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Dale Miller, Editor,
National Hog Farmer
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Market Preview
Market
"Spasms" Spawn Uncertainty
Uncertainty is a bad thing for a business climate. The
uncertainty of capital markets is largely responsible for the spasms (as
my friend John Ginzel calls them) that are going through the equity
markets these days. And the uncertainty of mandatory country-of-origin
labeling (COOL) and its impact on packers’ procurement plans is
apparently causing spasms in the Canadian feeder pig and weaner pig
industry as well.
I still believe this situation will work out over time and that U.S.
packers will buy Canadian-born pigs, primarily because they cannot do
without seven million market animals. I also believe that U.S. feeders
will buy young pigs since U.S. packers will buy them and, ultimately,
that Canadian farrowing operations will produce them. But getting from
this current state of uncertainty to that point may have its own
“spasms”.
Canadian journalist Bruce Cochran quoted Manitoba Pork Council Chair
Karl Kynoch this week, saying: “There are a lot of weanlings that
don’t even have homes anymore.” It was a reference to U.S. buyers’
backing away from Canadian pigs. Imports of Canadian feeder/weaner pigs
indeed fell last week to just over 100,000 head from nearly 120,000 head
the week before (See Figure 1). Canada’s Thanksgiving celebration on
Oct. 13 played a role in that decline, but the week’s total was 19%
lower than one year ago and only 1% larger than the five-year average.
I have to agree with Mr. Kynoch’s statement that this disruption,
though I think it’s temporary, will drive more Canadian sows out of
production. Canada’s producers have been through difficult times and
many simply do not have the financial wherewithal to stand another hit.
Canada’s October Hog Statistics report is due out next week. It will
not reflect this most recent pressure, but it should be watched closely
to see if the July breeding herd number (which I and nearly every other
analyst that I know thought was far too high) is revised downward.
Watch for discussion in next week’s North American preview.
U.S. Markets Bare Watching, Too
U.S. hog markets remain on the retreat this week as turmoil in world
financial markets continues to spill over into agricultural markets,
primarily via heightened concern about meat demand, in general, and
export demand, in particular. The rate of U.S. pork export growth
slowed in August, but remained 57% higher in volume (product weight) and
64% higher in value than one year ago. Those are far short of the
virtual doubling of exports in April through July, but it still leaves
year-to-date exports up 68% in volume and up 62% in value (see Figures 2
and 3).
But there are ample reasons for concern. First, prices of trimmings and
hams have fallen sharply since August, when they led a surge in U.S.
cutout values and hog prices; 72% trimmings are down 54% since August 15
and 42% trimmings are down 62%. Ham primal values are 43% lower at a
time of year when they are usually, at worst, holding steady and, at
best, increasing gradually as holiday ham needs are filled.
The latest pork export data available are for August, but weekly beef
export data are troubling to say the least. More on that later.
Altin Kalo of Steiner Consulting Group, writing for Chicago Mercantile
Exchange (CME) Group’s Daily Livestock Report this week, pointed out
that beef exports have fallen from about 15,000 metric tons/week in
August to just 7,000 MT last week. The largest contributor to that
decline was a roughly 75% drop in shipments to Mexico, our heretofore
largest beef customer this year. Shipments to Korea and Japan have
also fallen, even though the Japanese yen has held up to the rising U.S.
dollar much better than most currencies.
Why don’t we have weekly pork export data? Because producers and
packers did not ask for it as part of the Livestock Mandatory Reporting
Act of 1999. Beef producers and packers did. The pork industry
discussed this long and hard, but eventually felt that weekly data would
provide more helpful information to our competitors than it would to the
U.S. industry. I was part of those discussions and, right or wrong,
agreed with that viewpoint. In hindsight, it would be nice to have the
data so we could know more about current market conditions. That can
still be done if the industry decides it would be beneficial.
Finally, pork in cold storage as of Sept. 30 increased by 5% relative to
last month and 4% relative to last year. Ham stocks are up 13%,
year-on-year, while belly inventories are down 33% from last year. Rib
inventories are 15% higher as well, likely reflecting the slowdown of
foodservice trade as the economy softens.
More Meat in Storage
Perhaps more concerning is the level of all meats in storage. In
addition to the growth in pork inventories, chicken inventories were up
16% from last year and up 1% from last month, while beef inventories
were 9% lower than last year, but 2% larger than last month. Perhaps
most notable was turkey stocks that are 22% higher than last year – a
fact not conducive to much recovery in ham pricing during the holidays.
Total meat and poultry in U.S. freezers, at 2.357 billion pounds,
reached the highest level since October 2002 (see Figure 4) when
near-record stocks of pork and chicken and record stocks of beef sent
inventories to a record 2.527 billion pounds. The Sept. 30 total is 1%
higher than last month and 9.2% higher than last year.
Click to view graphs.
Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
e-mail: steve@paragoneconomics.com
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Production Preview
Claw Lesions Only
One Factor in Sow Lameness
Last week, John Deen discussed lameness in the sow herd.
Sows culled for feet and leg problems make up a significant percentage
of total culled females, so the issue is important. In addition,
lameness in swine raises a concern about animal well-being and increased
economic loss. Claw disorders are likely contributors to leg weakness
and subsequent culling.
A study was conducted on three commercial farms in Eastern Japan to
investigate the relationships between claw lesions, reproductive
performance, longevity and postural behaviors in prefarrowing females
and lactating sows. The farms were visited in the summer of 2007 to
observe the claw lesions of 308 lactating sows and 73 pregnant females
in farrowing crates with a totally slotted floor.
Female claws were individually examined for lesions in the farrowing
crates. Seven areas within each eight–claw were classified as: wall,
heel, overgrown heel, white line, junction between the heel and sole
(heel–sole junction), sole and toe. The claw areas were scored on a
scale of 0 (no lesions) to 4 (severe).
The highest lesion score was defined as the highest score of the seven
areas within the eight–claw of each female. Culling risk was defined
as the number of sows culled in one, three and five months from weaning,
divided by the number of sows scored by their claw lesions x 100,
respectively.
Researchers observed two kinds of postural behavior (lying and standing)
at 15-minute intervals for six hours by point sampling. The postural
behavior was expressed as a percentage of the total of 25-time
observations.
Of the 381 females, the proportions of females having at least one claw
lesion with score 4, >3 and >2 were 1.0% (n=4), 5.2% (n=20) and 54.1%
(n=206), respectively. The proportion of females having overgrown heels
with score 1 was 5.0% (n = 19); No female had overgrown heels with score
>2.
The relationship between lameness from these lesions and the effect on
reproductive performance were measured using PigCHAMP data. The highest
lesion scores in each sow did not appear to be associated with adjusted
21-day litter weights, pre-weaning mortality or culling risk within one,
three and five months from weaning. Furthermore, the highest score did
not seem to be associated with behavior in lactating sows and
prefarrowing females.
Why is this information contrary to other studies on lameness and
reproductive performance? First, the number of sows having claw lesions
is very small and, perhaps, one claw lesion out of the seven areas
studied on each sow was not enough to cause a decline in reproduction.
In addition, Japanese herds are smaller than U.S. herds, so animal
husbandry and individual attention to small problems may have been
greater.
Another factor to consider is that claw lesions are only one aspect of
lameness. Other problems include joint and structural ailments.
Regardless, the issue is important and certainly warrants further
research.
Editor’s Note: Information for this commentary was gathered from a
research study submitted to the 2008 Allen D. Leman Swine Conference.
Authors of the research report are: By M. Enokida, Y. Sasaki, Y.
Hoshino, H. Saito, Y. Takai, and Y. Koketsu, Meiji University, Kawasaki,
Japan.
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Legislative Preview
Livestock and Meat
Industries Say No to Ethanol Loans
The livestock and meat industries are objecting to
USDA’s plan to extend rural development loans to ethanol plants that
purchased corn at the higher prices that prevailed earlier this year. In
a letter to Secretary of Agriculture Ed Schafer, the groups said,
“Many of our producer and processor members also took long positions
on corn and soybeans and are paying above-market rates right now. It
will be some months before all the high-priced corn passes through the
system. That is simply the way the commodity markets work, and every
participant has to decide whether to go long or pay the current price.
It seems to be the opposite of free enterprise to insure companies –
and only some companies – against the possibility that their
speculative commodity bets might go wrong.” They also wrote, “High
commodity prices have been wreaking havoc in animal agriculture for
almost two years. Yet no one at USDA has suggested that the government
could provide loan funds to cover our members’ losses in the corn
market.” The groups reminded the secretary, “Despite numerous
requests to create a task force to address the negative consequences of
ethanol mandates in feed prices, USDA did nothing. It is not clear to
us why, now, USDA would be so inclined to provide assistance to one
particular segment of the industry in dealing with a problem that
affects us all.” The groups signing the letter were American Meat
Institute, National Cattlemen’s Beef Association, National Chicken
Council, National Meat Association, National Milk Producers Federation,
National Pork Producers Council, National Turkey Federation and United
Egg Producers.
Credit Derivatives Examined — The House Agriculture Committee
held a hearing to review the role of credit derivatives in the U.S.
economy. The hearing examined the role of credit derivatives, credit
default swaps and the role they may have played in the series of recent
failures and government takeovers of financial institutions.
Congressman Collin Peterson (D-MN), chairman of the committee, said,
“There is an estimated $55 trillion in credit default swaps somewhere
out there, but no one knows for sure if any of these swaps offset each
other, exactly who is on the hook for these swaps, who is trading with
who and on what terms; and worst of all, no one has any idea who is
solvent and who is upside down. The first step we need to take is to
shed some light on just how the unwinding of these obligations will take
place.”
Panel Rules on Sanctions Over Beef Dispute — A World Trade
Organization (WTO) Appellate Panel has ruled that the United States and
Canada were justified in keeping sanctions on against the European Union
(EU) over their ban on imports of U.S. and Canadian beef produced with
growth hormones. U.S. Trade Representative (USTR) stated that this
ruling means there is "no need" to remove the sanctions. The National
Cattlemen’s Beef Association said, “This report validates the
additional duties the United States imposes on certain EU products in
order to balance the trade disparity caused by the EU ban on
hormone-treated beef. The ban, which has been in place for more than 20
years, is scientifically unjustified and fails to satisfy the
requirements of the WTO agreement on Sanitary and Phytosanitary
Measures. The EU claims that amendments made to the ban in 2003 bring
them into compliance with WTO trade requirements. However, the ban
continues to prohibit beef treated with hormones, pending the
availability of further scientific evidence.”
2008 House Races — With just 11 days left before the
election, there are over 80 Congressional races that are considered
competitive at this time – a very large number this close to the
election. Members of the House Agriculture Committee that are
considered to be in competitive races include Congressmen John Barrow
(D-GA), Nancy Boyda (D-KS), Sam Graves (R-MO), Robin Hayes (R-NC), Steve
Kagen (D-WI), Nick Lampson (D-TX), Jim Marshall (D-GA), Tim Mahoney
(D-FL), Marilyn Musgrave (R-CO) and Tim Walberg (R-MI).
P. Scott Shearer
Vice President
Bockorny Group
Washington, D.C.
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Pork Industry Calendar
Nov. 6-7, 2008: Iowa State University Swine
Disease Conference for Swine Practitioners, Scheman Building, Ames, IA;
contact: conference coordinator Julie Kieffer at kiefferj@iastate.edu.
Nov. 11, 2008: Carolina Swine Nutrition Conference,
Sheraton Imperial Hotel in the Research Triangle Park, Raleigh, NC;
contacts: Eric van Heugten, North Carolina State University at
919-513-1116 or Eric_vanHeugten@ncsu.edu or
Bonnie Holloman, Carolina Feed Industry Association at 919-855-8981 or
bonnieholloman@bellsouth.net.
Click
here to get National Hog Farmer's complete pork
industry calendar.
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