt that we will finish our work in the near future and provide the certainty that our farmers, ranchers, and rural constituents need.”

Congressman Collin Peterson (D-MN), ranking member of the House Agriculture Committee, noted:  “The farm bill failed to pass the House today because the House Republicans could not control the extreme right wing of their party. From day one I cautioned my colleagues that to pass a farm bill we would have to work together. Instead, the House adopted a partisan amendment process, playing political games with extreme policies that have no chance of becoming law.  This flies in the face of nearly four years of bipartisan work done by the Agriculture Committee. I’ll continue to do everything I can to get a farm bill passed, but I have a hard time seeing where we go from here.”

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Secretary of Agriculture Tom Vilsack commented: “The failure by the House leadership, for the second year in a row, to reach consensus on a Food, Farm and Jobs Bill is a tremendous disappointment for all Americans. Twice now, the U.S. Senate has done its job and passed balanced, comprehensive legislation with overwhelming bipartisan support. Unfortunately, the House version of this bill would have unfairly denied food assistance for millions of struggling families and their children, while failing to achieve needed reforms or critical investments to continue economic growth in rural America. As a result, the House was unable to achieve bipartisan consensus."

As the agricultural groups were stating their disappointment in the House’s failure to pass the farm bill, the conservative groups, Heritage Forum, the National Taxpayers Union, and Bread for the World, praised the defeat of the farm bill.  

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Froman Confirmed USTR

Michael Froman was confirmed by the U.S. Senate to be the U.S. Trade Representative (USTR).  Froman has been deputy national security advisor for international economic affairs at the White House.  He was a senior official at the Department of the Treasury during the Clinton administration.  Froman gets high marks from the agricultural and business communities.  

 

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Shea New APHIS Administrator

Kevin Shea is USDA’s new administrator of the Animal and Plant Health Inspection Service (APHIS).  Previously, Shea served as associate administrator of APHIS. From2000 to 2004, Shea was deputy administrator for policy and program development.  

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Farm Bill Fails in the House

The House of Representatives defeated the Federal Agriculture Reform and Risk Management Act of 2013 by a vote of 195-234.  Conservative Republican members and urban/suburban Democratic members provided the votes to defeat the bill. 

Many of the Republicans who voted against the bill wanted more cuts to farm and nutrition programs.  Democratic no votes objected to the cuts in nutrition programs.  The final day of consideration consisted of debates on major reforms for dairy, sugar, payment limitations and additional restrictions for Supplemental Nutrition Assistance Program (SNAP).  All of this added to the problems of passing the bill. 

The House Agriculture Committee and agriculture and nutrition groups are going to have assess what happens next.  A key question for the future is what happens to the farm-nutrition coalition that has been the reason for success of farm bills in the past.  

 

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Second Farm Bill Extension Viewed as Likely

Second Farm Bill Extension Viewed as Likely

A trio of agricultural economists from Purdue University view as likely another extension of the 2008 farm bill after last week’s failure of the House of Representatives to pass new farm legislation.

Chris Hurt, Otto Doering and Roman Keeney, who closely follow developments of farm legislation, question whether Republican leadership in the House will allow debate on the contents of the farm bill again anytime soon. With the one-year extension set to expire at the end of the fiscal year Sept. 30, farmers could see another extension of the five-year agricultural spending plan.

“There was just too much in the bill to dislike,” Hurt says. “There were too many amendments passed at the last moment that changed the bill.”

One amendment in particular, sponsored by Rep. Steve Southerland (R-FL), would have given states the power to require food stamp recipients to seek work while on the program. That brought a backlash from Democrats and was key to the bill's failure last Thursday (June 20).

Without passage of a farm bill, farm legislation would revert to a 1949 law that could lead to steep price increases on some items, including milk, for consumers. Legislators avoided that scenario by extending the 2008 farm bill in late December as dairy subsidies were scheduled to expire and the nation also was about to fall off the “fiscal cliff.”

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“We cannot go without a farm bill because the 1949 legislation has too extreme of consequences,” Hurt says. “So odds may favor a second year of extension of the old farm bill.”

Doering believes the bill foundered on elements not directly related to agriculture – primarily the battle over how much spending should be cut from the Supplemental Nutrition Assistance Program, known as food stamps, and from commodity programs.

“There was the lack of real budget cuts in either the Senate or House version for either the food or the commodity titles, which rankled those conservatives wanting to make substantive, deep budget cuts,” Doering says. “The regions, especially the South, had already gained what they wanted most out of the commodity titles, so it came down to an almost ideological battle on how much to cut food stamps and whether the bill actually met any real budget-cutting principles.”

The Republican majority in the House will not follow its leadership and likely will remain fractured on important issues, such as a long-term budget fix, Doering says. “It will come together primarily on issues of shared values, and the farm bill was not such an issue,” he says.

While it is difficult to predict what Congress will do about farm legislation this year, Keeney says farmers should understand that the Sept. 30 end of the federal fiscal year doesn't mean that all farm programs would end on that date without congressional action. Programs for corn and soybean crops, for example, remain intact throughout the crop season, which extends well beyond September.

“September 30 is not doomsday for farming and safety nets,” he says. “Expiration of the fiscal year last year wasn't a big deal at all, and it probably wouldn't be this year, either.”

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NPPC Supports Free Trade Talks with the EU

The United States and the European Union (EU) will begin talks the week of July 8 on a comprehensive free trade agreement (FTA) to formulate plans for the Transatlantic Trade and Investment Partnership (TTIP).

The initial talks between President Barack Obama and EU President Jose Manual Barroso and European Council President Herman Van Rompuy are set to start in Washington, DC.

The National Pork Producers Council (NPPC) is on record as supporting the negotiation of an FTA with the EU, which represents a tremendous market opportunity for U.S. pork producers. Pork consumption in the EU totals 20 million metric tons (22 million lb.) – constituting the second-largest market in the world for pork consumption.

However, as NPPC notes, there are numerous trade barriers blocking the United States from exporting significant amounts of pork to the EU. Last year, in fact, the United States exported more pork to Honduras than to the 27-member European Union.

Trade barriers to the EU include multiple quotas with high in-quota duties, a ban on the use of ractopamine in livestock feeds, mandatory trichinae mitigation, a ban on pathogen-reduction treatments at processing and a costly plant approval system.

NPPC’s pork producer leadership has worked to rally other agriculture groups to ensure that agriculture would have a seat at the table to be part of TTIP negotiations.

NPPC has also led the agriculture coalition to call for sanitary and phytosanitary (SPS) measures that are based on scientific risk assessments and enforceable SPS provis

Registration Opens for Carthage Swine Conference

 

Registration is now open for the Carthage (IL) Veterinary Service Ltd 23rd Annual Swine Conference to be held on Aug. 27, 2013on the scenic campus of Western Illinois University in Macomb, IL.

This conference is known for providing quick-fire sessions with cutting-edge information that pork producers can implement the day after the conference.

It is designed to provide speakers and focused breakout sessions on breed-to-wean, wean-to-market, CEO/management, and ventilation topics in order for attendees to hone in on their interests. A history of 500-plus attendees each year allows for networking with peers and allied industries, and  has made this meeting a must attend for those interested in the pork industry.

This year’s theme of “Sustainability” will offer more than 30 speakers who will present information about the social, environmental and economic issues that shape their businesses.

Speakers like Larry Coleman, DVM, Broken Bow, NE; Mark Greenwood, AgStar Financial Services, Mankato, MN; Jim Lowe, DVM, St. Albers, IL;  Larry Firkins, DVM, University of Illinois;  Ron Plain, University of Illinois; and Mike Brumm of Brumm Swine Consultancy, North Mankato, MN, will present information about ventilation, disease, markets, and management of production, people and processes.

Speakers from Tyson Foods, Cargill, Agrosuper, and Commodity Ingredient Hedging will share their perspectives with attendees.

Joe Connor, DVM, Carthage Veterinary Service Ltd., will also discuss the emerging disease porcine epidemic diarrhea (PED) virus.

Motivational speaker, mountain climber and veterinarian Lance Fox will anchor the program this year with the keynote address No Place but UP! Fox shares his experience during his climb of Mt. Everest in 2009 in order to share the importance of dreams, working hard, and staying focused on the goal ahead, all the while remaining positive even during the darkest of times.

You can find additional information and register for the conference at www.hogvet.com/conference or call the Carthage Veterinary Services Ltd. main office at (217) 357-2811.

 

 

 

 

BIVI Adds Erin Johnson, DVM, to PRRSolutions Team

Erin Johnson, DVM, has been promoted to technical manager on the PRRSolutions Team in the Swine Division at Boehringer Ingelheim Vetmedica, Inc. (BIVI).

The PRRSolutions Team leads the Area Regional Control & Elimination (ARC&E) efforts and is supported and advised by recognized PRRS experts from across the U.S. The team conducts and coordinates the research, design and development of the ARC&E and plays an active role in supporting efforts of ARC&E working groups across the country.

PRRS (porcine reproductive & respiratory syndrome) is one of the most widespread and costly diseases that swine producers face. BIVI is a recognized leader in helping prevent PRRS through a combination of sponsored research, education, biosecurity practices and vaccination.

“I have had the pleasure of working with Dr. Johnson for several years,” says Edgar Diaz, DVM, senior associate director of the team. “She not only has technical knowledge of the disease, but also brings invaluable day-to-day experience with PRRS through working with producers throughout the Midwest.”

Johnson has been a swine professional services veterinarian for BIVI for the past six years. During that time she has worked with a variety of customers, primarily in Illinois, Michigan, Ohio and Pennsylvania. Johnson is based in Mahomet, Ill.

“While in the field, she earned the confidence of our customers and has become a valuable resource for technical swine disease information,” Diaz says, “particularly in regards to PRRS and Mycoplasma hyopneumoniae.”

 

Farm Bill’s Demise Highlights Divide between Urban and Rural America

Farm Bill’s Demise Highlights Divide between Urban and Rural America

By now you’ve heard this week’s big news in agriculture about the farm bill’s defeat in the U.S. House of Representatives.  Just two weeks ago, National Pork Producers Council President Randy Spronk was talking about the optimism pork producers were feeling as the Senate version of the farm bill progressed through the system.  Now this!

Reuters summarized the farm bill’s demise as being the result of Republican budget-cutters joining with Democratic defenders of food stamps. Many media outlets have pointed out that in the past, the farm bill has been a model of bipartisan support generally moving through Congress with ease. Now it seems legislators have forgotten where their food comes from. National Farmers Union President Roger Johnson said, “The House has let down rural America. We are deeply disappointed that the House voted against the best interests of family farmers and rural America.”

U.S. Secretary of Agriculture Tom Vilsack is also disappointed, "The failure by the House leadership, for the second year in a row, to reach consensus on a Food, Farm and Jobs Bill is a tremendous disappointment for all Americans. Twice now, the U.S. Senate has done its job and passed balanced, comprehensive legislation with overwhelming bipartisan support. Unfortunately, the House version of this bill would have unfairly denied food assistance for millions of struggling families and their children, while failing to achieve needed reforms or critical investments to continue economic growth in rural America. As a result, the House was unable to achieve bipartisan consensus."

 

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It is mightily frustrating when U.S. consumers (and the legislators who represent them), seem to have so little understanding about where their food comes from, or the systems that are in place to make sure that affordable food supply keeps appearing, as if by magic, in their local grocery stores.

I’m always interested in the “rest of the story” when I read the news reports in the mainstream media about agricultural issues. Often, there is even more to be learned by following the comments listed below the stories. Sadly, the comments following yesterday’s farm bill coverage in the metropolitan and national news outlets too often was focused on some vague sense of a need to punish agriculture because of genetically modified organisms (GMOs) or “big ag,” whatever that may be. Hard-working producers are becoming more aware of the disconnect that exists between the people who eat the food, and those who produce it. There is a lot of work to do educating consumers and bolstering their trust. There is still time to treat topics such as the farm bill as a learning opportunity when having conversations with non-farm friends and neighbors. As one person noted on Twitter recently, it’s sad that the farm bill is getting coverage from the mainstream media after it failed. Like it or not, it’s becoming more apparent that it is up to producers to share the rest of the story on why it is important to support agriculture through legislation such as the farm bill.

National Hog Farmer’s sister publication, Delta Farm Press, provides excellent coverage of the farm bill voting process that took place in the U.S. House of Representatives, and the response that followed from agricultural groups here. Farms.com's Stu Ellis also gives the farm bill topic a thoughtful discussion here

What is your opinion of the farm bill situation? Have you contacted your legislator? Share your thoughts and opinions in the “Comments” section below, or email lora[email protected].  National Hog Farmer will provide additional coverage in the Legislative Preview section of our Weekly Preview newsletter on Monday, and at http://nationalhogfarmer.com/.

 

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Now What?