• U.S. pork exports are sick. They are not on life support yet, and the disease may not even amount to more than a common cold, but for an entity that has been in such robust health for so many years, this is quite a shock. April shipments were 12% lower than one year ago and leave our year-to-date (YTD) total 1% lower. That's the first negative YTD number since February 2003. The only bright note -- and it is an important one -- is that the value of exports through April remained 8% larger than last year. Still, the slowdown in volume is definitely a concern. The main source of the malady, as can be seen in Figure 1, is Mexico where April shipments were nearly 40% smaller than one year ago and YTD shipments are down by 24%. Exports to Japan are still up 12% for the year, but even they fell 5% below year-ago levels in April. The only major markets that took more U.S. pork this year than last in April were Korea, China and Hong Kong.



• Chicken production is responding to higher prices. Figure 2 shows that broiler companies have responded quite logically to significantly higher prices by increasing egg sets every week since the week that ended Feb. 17. Those increases became significant the week that ended March 3, and have averaged 2.2% since that time. Perhaps more important is that egg sets have been over 3% larger than last year in six of the past eight weeks.
  
  Reduced chicken production during the fourth quarter of 2006 drove chicken prices significantly higher over the winter months and, given the close substitute relationship of chicken and pork, helped keep pork wholesale and retail prices up. Like it or not, the Other White Meat is closely linked to chicken in consumers' minds and lower chicken prices will not be good for pork and hog values.



• Hog slaughter is heading upward. The increase will very likely be more than what was suggested by the March Hogs & Pigs report. Figure 3 shows actual weekly slaughter and forecasted slaughter based on that report. The red forecast line doesn't look much different from the green line representing 2006, but I believe some major changes are on the way.
  
  My main goal at last week's World Pork Expo was to get an idea of the impact that circovirus vaccines may be having on supply. What I came away with was a clear consensus that the impact is large and growing. Producers, vendors and veterinarians all reported huge reductions in death loss and morbidity on farms that have used full doses of the various vaccines. Sow productivity is also higher on the farms that have vaccinated sows, leading one veterinarian to speculate that we may have actually been fighting this disease complex for several years without knowing it. In addition, one major supplier will have over 30% more vaccine available in July than is available in June.
  
  The real question is: "How many more hogs will make it to market?" I think we have an indicator in March slaughter. Recall that I speculated back in April that the March bubble could have been caused by circovirus vaccine that became available in October. I, like many, thought that if that was so, the increase would be persistent, but it didn't stay and we have been searching for other answers ever since.
  
  I overlooked pig flow dynamics, however. It now appears that the March bubble was likely caused by the first five weeks or so of vaccinated pigs reaching the market at the same time that older, slower-doing unvaccinated pigs were reaching market weight. The better-surviving, faster-growing vaccinates caused the bubble and slaughter surged by 4.5% for the six weeks from March 10 through April 21. Slaughter has averaged only 0.7% higher than in 2006 for the rest of the weeks this year. A circovirus vaccine impact of 3.8% sounds high for this fall, but it certainly leaves 2-3% as a very real possibility, especially where more and more doses are available.
  
  
• What about corn prices? Too much rain in wheat growing regions and questions about growing conditions in Russia and Ukraine caused another explosion in wheat futures this week. Add that to growing concerns about moisture conditions in the southeastern U.S. and the eastern Corn Belt and we now have December corn futures at $4.17 -- just a dime away from the contract life high. Welcome again to the world of subsidized and mandated biofuels. This will not be the last time this happens and the magnitude of these price changes could get even larger!

• This database summarizes performance across individual sows or growing pig groups, then summarizes on a farm-by-farm basis. This allows data validity steps to be taken to ensure utility. We test whether the sows' productivity is recorded correctly and whether herds are stable in production methods. This level of validation is often not seen in summary results in agriculture.


• Most of these comparisons are in the area of reproductive efficiencies. Reproduction benchmarking is often characterized by differences in capability to achieve high performance. That high performance is rarely tied to any single, costly technology. In most cases, the variation that we see in reproduction is not a strategic differentiation, but simply an outcome of management. In other words, most farms are capable of reaching the higher levels of reproductive efficiencies seen in this database.


• We see generalized trends in improvements in reproductive output and we believe the long history of PigCHAMP benchmarking has contributed to these improvements. There are two ways of analyzing this improvement. The first is to suggest that reproductive improvement occurred in all farms. The second is to suggest that there is a "selection of the fittest" occurring, where only the best farms survive. Though the latter does occur, it appears that most improvement is occurring within farms.


• It is still surprising that there is such a large range of productivity. There are very few technological secrets or capabilities that are not available to all participants in the industry. Yet we must view opportunities for improvement as relatively difficult to attain. It is unlikely that there is a single "silver bullet" that can be discerned from these benchmarks for a farm.

• Renewable Energy and By-product Research -- Federal funding should be provided for broad-based, applied research into renewable energy technologies, economics, and by-product safety, quality and usability.


• Emerging Bio-Energy Mandates -- New mandates should be limited to energy from emerging bio-based sources (i.e. cellulosic, methane) that do not adversely affect animal feed availability.


• Incentive Neutrality/Counter Cyclical -- Global energy demand will increase by more than 50% by 2030. Subsidies and tax credits for agriculture-based energy sources should be equally available among all forms of energy and source-neutral as a means to grow opportunities for all forms of energy. Fuel-based tax credits should function inversely to oil prices.


• Energy Infrastructure Incentives -- We support subsidies/tax credits to grow agriculture-based energy infrastructure. Infrastructure incentives should be source/feed stock and renewable energy neutral.


• Conservation Reserve Program (CRP) -- We believe that policymakers should provide producers regulatory and legislative policy options to opt out of CRP to respond to market forces. Support a working lands approach to reintroduce acres into crop production.


• Import Tariffs -- We support exposing consumers to more renewable fuels choices by allowing the current ethanol tariff to expire in December 2008.
  Members of the coalition are American Meat Institute, National Chicken Council, National Cattlemen's Beef Association, National Meat Association, National Milk Producers Federation, National Pork Producers Council, National Turkey Federation and United Egg Producers.

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