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March 6, 2009 A Penton Media Property



Table Of Contents
Forecasters Predict 10-15% Drop in Pork Exports
Influenza Subtype Trends
President Obama Releases Budget





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Dale Miller, Editor, National Hog Farmer

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Market Preview
Forecasters Predict 10-15% Drop in Pork Exports
“What are exports going to do this year?” I get that question a lot these days as producers, packers and processors, knowing the huge role that exports played in 2008, contemplate what is almost certainly the first year-on-year export decline in 18 years. Note: The first year of this growth period, 1999, was not a record year. That year exports were larger than those of 1998 but not those of 1997. Thus, we have just completed our 18th year of export growth but only our 17th-consecutive record year of increases in pork exports.

The two biggest, most widely watched, long-term models of U.S. agriculture are USDA’s Baseline Projections and the FAPRI Baseline Forecasts from the Food and Agricultural Policy Research Institute at the University of Missouri and Iowa State University. The USDA Baseline, released in February, predicts that U.S. pork exports this year will fall by 11.2% from 2008 levels. FAPRI’s forecast, which is being released this week, pegs the year-on-year decline at 14.6% this year. Interestingly, another USDA publication, the February edition of the World Agricultural Supply and Demand Estimates (WASDE) pegs 2009 pork exports at 15.2% smaller than last year.

It appears that the modelers think exports will decline by 10 to 15%. Since exports accounted for almost exactly 20% of U.S. production in 2008, this decline would leave 2 to 3% more pork on the U.S. market this year.

Comparing Pork Export Trend Data
All of this talk drove me to look at monthly pork export data since 1990, to see what trends would suggest, and how the surge in 2008 compared to those trends. What I found, I think, is pretty interesting. I hope you agree.

Figure 1 shows the actual data as well as four separate trend lines. The first trend encompasses all of the data, including 2008. It is a polynomial function that accounts for the accelerating growth rate of U.S. exports. But even using an accelerating export rate, this function’s prediction for 2009 exports is 7.3% lower than for those of 2008 – due to the huge surge last summer.

The three other trends all apply to subset time periods. The first is a pre-NAFTA (North American Free Trade Agreement) trend from 1990 through 1994. Average monthly exports during this period were 27.86 million pounds. Interestingly, though the slope of this line is less (flatter) than the other trends, the compound annual growth rate (22.6%) is the highest of the sub-periods. The reason: It doesn’t take much unit growth to get a high growth rate when exports are relatively low. And due to those relatively low average export amounts, the coefficient of variation (CV) of exports (ie. the standard deviation divided by the average) is high at 22.8%. What appears to be stability is actually a function of the size of the business at that time.

The second trend runs from 1995 through 2003, and is different from the earlier trend, primarily due to NAFTA. Average exports were 103.77 million pounds per month and, even though the unit growth was faster (ie. the slope is steeper), the compound growth rate slowed to 10.4% per year. The period saw higher unit variability, but a lower CV (relative variability) of 13.9%.

The third trend begins in 2004 and runs through 2007. Discovery of BSE (bovine spongiform encephalopathy) in the United States in December 2003, and tariff rates going to zero between NAFTA signatory countries and trade agreements with Central America, Russia and Australia, all contributed to the shift. Average exports jumped to 228.8 million pounds per month and, even at these higher unit levels, the growth rate increased to 12.1% per year. While variation in unit terms certainly increased, relative variability actually fell again with the CV for this period being just 11.7%.

So what does all of this mean for the future?
  • It appears that the long-term, polynomial function provides a very rosy forecast for 2009 due to the influence of the 2008 surge. But even if this trend does hold, 2009 exports would be 7.3% lower than in 2008.
  • Throwing out the 2008 data and using the 2004-2007 trend suggests that 2009 exports will be roughly 3.9 billion pounds, 16.8% lower than in 2008.
  • Based on the ’04-’07 trend, the data suggested that the 2008 trend in exports would have been 3.557 billion pounds, 13.3% higher than in 2007. So the 2008 surge added 1.111 billion pounds to 2008 exports.
And what if China/Hong Kong had just bought their “normal” amounts in 2008? Figure 2 shows where exports would have been had growth in exports to China/Hong Kong from September 2007 through November 2009 had been linear – just a straight line connecting the two months. The interesting result is that, even without the surge to China/Hong Kong last year, U.S. pork exports would have been 31% larger than in 2007.

If we can hold onto only that growth this year, the forecasts of an export decline may be far too pessimistic.




Click to view graphs.

Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
e-mail: steve@paragoneconomics.com



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Swine Health Preview
Influenza Subtype Trends
We have summarized data from our respective diagnostic laboratories (Iowa State University and the University of Minnesota) in many prior issues of this newsletter. Kent Schwartz, DVM, at Iowa State has been an advocate of pooling our data to get a more composite view of disease trends. The data presented this month is a first step in that direction.

Schwartz provided influenza subtyping data from the group working with Kyoung-Jin Yoon, DVM, and Bruce Janke, DVM. We pooled this with data from the group in Minnesota working with Marie Gramer, DVM, for an overview of the trends for influenza subtypes for Iowa and Minnesota. The resulting combined database includes 2,283 subtyping results for the five-year period from 2004 through 2008 (Figure 1).

These data provide information on some trends that have been observed in the field: a general decrease in the proportion of H3N2 influenza subtypes in both Iowa and Minnesota over the past five years and an increase in the proportion of H1N2 subtypes in 2007 and 2008.

Data Limitations
Although we believe the general trends, these data do not represent true prevalence values, so care should be taken with interpretation. First, these subtype results are from cases submitted for diagnostic evaluation rather than samples for purposes of determining the prevalence. Second, subtyping is not successful in all of the cases where influenza is diagnosed. In this data set, definitive subtyping was available in less than 10% of the cases with a positive PCR result for influenza. Thus, even though we have a large database, there is potential for bias in the results.

Subtype Variant Trends
Many variants within each subtype have emerged over time and are also tracked. In this case, the data set is from Minnesota cases only (for now, at least). Charts presented in Figure 2 break out the trends for H1 variants over time in four states where we had sequence data on at least 200 H1 subtypes. Data for Iowa, Illinois and North Carolina farms are only available for 2006-2008. There are even more limitations on these data, as sequencing is performed on an even smaller subset of the PCR positive cases, often related to problem herds that may not represent the general population. With those limitations in mind, it is interesting to note a higher proportion of cases in Illinois and North Carolina of the Indiana-like swine influenza virus, in addition to other differences among the states over a three year period.

Figure 3 illustrates the distribution of H3 variants in the same four states over the same period. Each state has a slightly different pattern, with a recent increase in the proportion of Cluster III cases in Illinois and North Carolina, a decrease in Minnesota and an apparently stable Cluster IV variant population in Iowa.

Variant Impact
Monitoring changes in the swine population for influenza variants is important for ongoing management of respiratory disease in pigs. Developing a stronger understanding of regional differences in the influenza populations will provide important information for more targeted disease control. Pooling data will be an important tool for improving this understanding. We appreciate the efforts of Schwartz to forward this goal.




Click to view graphs.

Jerry Torrison, DVM
University of Minnesota Veterinary Diagnostic Laboratory
torri001@umn.edu



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Legislative Preview
President Obama Releases Budget
President Barack Obama released his proposed $3.6 trillion budget for fiscal year 2010. The budget outlines the administration’s priorities for health care, education and energy independence. The administration plans to cut the deficit it inherited in half, from $1.3 trillion to $533 billion, by the end of President Obama’s first term. The budget will include pay-as-you-go budgeting. This is a very aggressive budget. More details concerning the budget proposals will be released in April.

Agriculture & Fiscal Year 2010 Budget — The administration’s proposed budget for the U.S. Department of Agriculture (USDA) proposes more investments in child nutrition, food safety, rural development and renewable energy. The budget also proposes implementing a limitation of $250,000 in farm payments. The most controversial proposal is the phasing out over three years of direct payments to producers with sales revenues of more than $500,000. This proposal was not well received by key congressional agricultural leaders and farm and commodity organizations.

Highlights of the administration’s budget:
  • “Provide over $20 billion in loans and grants to support and expand rural development activities, including small businesses, renewable energy and telecommunications.
  • Include a $50 million increase to address deferred maintenance on the most critical health and safety infrastructure within our national forests.
  • Support the implementation of a $250,000 commodity program payment limit. The payment limit will help ensure that payments are made to those who most need them.
  • Reflect the president’s commitment to wildfire management and community protection by fully funding suppression costs at the 10-year average, establishing a discretionary contingent reserve for wildfires, and including program reforms to ensure fire management resources are focused where they will do the most good.
  • Fully funds the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) to serve all eligible individuals.
  • Include $1 billion per year for the Child Nutrition reauthorization.
  • Support a pilot program to help increase senior participation in the Supplemental Nutrition Assistance Program.
  • Reflect the president’s commitment to supporting independent producers through improved enforcement of the Packers and Stockyards Act and investing in the full diversity of agricultural production, including organic farming and local food systems.
  • Reflect the president’s commitment to fiscal responsibility by reducing direct payments to the largest farmers, reducing crop insurance subsidies, eliminating cotton storage credits, eliminating funding for the Resource Conservation and Development program and reducing funding for overseas brand promotion.”
Vilsack Outlines USDA Priorities — At USDA’s Outlook Forum last week, Secretary of Agriculture Tom Vilsack outlined President Barack Obama’s three goals for USDA. The priorities for the agency are:
  • To make sure that America’s children have more nutritious food.
  • To do everything USDA can to expand energy opportunities and the capacity of land, farm and ranches to produce alternative forms of energy and fuel.
  • To make sure USDA is working hard at doing the research necessary to allow, over time, agriculture to transition away from its rather significant dependence today on fossil fuels.
The administration’s proposed budget reflects these priorities.

Bipartisan FDA Food Safety Bill — Senators Dick Durbin (D-IL), Judd Gregg (R-NH), Ted Kennedy (D-MA) and Richard Burr (R-NC) introduced the “FDA Food Safety Modernization Act” that will give the Food and Drug Administration (FDA) new authorities, tools and resources to reform the nation’s food safety system. Senator Durbin said, “Over the last year, we’ve seen major recalls of peanut butter spiked with salmonella, spinach laced with E-coli and chili loaded with botulism. These are not isolated incidents and are the result of an outdated, under-funded and overwhelmed food safety system. Today’s bipartisan bill will improve the FDA’s ability to prevent food-borne illness outbreaks and ensure FDA responds quickly and effectively when outbreaks do occur.” The legislation has a number of goals:

Improves our capacity to prevent food safety problems
  • Hazard analysis and preventive controls: Requires all facilities to have in place preventive plans to address identified hazards and prevent adulteration, and gives FDA access to these plans and relevant documentation.
  • Access to records: Expands FDA access to records in a food emergency.
  • Third party labs and audits: Allows FDA to recognize laboratory accreditation bodies to ensure U.S. food testing labs meet high-quality standards and requires food testing performed by these labs to be reported to FDA. Allows FDA to enable qualified third parties to certify that foreign food facilities comply with U.S. food safety standards.
  • Imports: Requires importers to verify the safety of foreign suppliers and imported food. Allows FDA to require certification for high-risk foods, and to deny entry to a food that lacks certification or that is from a foreign facility that has refused U.S. inspectors.
Improves our capacity to detect and respond to food-borne illness outbreaks
  • Inspection – Increases FDA inspections at all food facilities, including annual inspections of high-risk facilities and inspections of other facilities at least once every four years.
  • Surveillance – Enhances food-borne illness surveillance systems to improve the collection, analysis, reporting and usefulness of data on food-borne illnesses.
  • Traceability – Requires the secretary of Health and Human Services to establish a pilot project to test and evaluate new methods for rapidly and effectively tracking/tracing fruits and vegetables in the event of a food-borne illness outbreak.
  • Mandatory recall – Gives FDA the authority to order a mandatory recall of a food product when a company fails to voluntarily recall the product upon FDA’s request.
  • Suspension of registration – Empowers FDA to suspend a food facility’s registration if there is a reasonable probability that food from the facility will cause serious adverse health consequences or death.
Enhances U.S. food defense capabilities – Directs FDA to help food companies protect their products from intentional contamination, and calls for a national strategy to protect our food supply from terrorist threats and rapidly respond to food emergencies.

Increases FDA resources – Increases funding for FDA’s food safety activities through increased appropriations and targeted fees for domestic and foreign facilities.

The bill has been endorsed by the Grocery Manufacturers Association and the National Restaurant Association.

P. Scott Shearer
Vice President
Bockorny Group
Washington, D.C.



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Pork Industry Calendar
March 24, 2009: Livestock Manure Management Conference workshop, sponsored by the University of Illinois, Knights of Columbus Hall, Effingham, IL; register by calling (800) 345-6087. Access the conference brochure at http://www.livestocktrail.uiuc.edu/manure/.

March 26, 2009: Livestock Manure Management Conference workshop, sponsored by the University of Illinois, Wise Guys Bar & Grill, Princeton, IL; register by calling (800) 345-6087. Access the conference brochure at http://www.livestocktrail.uiuc.edu/manure/.

Click here to get National Hog Farmer's complete pork industry calendar.



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