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Dale Miller, Editor,
National Hog Farmer
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Market Preview
Why Heavyweight Hogs,
Now?
Big question of the day: Why are pork producers selling
such heavy hogs when feed costs so much and profits are so awful? See
Figure 1 for the evidence of continued high weights.
Answer: There are lots of reasons.
First, waiting to sell pigs will almost always get you a higher price at
this time of year. National negotiated net prices have gained
$7.50/cwt. carcass, since April 1, so the strategy seems to be working.
Second, producers generally consider feed to be about the only component
of marginal cost, the amount added to total costs by the last pound of
gain. Only recently have feed costs gotten so high and hog prices so
low that marginal revenue (i.e. the price/lb.) has not exceeded marginal
cost. So, the incentive to feed pigs longer has been strong. Even if
pigs are shipped a bit earlier, someone still has to tend to the barn
and the barn may have to be heated. In fact, that latter factor has
worked against earlier marketing, especially during the cold winter we
just had.
Third, the circovirus vaccines, which are largely responsible for the
huge slaughter runs since last fall, are also responsible for pigs
growing faster than most people believed possible. In a
time-denominated business, faster growth rate means higher end weights,
even if you are trying to get them moved.
Finally, there just isn’t room in our slaughter facilities to speed up
the slaughter rates to pull marketings forward and pull weights down.
Daily slaughter rates have been consistently above 430,000 head. To
pull weights down 2 lb. or so, one of those days has to disappear. But
about all we could possibly do is add 10,000 head on weekdays and 50,000
or so on Saturday. That’s 100,000 head per week, meaning that it
would take four weeks to get that 2-lb. reduction.
Weights will come down. They always do as spring progresses. But I
believe we will be hard-pressed to push weights below year-ago levels
given large supplies and fast-growing pigs.
Will Anyone Take Weaned Pigs?
There have been some reports of plans to euthanize pigs in Canada due to
high feed costs and the fear that mandatory country-of-origin labeling
(COOL) will mean there will be no market for them next fall. I have
also had reports that this idea is sensationalism. I really hope it is.
Pig prices have plummeted in recent weeks (see Figure 2), indicating
plenty of supply and, given feed costs and expectations for cash hog
prices this fall, not much demand.
Returning to my soap box now, I encourage feeders to look at the futures
market for pricing opportunities. Figure 3 shows the forecasts for
quarterly cash hog prices from me and three other market analysts. They
are pretty dismal given projected cost levels. It also shows Lean Hogs
futures prices as of Thursday. Even allowing for a $3-$4/cwt. basis, Q4
Lean Hogs futures imply that these weaned pigs can be priced at about
$140/head.
Will that provide a profit? Probably, as long as there is, in fact, a
cash market for the pigs this fall. Let’s hope we can get the COOL
issues clearly and quickly established. No one will benefit from the
alternative.
Click to view graphs.
Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
e-mail: steve@paragoneconomics.com
 Hermitage NGT
Hermitage NGT offers their North American clients:
- Breeding Stock (GGP/GP/Parent stock)
- Semen-fresh & frozen
- Closed herd breeding programs
- Genetic monitoring through the Hermitage BLUP recording system
Talk with our team of specialists in genetics, reproductive physiology,
nutrition, veterinary medicine, pig production management and A.I. to
design a program to allow you to take advantage of these exciting
genetics.
www.hermitagengt.com
Production Preview
Proactive, Preventative
Measures
Most pork systems embrace proactive management practices
in regard to antibiotic use, but more can be done. Any use of
antibiotics should be carefully monitored and their use limited to those
times when they are necessary.
Pork Quality Assurance programs provide the industry with information
about excessive use of antibiotics and how to reduce antimicrobial
residues. Two additional programs that are similar include the “Take
Care -- Use Antibiotics Responsibly” program and the “Judicious Use
of Antibiotics” program.” These programs promote the responsible use
of both therapeutic and subtherapeutic antibiotics and encourage
producers to work closely with their veterinarians.
Additionally, the American Veterinary Medical Association (AVMA) and the
American Association of Swine Veterinarians (AASV) both have prudent use
guidelines for antibiotic use.
Concerns surrounding antibiotic-resistant bacteria infecting humans
exist, but the industry can take a proactive approach, says Randall
Singer at the Department of Veterinary and Biomedical Sciences at the
University of Minnesota.
“Because the complete cessation of all antibiotics in animal
production is not a viable option, the key is to continually monitor
changes in antibiotic resistance over time, especially as the use of new
compounds increases,” Singer notes. “Only through a rigorous
monitoring program can we evaluate the potential impacts of the use of
an antibiotic on resistances to other antibiotics and, thus, comprehend
the animal and human health risks. In addition, such a monitoring
program would help ensure that the most efficacious antibiotic is being
used for each specific health problem.”
The development of risk analysis models and the measurement of the
impact of prevention strategies are dependent on good surveillance
methods, say members of the colloquium of experts in the American
Academy of Microbiology.
“The current National Antibiotic Resistance Monitoring System (NARMS)
program is an important first step in the surveillance of foodborne and
animal pathogens,” the report states. “However, we also believe that
this program needs expansion to include the entire ‘farm-to-fork
continuum,’ as well as better representative sampling schemes. In
addition, this surveillance needs to be linked to specific focused
studies that would create a more proactive system. Limited funding
certainly will lead to limited studies,” they continue.
“Consequently, any studies that are performed, including the NARMS
project, require statistically valid and appropriate sampling strategies
to produce scientifically sound data that will make good use of limited
funding.”
As incidents involving drug-resistant pathogens increase, there will be
more pressure for policies or regulations on using antimicrobial feed
additives in U.S. livestock production. However, these policy decisions
must be based on well-designed, science-based risk assessment studies.
Economists and other scientists will be called upon to assess potential
effects of these policies and regulations. Whatever steps are taken,
collaborative relationships, rather than defensive, blaming postures,
will help those involved find solutions to this complex issue.
JoAnn Alumbaugh
Farms.com
joann.alumbaugh@farms.com
To learn more about benchmarking go to www.pigchamp.com. For
all your agricultural news, markets and commentaries, go to www.farms.com.
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Legislative Preview
Seven-Day Farm
Bill Extension
The House of Representatives passed a seven-day
extension of the farm bill until April 25. The Senate plans to pass the
bill before the April 18 deadline. Leaders of the House and Senate
Agriculture Committees believe they are close to completing the farm
bill, but need a few more days. The main sticking point is the tax
package contained in the Senate-passed version. The House Democratic
leadership keeps insisting that they want the tax package dealt with in
another manner. Negotiations are continuing at a frantic pace. The
conference committee continues to meet and work through many of the
bill’s titles. The conference committee has completed most of the
items in the credit, trade, forestry and research titles.
“Significant Progress” Needed — The White House and USDA
officials have indicated that the President needs to see “significant
progress” on the farm bill before he will sign the one-week extension.
A USDA statement read, “The President has stated that he does not
intend on signing another short-term extension if Congress has not shown
significant progress towards crafting a good farm bill that he can sign.
It is up to the farm bill negotiators to demonstrate that progress is
being made on legislation that provides real reform while using
acceptable offsets to pay for any additional spending.”
Farm Bill and Taxes — A key sticking point in the farm bill
negotiations has been the Senate’s insistence that tax provisions in
the Senate-passed version be included in the final bill. The conferees
from the House of Representatives, on a bipartisan basis, believe the
tax issues should be resolved in a separate bill. Some of the key tax
provisions in the Senate farm bill tax package include:
- Tax Relief for Retired and Disabled Farmers – Provides that
Conservation Reserve Payments (CRP) to retired or disabled individuals
are to be treated as rental payments for tax purposes and are therefore
excluded from self-employment taxes from a trade or business.
- Extend Tax Benefits for Conservation Contributions – Extends for
two years the enhanced tax incentive for contributions of conservation
easements included in the Pension Protection Act.
- Agricultural Equipment Depreciation – Makes important farm
equipment more affordable by shortening the recovery period for certain
farm equipment and machinery to five years.
- Residential Wind Credit – Creates a 30% investment tax credit
(capped at $4,000/year) for qualified residential and commercial
applications of small wind energy projects, not to exceed 100 kilowatts.
(Credit allowed for 2009).
- Cellulosic Biofuels Credit – Creates a new production tax credit
for cellulosic biofuels, per the December 2007 Clean Renewable Energy
and Conservation Tax Act. Amount of credit is equal to the difference
between $1.01/gal. and the per-gallon ethanol blender tax credit
(currently 51¢/gal.). For example, this credit would be $1.01/gal. if
the ethanol blender credit were to expire; credit would be 55¢/gal. if
the ethanol blender credit were reduced to 46¢ per “ethanol credit
modification.” The credit could be claimed on up to 60 million gallons
per taxpayer and would be available through 2013.
- Biodiesel/Renewable Diesel Credits – Extends through 2009 the
$1/gal. and 50¢/gal. biodiesel credits, as well as the 10¢/gal. credit
for the first 15 million gallons of biodiesel from “small
producers.” Adds camelina to the list of agri-biodiesel ($1/gal.
credit) sources. Also extends the $1.00 renewable diesel credit through
2009, while adding jet fuel as a qualifying use of renewable diesel.
Caps, on a per-facility basis, the renewable diesel credit at 60 million
gal./year of co-produced fuel, effective for fuel sold or used after the
date of enactment.
- Ethanol Credit Modification – The Energy Policy Act of 2005
mandated that gasoline contain 7.5 billion gallons of renewable fuel
annually by 2012. This proposal reduces the 51¢/gal. credit for ethanol
by 5¢ in the year after which the 7.5 billion-gallon threshold is
reached. This proposal is the same as the December 2007 Clean Renewable
Energy and Conservation Tax Act.
P. Scott Shearer
Vice President
Bockorny Group
Washington, D.C.
Ingelvac CircoFLEX® vaccine makes it easier to protect pigs from
PCV2 as early as 3 weeks of age or older . It starts early and stays
late.
Call Boehringer Ingelheim at 1-800-325-9167.
Pork Industry Calendar
April 21, 2008: Missouri
Pork Profit Seminar & PQA-Plus Certification Spring 2008 Series,
Kurzweil’s
Country Meats, Harrisonville, MO; contact Diane Slater at (573) 445-8375
or
diane@mopork.com.
April 28, 2008:
Missouri
Pork Profit Seminar & PQA-Plus Certification Spring 2008 Series, MFA
Research Farm, Marshall, MO; contact Diane Slater at (573) 445-8375 or
diane@mopork.com.
April 30, 2008: Missouri Pork Profit Seminar and
PQA-Plus Certification Spring 2008 Series, Lake Lenore Hall, Mexico, Mo;
contact Diane Slater at (573) 445-8375 or diane@mopork.com.
May 6, 2008: PorkCast "Introduction to Farm Estate Planning and
Transfer" Webcast program via the Internet, 1 p.m. CST; contact:
Mark Whitney, (507) 389-5541, whitn007@umn.edu or click on www.extension.umn.edu/swine.
Click
here to get National Hog Farmer's complete pork
industry calendar.
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