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| July 28, 2006 | |
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Table of Contents Lessons from Mandatory Price Reporting Pork Industry, 2012 Japan Reopens to U.S. Beef HogInfo Link: Herd Health Management, Ileitis Market Preview Lessons from Mandatory Price Reporting One of the driving forces behind the Livestock Mandatory Reporting Act of 1999 was a desire of producers to know the prices that were being paid for hogs purchased by some means other than the daily spot or cash market. The suspicion was that there were many "sweetheart" deals in which packers were paying favored suppliers more money than was available to others. I have to admit that I always had a problem with that suspicion. Packers are generally good businessmen and their job is to buy hogs for the lowest possible price. They do not pay anyone, favored or not, money that they do not have to pay. Generally, they only pay extra for value. While the people who work for packers are just like the rest of us, and many are very generous in their personal dealings, they are not benevolent benefactors in their work in procuring hogs. Such suspicions were still a driver when the mandatory price reporting system was created. So, the question remains: What have the data taught us? Figures 1 and 2 show daily prices for the four purchase classifications from Jan. 1, 2002 through June 30, 2006. Note that Figure 1 shows base price data while Figure 2 shows net prices, which include premiums and discounts. These graphs appear just as I expected they would and they are really quite logical. Consider:
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Financial Preview Pork Industry, 2012 I had the pleasure of speaking at the National Pork Industry Conference conducted by Graham Strategic Marketing this month. My assigned topic -- What will the swine industry look like in 2012? At first, I thought: "I have no clue!" But, after more consideration, I came up with some ideas that I think all of us will be facing as we look forward. Ethanol -- This was the biggest topic of discussion at the conference. In fact, there was more talk about ethanol expansion than sow herd expansion. One comment got my attention: "In one quarter, Exxon had net earnings almost equal to the entire earnings the agricultural industry had in one year." When energy profits are that extreme, it will draw a lot of attention from investors. We know that ethanol from corn has been highly profitable the past couple of years, but there are a few points to keep in mind:
The trend to hire more immigrants will continue, but it raises issues of training and communication of employees who do not speak English. Several firms that I work with today have human resource people who are bilingual. Another point, many current owners of companies are in their late 40s and early 50s. I continually challenge them to develop a pool of talent that can help run their organizations in the future. Succession planning will be a critical part of our industry in the future. Sow expansion -- It is my best guess that close to 100,000 sows will be added to the U.S. sow herd this year. Like 2005, many of these sows will be added late in the year and their pigs will hit the market towards the third and fourth quarters of 2007. It looks like the 2005 sow-expansion pigs are starting to hit the market now. We are seeing larger runs and I believe we will see larger runs for the rest of the year, even though the pig report does not agree. I know we still have cash prices above $68 carcass price, but things can change quickly. You can lock up profits on the board through July 2007. I suggest assessing your operation to determine how much risk and adversity you can handle. Mark Greenwood Swine Industry Consultant Contact Greenwood at mgreenw@agstar.com ADVERTISEMENT  Don't repeat yourself. Now licensed for simultaneous use. Administer three vaccines at once: Enterisol® Ileitis FF for ileitis; Enterisol® SC-54 FF for salmonella; and Ingelvac® ERY-ALC for erysipelas -- all from Boehringer Ingelheim Vetmedica, Inc. Click here for details. Legislative Preview Japan Reopens to U.S. Beef Japan announced that it is reopening its market to U.S beef from cattle under 20 months of age. Secretary of Agriculture Mike Johanns commented, "This has been a long process as we've confirmed that our system is in full compliance with Japan's import requirements and provided Japan with clear, scientific data confirming that American beef is extremely safe." He added, "Nations need reasonable methods of addressing the inadvertent shipment of products that don't meet an importing country's specifications, without disrupting an entire trading relationship. The United States has such methods of addressing noncompliant shipments from Japan, as well as our other trading partners, and I am hopeful that going forward Japan will take a similar approach." Japan earlier this year closed its market again after a shipment was found to contain product not allowed under the original agreement. The United States exported $1.4 billion worth of beef and beef products to Japan in 2003. Doha Talks Suspended -- Pascal Lamy, World Trade Organization (WTO) director general, suspended the Doha WTO negotiations after failing to reach agreement on the issues of domestic support and market access for agriculture. Lamy, in announcing the suspension of the talks, said, "If the political will really exists, there must be a way. But it is not here today. And let me be clear, there are no winners and losers in this assembly. Today there are only losers." The negotiations were suspended after the G-6 countries -- the United States, European Union (EU), Brazil, Australia, Japan and India could not make progress on market access and reductions in domestic support. Lamy said he would not resume the negotiations until "the conditions exist to permit renewed progress, and this means changes in entrenched positions." Now the finger-pointing has started between the United States, EU, and others on who is at fault for the failure of the negotiations. In reaction to the EU's statement that the United States had failed to "show flexibility" in the Doha agriculture negotiations, U.S. Trade Representative Susan Schwab said, "Unable to endorse the U.S. proposal, given substantial opposition from France and a few other member states with strong farm interests, the EU attempted, alternately, to criticize the U.S. proposal as too ambitious or too weak. Most recently, the EU attacked the United States for failing to propose even more dramatic cuts to domestic support while at the same time insisting on the right to lavish more than twice as much trade-distorting subsidies on its farmers." Agriculture's Reaction to Failed Doha Talks -- Reaction from U.S. agriculture and congressional leaders were one of disappointment but supportive of the administration backing away from a bad deal. Congressman Bob Goodlatte (R-VA), House Agriculture Committee chairman said, "The United States was asked to come up with a bold proposal to significantly reduce domestic supports and our proposal did just that. Yet, our trading partners refused to even meet us part way. As disappointing as the result may be, from the standpoint of America's farmers and ranchers, no deal is better than a bad deal." Senator Tom Harkin (D-IA), ranking member of the Senate Agriculture Committee said, "The United States made a generous proposal for other countries last fall, particularly the European Union, to reduce their trade barriers as we scale back our trade-distorting farm payments. The ball has been in the EU's court to make a reasonable offer, yet they haven't done so, leading to a suspension of the negotiations in the Doha Round." The National Pork Producers Council (NPPC) in a statement said, "We are pleased the United States did not succumb to pressure from India, the European Union and other trading partners who want a Doha 'lite' deal." The American Soybean Association (ASA) said, "ASA is disappointed that World Trade Organization (WTO) negotiators were unable to agree to meaningful trade reforms that would level the global playing field for U.S. agriculture exports. But we've said all along that ASA would not support a WTO agreement that failed to provide significant market access improvement for U.S. soybean and livestock products. As such, we're pleased that the administration didn't budge on its commitment to produce a robust and balanced agreement." The American Farm Bureau Federation in a statement said, "It is truly unfortunate that other nations of the world failed to seize this Doha Round opportunity for freer trade created by the bold agricultural proposal offered by the U.S. negotiators." The National Farmers Union said, "From the U.S. agriculture producer perspective, there was great fear that the trade round would severely tie the hands of the U.S. government as it attempts to address the challenges facing rural America. We will continue to urge U.S. and global policymakers to only pursue trade agreements that create a fair and level playing field for producers at home and abroad." Carbon Monoxide Meat Packaging -- Congresswoman Rosa DeLauro (D-CT) announced that she would be introducing legislation that will stop the use of carbon monoxide (CO) packaging of meat. Currently, the Food and Drug Administration allows the use of CO for meat packaging. Recently, Texas Tech University and the University of Georgia did an analysis that showed that CO packaging could prevent the growth of pathogenic bacteria. Melvin Hunt of Kansas State University said, "The effort to discredit the science that went into it -- and efforts to discredit the federal agency that reviewed it three times -- is scientifically inaccurate and unfortunate." House Approves Oman FTA -- The House of Representatives approved the Oman Free Trade Agreement (FTA) by only 16 votes. The administration would like the Congress to vote on the Peru FTA and the Vietnam Permanent Normal Trade Relations (PNTR) legislation this year. P. Scott Shearer Vice President Bockorny Petrizzo, Inc. Washington, D.C. ADVERTISEMENT  NPPC -- the leading advocate for pork producers * Backed successful repeal of anti-trade Byrd Amendment * Obtained favorable treatment for pork in U.S. -- Peru trade pact * Negotiated legal protections for producers in air consent agreements Be part of the progress. Go to www.nppc.org/producers/SIP.html to join the Strategic Investment Program. Research Link Of The Week HogInfo Link: Herd Health Management, Ileitis Visit www.hoginfo.com to view research articles on amino acid utilization. Articles include the following: "Fact sheet: An outbreak of proliferative hemorrhagic enteropathy in a sow herd," "Can cupper sulfate be used as a growth promotant and does it has a positive effect in the treatment of Ileitis?" and more.  ADVERTISEMENT 
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