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Dale Miller, Editor,
National Hog Farmer
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Market Preview
Pork Exports
Gain More Strength
Let’s start with some good, good news: U.S. pork
exports are smoking thus far in 2008! USDA’s Foreign Agricultural
Service data released Thursday indicate that pork exports set an
all-time monthly record of 129.193 MT (million metric tons) or 142.112
million tons in February. That number is 55.3% larger than February
2007. That puts year-to-date pork exports at 246.575 MT or 271.232
tons, 39.8% higher than the same period last year.
Figure 1 shows total pork exports year-to-date as well as exports to
major U.S. pork markets. As has been the case since mid-2007,
China-Hong Kong is the biggest driver of these higher export levels,
growing an astounding 433% year-to-date. Shipments to China-Hong Kong
so far in 2008 are only 8.1% smaller than shipments to Japan, our
long-standing largest export customer.
Shipments in February were also larger, year-over-year, to Canada (+40%)
and Russia (+185%), meaning that year-to-date shipments to those
countries are 34% and 195% larger, respectively, than in 2007.
Shipments to Mexico were again lower than one year ago, but February’s
-2.8% was the smallest year-over-year reduction since December 2006,
which saw 1.3% year-over-year growth. Pork trade with Mexico is still
7.1% smaller thus far in 2008, but that compares to -16.1% at this time
last year, and -27.8% for all of 2007. So while we have not caught up
to year-earlier levels in our pork trade with Mexico, the situation
appears to be improving.
Perhaps even better news is that all of this pork is moving out of the
United States at prices very near those of one year ago. Figure 2 shows
the value of U.S. pork exports, year-to-date. Total export value is up
36.2%, driven largely by a more than six-fold increase in the value of
exports to China-Hong Kong. The value of February shipments was
$308.576 million, 46.1% larger than one year ago.
Export Value to Hogs
February pork exports amounted to $32.90/head for each hog slaughtered
in the month. I realize that not all pork product exported in February
came from hogs slaughtered in February, but, over time, this number is
very important to U.S. producers since it represents the value provided
by export sales.
Packers can only bid as much for hogs as the value of the products from
those hogs will allow. There is never a guarantee that increased
product values will in fact be bid into hog prices, especially in the
short run. But the level of hog prices thus far in 2008 relative to the
huge slaughter runs we have seen strongly suggest strongly that these
export values have been bid back into hog prices quite efficiently this
year.
Exports of pork variety meats have added to this year’s export success
story as well. Variety meat shipments were 57.4% larger this February
vs. last February, and stood at 50.2% larger year-to-date through
February. The value of those exports was 54.5% higher in February and
stood at 49.6% higher for the year through the end of February. Pork
variety meat export sales amounted to $3.17/head slaughtered in
February, 27% higher than last year’s $2.50/head slaughtered.
Setting Another Record
Will this kind of performance last? It is difficult to imagine that
these kinds of year-over-year increases will last through all of 2008,
but that doesn’t mean this will not be a banner year for U.S. pork
exports. While high feed prices hurt, producers in the European Union
(EU) and Canada have it much worse. In addition, the weak U.S. dollar
makes U.S pork products very competitive vs. those of Canada, the EU and
Brazil, our major competitors in world markets. I have seen no
forecasts of a major strengthening for the greenback this year, so that
factor should remain in our favor.
In my opinion, only a major trade disruption would prevent the United
States from setting its 17th-consecutive record year for pork exports
– and from doing so by a wide margin!
That’s a very good thing, too, given where feed costs are and might
go. USDA’s April World Agricultural Supply and Demand Estimates,
released on Tuesday, took 155 million bushels off projected year-end
corn inventories to drop the projected ratio of year-end stocks for
total usage to 9.8%. That would be the fourth-lowest inventory since
1970, when my data begin, and the lowest since the 9.4% of 2003/2004.
It’s a Different World
But this is a different world from the bucolic, “we feed corn to
critters and people” days of ‘03/’04, and corn demand is much
higher, thanks to ethanol usage and record exports (which, by the way,
USDA increased by 50 million bushels this month).
In fairness, I must also point out that USDA reduced the projected usage
of corn for ethanol by 100 million bushels to 3.1 billion to reflect the
unfavorable economics that $5-plus corn presents for ethanol plants as
well as livestock feeders.
That different world is reflected by USDA’s new season-average price
forecast of $4.10 to $4.50/bu. (up from $3.75 to $4.25 in April). That
compares to a season average price of $2.42/bu. in ‘03/’04.
It looks more and more as though the chances of corn over $6/bu. are
higher – and perhaps significantly so – than the chances of corn
under $5/bu., especially given recent weather patterns.
Excuse me for a bit, I have to go put my lawn mower away and find that
snow shovel again.
Click to view graphs.
Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
e-mail: steve@paragoneconomics.com
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Production Preview
The Antibiotic Issue
Antibiotics have been used since the early 1950s for
control and prevention of disease. In addition, when added to feed,
antibiotics are used to promote growth and improve feed efficiency.
Due partially to concerns about antimicrobial resistance, those
production-related uses have come under scrutiny globally. In fact, some
countries have banned the use of antibiotic growth promoters entirely.
In the United States, some consumer, food safety and physician groups
are opposed to the use of antimicrobials to enhance growth. The primary
reason for this opposition is the concern that the use of antimicrobials
in this manner may lead to increased antimicrobial resistance in
pathogenic bacteria in humans. These concerns have made it increasingly
important for those in animal agriculture to know the science regarding
antibiotic resistance, evaluate the concerns, and understand the
protocols to ensure proper protections are in place.
The newsletter for the Animal Health Institute, the AHI Quarterly,
reports: “In humans, microbial resistance to antimicrobial drugs stems
from over-reliance on antimicrobial drugs in human medicine, failure to
adhere to prescriptions for the full duration of treatment, and
increased clustering of people in hospitals, day care centers, and other
similar places where humans congregate. Two of the greatest sources of
drug-resistant pathogens observed in humans are from drug-resistant
pathogens encountered during hospitalization, and misuse of
antimicrobial drug prescriptions by both doctors and patients (U.S.
Congress, Office of Technology Assessment and Committee on Drug Use in
Food Animals). It is estimated that as little as 10% of the problems of
antimicrobial resistance originate with livestock health practices,”
the article concludes.
The Committee on Drug Use in Food Animals offered the following
perspective: “While the use of antibiotics in food animals can cause
resistance emergence, not all instances of resistance are clinically
significant, involve resistance in pathogens, or cause an actual
illness. In contrast, because the occurrence of infection in hospitals
is often considered life-threatening, the risk to human health of
hospital-acquired infections might be thought of as a greater risk.”
There have been isolated cases in which the transfer of
antibiotic-resistant bacteria to humans through consumption of meat has
occurred, however, these events are highly uncommon and have not been
linked to the use of feed-grade antibiotics in animal feed.
The natural inclination is to equate the amount of antibiotics used in
human and veterinary medicine to the amount of existing antibiotic
resistance; however, the relationship between use and antibiotic
resistance is not linear and seems to be much more convoluted. This
issue is complex, particularly in agriculture, because food animal
production is the result of diverse management practices and production
goals, and each system employs distinct antibiotic use by producers,
veterinarians and others (National Academy of Sciences, 1999).
We will continue this discussion next week with a look at the numbers
and safeguards that have been put in place.
JoAnn Alumbaugh
Farms.com
joann.alumbaugh@farms.com
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Legislative Preview
Farm Bill
Deadline Fast Approaching
Congress is facing an April 18 deadline on the farm
bill. With this in mind, the House of Representatives proposed to the
Senate a bipartisan farm bill framework that is $5.5 billion over
baseline. The proposal makes additional cuts in crop insurance and does
not include a permanent disaster program. The proposal does not include
any increase in taxes that caused such a political firestorm last summer
when the House passed its farm bill. On Wednesday evening, the House of
Representatives passed a motion to instruct House farm bill conferees
not to agree to any provisions that increase taxes in the final farm
bill agreement. The motion passed 400-11. The key question remains
whether this new proposal has any support in the Senate.
House Names Farm Bill Conferees — House Speaker Nancy Pelosi
(D-CA) named 14 members of the House Agriculture Committee to serve on
the House-Senate farm bill conference. Also, 36 other House members
from various House committees (Education and Labor, Energy and Commerce,
Financial Services, Foreign Affairs, Judiciary, Natural Resources,
Oversight and Government Reform, Science and Technology, Small Business,
Transportation and Infrastructure and Ways and Means) were named to the
conference. These conferees will consider certain provisions with
jurisdiction beyond the Agriculture Committee. Those members from the
House Agriculture Committee are: Democrats - Chairman Collin C. Peterson
(MN), Tim Holden (PA), Mike McIntyre (NC), Bob Etheridge (NC), Leonard
Boswell (IA), Joe Baca (CA), Dennis Cardoza (CA), and David Scott (GA).
Republicans include Ranking Member Bob Goodlatte (VA), Frank Lucas (OK),
Jerry Moran (KS), Robin Hayes (NC), Marilyn Musgrave (CO), and Randy
Neugebauer (TX).
Farm Bill Conferees Meet — The first meeting of the
House-Senate farm bill conference committee was on Thursday morning.
The House Agriculture Committee conferees presented to the Senate its
proposed farm bill framework. The Senate conferees indicated they would
take it under advisement and would provide the House with a
counterproposal. The Senate conferees seem intent on trying to find an
additional $10 billion instead of the House offer of $5.5 billion. The
key question still remains if the Senate Finance Committee and House
Ways and Means Committee can reach an agreement on the additional
funding for the farm bill. The conference committee is expected to meet
again early next week. Time is running out for a new farm bill.
Bush Sends Colombia FTA to Congress — In a major political
showdown, President George W. Bush sent the pending U.S.-Colombia Free
Trade Agreement (FTA) to Congress for consideration. President Bush
said, “The need for this agreement is too urgent, the stakes for our
national security too high, to allow this year to end without a vote.”
He added, “If you’re an American farmer, it’s in your interest
that this agreement gets passed. After all, farm exports like
high-quality beef, cotton, soybeans and fruit will enter duty-free. In
time, this agreement will eliminate tariffs on all of America’s
exports to Colombia.”
Congressional Democratic leaders had urged Bush not to send the
agreement to Congress until there had been further consultations.
Senator Max Baucus (D-MT), chairman of the Senate Finance Committee,
stated, “The president is making a big mistake. Forcing Congress to
vote on the Colombia trade agreement without a chance to weigh in on the
legislation is an abuse of the fast-track process for trade agreements,
and may well turn supporters and potential supporters of the Colombia
agreement into opponents of the deal.”
Senate Majority Leader Mitch McConnell (R-KY) said, the FTA would
“strengthen our economy, because America needs trading partners to buy
the goods that are made here by the best workers in the world. And it
would send a strong and unmistakable signal to our allies in the
hemisphere that the United States stands with those who support strong
and unmistakable signals to our other allies in the hemisphere that the
United States stands with those who support strong markets and free
societies, especially in the face of threats.”
Congress Delays Vote on Colombia FTA — The House of
Representatives voted this week (224-195) to change the rules and delay
a vote on the U.S.-Colombia FTA. Previously, if a free trade agreement
was sent to Congress, it had to vote on the agreement within 90
legislative days. The administration strongly opposed the House action.
The National Pork Producers Council (NPPC) strongly condemned the House
action to extend indefinitely the time period during which Congress must
vote on a free trade agreement with Colombia. NPPC said, “Should
Congress remove the timetable, it will be bad for U.S. pork producers,
bad for American agriculture and business, bad for Colombia’s economic
and political stability, and bad for the prospects of future trade
agreements, such as South Korea and Doha. If Congress disregards this
trade law, it will undermine the credibility of the United States with
its trading partners.”
The American Farm Bureau Federation (AFBF) said it was “disappointed
with the House Leadership’s decision to remove the timetable for
consideration of the Colombia Trade Promotion Agreement. This decision
will not only place a vote on the agreement in limbo, but it is a direct
strike at the United States’ most important trade-negotiating tool,
Trade Promotion Authority.”
P. Scott Shearer
Vice President
Bockorny Group
Washington, D.C.
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