What's new on National Hog Farmer?
- Seeking
More Full-Value Pigs
- 12
Risk Factors Worth Checking
- California’s
Proposition 2 Passes by Wide
Majority
- COOL
Causes Trade Friction Between U.S.-Canada
Producers
- Blueprint Issue: Sow
& Pig Care – Birth to Weaning
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Market Preview
COOL Fallout Hits
Canadian Producers Hardest
As promised last week, this week’s topic is mandatory
country-of-origin labeling (COOL) and its impact on the U.S. and
Canadian pork sectors.
While not the “worst of times,” I think a par-plus Canadian dollar
wins that award in spades. COOL is not a good development for Canadian
producers. In the long run, I don’t believe it is a good development
for U.S. producers either, especially if it precipitates a trade action
by Canada and all of the ill-will that will engender.
Mandatory COOL seems to be playing out much as I expected. A few U.S.
packers will not purchase pigs with any Canadian ties. Most notable
among those is Smithfield Foods and its midwestern subsidiaries, John
Morrell and Farmland. Vertically-integrated Triumph Foods and Seaboard
Foods will not buy Canadian-sourced pigs and neither will Hatfield
Quality Meats nor Indiana Packing. The other companies among the top
10 U.S. slaughter firms (Tyson Foods, Excel, Swift, Hormel Foods and
J.H. Routh) all plan to slaughter Canadian-sourced pigs. Only Tyson has
said it plans to slaughter Canadian market hogs, however. The top 10
companies account for 88% of all U.S hog slaughter capacity.
The U.S. packers that have decided not to take Canadian-origin pigs have
done so for, I think, one or more of these reasons:
- They don’t need them. That might mean they haven’t needed them
in the past or that they believe they can find U.S.-origin pigs easy
enough to adjust.
- They think that not buying Canadian-origin pigs will force the
Canadian sector to contract, thus driving up pig prices.
- They want to avoid the costs of duplicate stocking units (sku),
segregation, logistics, etc. that buying pigs with Canadian ties will
allow.
The packers that plan to use Canadian-origin pigs may believe any or all
of those reasons, too. They have just decided that the reasons are
trumped by the economic realities of large plants with high fixed costs
that require high throughput. They will, consequently, find a way to
efficiently use at least some Canadian pigs.
Under the original 2003 mandatory COOL rules, product from any pig with
a Canadian tie could have carried the same label, simplifying the
segregation process. Not so under the most recent set of rules.
Products from pigs born in Canada and raised and slaughtered in the
United States will carry a “Product of the United States and Canada”
label. Product from pigs imported from Canada for immediate slaughter
(i.e. born and raised in Canada) will carry a “Product of Canada and
the United States” label.
The class that is most in question is Canadian market hogs shipped to
the United States for slaughter. As can be seen in Figure 1, that
number has dropped from 3.28 million head in 2007 to a projected volume
of just under two million head this year. The weekly numbers (Figure
2) have been falling all year, but they have moved sharply lower since
Oct. 1, when the rules went into effect. Further, the drop in market
hog imports has coincided with a noticeable increase in Canadian hog
slaughter (Figure 3). Canadian slaughter during the five weeks prior
to COOL’s Sept. 30 start-up had averaged 205 head/week less than one
year ago. The five weeks since then have seen those numbers rise to
11,504 head/week more than one year ago. Imports of these hogs could be
headed to zero. I don’t see any way for packers to handle three
labels efficiently.
I think the real question is what will happen with Canadian weaned pigs
and feeder pigs? Those numbers (Figure 1) are about even with last
year. The weekly data trended downward early this year, but have
recently been in the 110,000 to 120,000/week range. Currently, there is
a lot of interest on the part of U.S. finishers in securing sources of
U.S.-born pigs. That has understandably put negative pressure on prices
of Canadian pigs. Much of this shift, though, is based on fear of the
unknown – just how will U.S. packers play this thing out? Will there
be problems when USDA’s six-month “education” period ends March
30, 2009?
The ultimate answer will be two-fold. First, how will U.S. consumers
react to the “Product of the United States and Canada” label? My
guess is that U.S. consumers will not mind that at all. We have a
pretty positive view of things “Canadian” and I’m sure the product
will not be visibly different from U.S. product. This will probably not
be the case for the beef industry, where there will be countries other
than Canada added to the list. I think U.S. consumers’ views of
labels including Mexico, Uruguay, Brazil, etc., will be somewhat more
negative.
Second, how will the logistics work out and what will be the ultimate
costs of segregation, additional skus, etc.? That will be highly
dependent on how much of the product can be merchandised through exports
and foodservice where it does not have to be labeled. It will also
depend on any technological solutions that can be brought to bear. For
example, will labeling application, bar-coding or some other technology
be developed to make the multi-label solution less onerous? My guess is
yes. Necessity is still the mother of invention, and anyone who has been
through modern packing plants knows that these people can be pretty
clever with machinery.
Again, COOL is certainly not a good thing for Canadian producers. It is
worse for those who are currently shipping market hogs to the States.
At present, it is certainly bad for sellers of weaned pigs and feeder
pigs, but I think that will get better when the fear factor subsides a
bit. COOL will benefit Canadian packers and the product from any pigs
left in Canada, by COOL restrictions, will still compete directly with
U.S. product either in the U.S. market or an export market common to the
United States and Canada. In the long run, that will be bad for U.S.
producers, too.
But this whole thing is better for Canadians with the loonie (Canadian
dollar) at $0.80 or even $0.85 than it was at $1.02.
Click to view graphs.
Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
e-mail: steve@paragoneconomics.com
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Production Preview
Is PRRS Eradication
Possible?
Porcine reproductive and respiratory syndrome (PRRS)
virus continues to be an issue for North American pork producers.
Obviously, if we were to have the capabilities to eradicate this
disease, it could save the industry millions of dollars. The results of
a regional pilot project provide some room for optimism in regard to
eradication of this disease.
Researchers at the University of Minnesota chose Rice County, MN as the
region to study on PRRS control. Based on information provided by the
Minnesota Board of Animal Health database, there were 35 producers and
49 sites in the county.
In the first phase of the study, producers were asked if their herds
could be tested for PRRS and whether they would share this data with
other producers. In addition, researchers wanted to identify the
prevalence of PRRS and assess the geographical distribution of the viral
strains in the region.
Ninety percent of producers willingly participated and openly shared the
status of their farms. They also shared their positive experiences and
their frustrations with virus control.
In the second phase, the project was expanded to include Stevens County
in west-central Minnesota. Stevens County is very different from Rice
County because many of the herds are primarily for seedstock production.
While there was no funding for testing in Stevens County (as there was
in Rice County), the observations were similar.
Researchers were able to assemble a list of challenges and general
conclusions as a result of this study:
-
Local veterinarians play an important role and must be on-board for a
project to succeed. In this study, local veterinarians were supportive
and approached their key clients to enlist support. In turn, producers
looked to their local veterinarian for guidance.
- Begin with the end in mind. Researchers initially wanted “PRRS
control,” meaning no PRRS spread within the region. Long-term, they
want no PRRS-positive pigs entering the region. To date, this goal has
not been accomplished, but they feel they are making progress.
- Although 90% participation is excellent, full participation is
preferable.
- Permanent sites can be identified quickly, but “new” sites were
continually found, particularly related to pigs for exhibition or
producers who might finish a group and then exit the business for
awhile.
- Maintaining engagement was difficult. A few dedicated producers
would attend all quarterly meetings, but most eligible producers don’t
attend, which makes communication on program status difficult.
- A program is costly. Ultimately, producers will have to bear the
cost of clean-up, but creative solutions from the leaders in the region
are necessary.
- Pilot projects of this nature have more impact than research studies
conducted elsewhere. The researchers say negative impacts, such as the
cost of an outbreak or the impact on growth performance, are valuable
motivators for being involved. Similarly, positive stories of local
producers creating a stable sow herd or having less health problems when
they are receiving PRRS-negative pigs will have impact, researchers
say.
- Commitment is necessary. While producers may say they will test
their herds, share data and attend meetings, this wasn’t always the
case. Again, the encouragement of local veterinarians is essential to
overcoming this barrier.
In summary, the researchers believe regional eradication of PRRS is
achievable with current diagnostic tools, vaccines and knowledge on
biosecurity and elimination methods, though challenges are substantial.
Editor’s Note: This information was condensed from a paper
presented at the 2008 Banff Pork Seminar, entitled, “Regional
Eradication of PRRS Virus: A Pilot Project.” The research was
performed by Bob Morrison, Spencer Wayne, Peter Davies and Scott Dee.
Lead research was Bob Morrison, College of Veterinary Medicine,
University of Minnesota, St. Paul, MN.
Legislative Preview
High Food Prices
Deserve Another Look
The National Farmers Union (NFU) has called on Congress
to take another look at the causes of high food prices, following up on
hearings on high food and commodity prices held last spring. NFU said,
“It is clear that contrary to claims of food processors, retailers and
others quick to criticize agricultural commodities, commodity prices
have very little impact on the American consumers’ cost of food. It
is equally clear that processors and retailers are pocketing the
economic benefits of declining farm commodity prices and reduced energy
costs without passing those savings on to the consumer.” In a letter
to the Congressional Joint Economic Committee and the House Small
Business Committee, NFU reminded the committee leadership that some
groups testified earlier this year that increased retail food prices
were the result of the rising cost of agricultural commodities and
renewable fuels. NFU said, “This portrayal of retail food prices is
finally being proven inaccurate by recent market conditions.”
Corn, Soybeans Forecasts Lowered – USDA’s latest crop
production report shows corn and soybean production down from its
October forecast. Corn production is now forecast at 12.02 billion
bushels. Yields are expected to average 153.8 bu./acre, down 0.1%
compared to October. If this forecast is realized, this will be the
second-largest corn crop ever. Soybean production is forecast at 2.92
billion bushels, down less than 1% from the October forecast. Yields
are expected to average 39.3 bu./acre.
2008 Election Results Continue — So far, Democrats have
gained six Senate seats – Colorado, New Hampshire, New Mexico, North
Carolina, Oregon and Virginia. Three Senate seats have yet to be
decided, including:
- Georgia: Having failed to receive 50% of the vote, Senator
Saxby Chambliss (R-GA), ranking member of the Senate Agriculture
Committee, is forced into a Dec. 2 runoff election under state law.
- Minnesota: Senator Norm Coleman (R-MN) is leading Al Franken by
approximately 200 votes. Minnesota will conduct a mandatory
recount.
- Alaska: Votes are still being counted; as of Nov. 13, Anchorage
Mayor Mark Begich was leading Senator Ted Stevens (R-AK) by less than
1,000 votes.
Democrats have also picked up 22 seats in the House of Representatives.
There are still six House races that have not been decided. The House
and Senate caucuses will meet the week of Nov. 17 to choose their
leaders for the 111th Congress.
Transition Begins — The Obama transition has begun with the
selection of Congressman Rahm Emanuel (D-IL) to serve as President-elect
Barack Obama’s chief of staff. Prior to being elected to Congress,
Emanuel served in the Clinton White House where he was in charge of
securing congressional passage of the North American Free Trade
Agreement (NAFTA). President-elect Obama will soon be naming transition
teams for each of the federal departments. Secretary of Agriculture Ed
Schafer explained that over the past several months, federal
departments, including the USDA, began preparing for the presidential
transition. Earlier this year, President Bush charged members of his
administration to begin the most comprehensive transition effort ever to
ensure the President-elect has complete cooperation from the current
administration for a smooth, seamless transfer of authority.
Livestock Provisions of National Organic Program — USDA’s
Agricultural Marketing Service (AMS) is proposing to amend the livestock
provisions of the National Organic Program. The revisions are intended
to provide greater detail for livestock regulations of pasture and
ruminant animals. According to the proposed rule, "By specifying in
greater detail that producers are to provide ruminants with pasture,
recognize pasture as a crop, and incorporate pasture into their organic
system plan, producers will have better records and tools for managing
pasture and demonstrating compliance with the livestock regulations.
Certifying agents will have better tools for measuring compliance with
the livestock regulations ... [The] proposed rule would also clarify the
replacement animal provision for dairy animals ..." The deadline for
public comments on the proposed rule is Dec. 23, 2008.
P. Scott Shearer
Vice President
Bockorny Group
Washington, D.C.
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Click on the Baytril 100 logo for more information.
Pork Industry Calendar
Nov. 20, 2008: Kansas State University
Swine Day, Alumni Center, Manhattan, KS; contact: www.ksuswine.org
Dec. 4-5, 2008: National Swine Improvement Federation Annual
Conference, Embassy Suites Hotel, St. Louis, MO; contact: Glenn Conatser
at gconatse@utk.edu or go to www.nsif.com.
Click
here to get National Hog Farmer's complete pork
industry calendar.
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