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|November 17, 2006|
Table of Contents|
Market Slippage No Surprise
Season Impacts Productive Herds Less
Voters Send Administration a Message
Sow Farm Serviceperson & Production Manager
Market Slippage No Surprise
This week's cash hog market is somewhat of a head-scratcher. Not that I didn't expect lower prices. Anyone who has been around the hog business for long expects lower cash prices come late November.
The usual culprit this time of year is a declining cutout value. The push for Thanksgiving hams is well behind us and any momentum left from preparations for Christmas ham sales is waning quickly. The seasonal strength of those grilling cuts is definitely past and there are no more fresh tomatoes to maintain much strength in the belly (bacon) market, even though that is not as big a seasonal factor as it once was.
But cutout values have been relatively stable for the past few weeks (see Figure 1) and have actually risen this week. That is certainly a good sign for pork producers given the fact that boneless/skinless chicken breasts, a major competitor for loins at the retail level, are back below $1/lb. again.
In addition, slaughter rates are not reflecting a huge flood of hogs. Sure, daily slaughter runs of roughly 420,000 head are astounding from a historical perspective, but the U.S. slaughter sector has shown that it can handle those kind of numbers with relative ease, provided there is a margin to be earned.
My estimates show that packer margins have been about normal through the week that ended Nov. 4, the last week for which by-product value data are currently available (see Figure 2). I suspect that we will see margins grow when data for this week is published, but that should surprise no one. Packers' highest margins almost always occur in late November or early December.
What I suspect is happening is this: A good number of producers are now feeding expensive corn to hogs. Even those who planned ahead may well have missed the lower-priced corn of August when they were quite logically waiting for harvest lows that never happened. High-cost corn means high-cost feed and a strong incentive to move hogs to slaughter. Average carcass weights last week were 3 lb. lighter than one year ago.
Even though slaughter levels are close to those predicted by the September pig report, I think they are really a function of an awareness by packers that hogs are moving to slaughter earlier and that any run-up in slaughter could cause real shortages later on. The logical reaction is to take advantage of producers pushing hogs by keeping slaughter levels near expected levels and increasing margins by simply bidding lower for the pigs.
Chicago Mercantile Exchange (CME) Lean Hog futures have fallen largely due to cash price weakness at the same time that commodity funds (most notably the Goldman-Sachs fund) were rolling out of long December positions. Put the two together and you have a significant break in futures prices.
If you missed selling on the contract life highs last week, don't panic. Cash markets and the front month heavily influence futures prices. If we are, in fact, selling hogs earlier than normal due to high feed prices, it will catch up to this market at some point and give some support to cash prices. Chicken producers are working hard to reduce supplies as well, and any support they can give to breast prices will be positive.
I expect some recovery in the futures markets and would urge producers to take some price protection on rallies. Again, selling into a rally is almost always a good move provided the actual price represents a profit!
Click to view graphs.
Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
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Season Impacts Productive Herds Less
In keeping with the seasonal impact theme, this week's column is devoted to the effect of season on live born litter size.
The causes of seasonal changes in sow productivity are not completely clear. Shortening photoperiod (day length) seems to play a role, while the role of temperature is harder to describe.
A while back, we considered how farrowing rate differs with season across herds in the United States, Canada and Brazil. Because of its proximity to the equator, Brazil experiences relatively small changes in photoperiod and warmer temperatures. At the other end of the spectrum, Canada is a colder climate with substantial differences in day length between summer and winter. The United States lies somewhere in between.
With these contrasts in mind, we used weekly production records from 68 herds in the United States (Iowa), Canada (Manitoba), and Brazil (Sao Paulo, Minas Gerias, Mato Grosso and Mato Grosso do Sul) to predict the weeks when herd average litter live born would fall more than one standard deviation below its annual average. Photoperiod was estimated using sunrise and sunset times, while temperature was estimated using average monthly temperature from the regional capitals.
For the entire data set, weeks with low average litter live born were less likely to occur under longer photoperiods and increasing day length. Alternatively, low weekly farrowing rate (where the farrowing rate fell more than one standard deviation below the annual average) was predictive of weeks with low average litter live born. Average monthly temperature was not a significant predictor.
Interestingly, the predictions changed when the herds were divided based on their annual litter live born averages. For herds where annual litter live born average was less than 10.5 pigs, the relationships between photoperiod, direction of day length change (increasing or decreasing), and low farrowing rate were the same.
However, for herds with an average annual litter live born greater than 10.5, photoperiod was no longer predictive. Instead, weeks with 80% or more of the sows farrowing with a prior litter (i.e., had two or more litters) were protected against low litter live born.
Figure 1 shows the percent of herds with low weekly average litter live born by week of the year. Figure 2 contains estimates of the odds ratios for factors predictive of low weekly average litter live born.
While we have yet to answer the question of photoperiod vs. temperature, study outcomes increasingly suggest that herds achieving higher productivity appear less sensitive to seasonal fluctuations.
Stephanie Rutten, DVM
University of Minnesota
Editor's Note: Editor's Note: To learn more about benchmarking, go to www.pigchamp.com. For all your agricultural news, markets and commentaries, go to www.farms.com.
Boehringer Ingelheim is awarding $75,000 annually to fund three research proposals to help solve PRRS. Submit yours by January 1, 2007. Visit http://www.prrsresearch.com/symposium3.html
Voters Send Administration a Message
The voters sent a strong message to President Bush and the Congressional Republican leadership when the Democrats were elected to take control of both the Senate and the House of Representatives. Democrats gained six Senate seats and 29 House seats. There are a few House seats still waiting the final results do to recounts. The four most important issues cited by voters were the economy, corruption in government, terrorism and the war in Iraq. Sixty percent of voters disapprove of the war in Iraq and indicated that the long-term security of the United States has not improved. Forty percent of the voters disapprove of Bush, 40% indicated the President was not a factor in their voting, and 20% voted Republican to show their support of the President. Other views expressed by voters: over 60% disapprove of Bush's job performance, 60% disapprove of Congress' job performance, and 50% indicated the economy was not good. Voters were split on the immigration issue -- 60% indicating that illegal immigrants working in the United States should be offered an opportunity to apply for legal status, while 40% said they should be deported.
110th Congress -- With the change in control of the Congress, there will be a number of new leaders. In the Senate, Harry Reid (D-NV) will serve as majority leader and Dick Durbin (D-IL) will be the majority whip. Senator Mitch McConnell (R-KY) will serve as minority leader and Senator Trent Lott (R-MS) will be minority whip. Durbin serves on the Senate Agriculture Appropriations subcommittee and McConnell is a member of the Senate Agriculture Committee. In the House of Representatives, Nancy Pelosi (D-CA) will be the first female Speaker of the House. The new majority leader will be Congressman Steny Hoyer (D-MD). Congressman James Clyburn (D-SC) will be the new majority whip. Speaker Dennis Hastert (R-IL) announced he will not serve as a leader of the House Republicans. The Republicans were electing their new leaders at press time.
House & Senate Agriculture Committees -- Congressman Collin Peterson (D-MN) will be the new chairman of the House Agriculture Committee with Congressman Bob Goodlatte (R-VA) serving as ranking member. There will be at least seven new members of the House Agriculture Committee. Approximately 75% of the new committee members have never been through a farm bill debate. Senator Tom Harkin (D-IA) will serve as chairman of the Senate Agriculture Committee and Senator Saxby Chambliss (R-GA) will be the ranking member. The Democratic leadership has appointed Senators-elect Bob Casey (D-PA), Amy Klobuchar (D-MN) and Sherrod Brown (D-OH) as new members of the committee. The Republican leadership will make their appointments next month.
Animal Terrorist Acts -- The House of Representatives passed the "Animal Enterprise Terrorism Act of 2006." The legislation increases penalties for criminal acts against animal enterprises (farms, meat processing companies, laboratories, animal shelters, pet stores, breeders or furriers). It revises criminal prohibitions against damaging or interfering with the operations of an animal enterprise to include "intentional damage or loss to any real or personal property and intentional threats of death or serious bodily injury against individuals." The legislation passed the Senate in September. President Bush is expected to sign the legislation.
Lame Duck Session -- There are a number of issues that need to be finished before the 109th Congress adjourns. The main items the House and Senate leadership hope to finish are appropriations bills (including agriculture), tax extenders and the Vietnam trade bill.
Russia WTO -- The United States and Russia have reached a bilateral market access agreement concerning Russia's entry into the World Trade Organization (WTO). According to the U.S. Trade Representative (USTR), the agreement will continue to enforce the 2003 Bilateral Meat agreement, which covered beef, pork and poultry through 2009. The tariff commitments will benefit food processors of wheat, corn, barley, apples, pears, grapes, raisins, almonds, walnuts, pistachio nuts, dairy, soybeans, soybean meal, soybean oil, pet food, pork, beef and poultry once Russia joins the WTO. The National Pork Producers Council (NPPC) said the 2003 meat agreement on a country-specific quota for U.S. pork has allowed U.S. pork exports to increase from $8 million in 2003 to $72.2 million in 2005. Russia imports approximately $1 billion in U.S. agricultural products annually.
USDA Nominations -- Mark Keenum, chief of staff to Senator Thad Cochran (R-MS), has been nominated to be USDA Under Secretary of Agriculture for Farm and Foreign Agricultural Services. Keenum has been involved in a number of previous farm bills. He is a former assistant professor of economics at Mississippi State University.
P. Scott Shearer
Bockorny Petrizzo, Inc.
NPPC -- the leading advocate for pork producers
* Backed successful repeal of anti-trade Byrd Amendment
* Obtained favorable treatment for pork in U.S. -- Peru trade pact
* Negotiated legal protections for producers in air consent agreements
Be part of the progress.
Go to www.nppc.org/producers/SIP.html to join the Strategic Investment Program.
Sow Farm Serviceperson & Production Manager
WYOMING -- Sow Farm Serviceperson - 14,000+ sows. This position is responsible for the supervision of all sow farm operations and all employees within the sow farms. The Serviceperson will provide site managers with the tools, equipment, personnel and inventory to assure safe, quality production that meets production targets set by management. He/she will monitor all sow farms for proper animal condition, overall herd health, cleanliness and maintenance and ensure proper training and procedures are implemented.
Interested candidates please mail resume and cover letter to Clougherty Packing, attn: Susan Howard, 59 W. Center St., Snowflake, AZ 85937 or e-mail resume to email@example.com.
ARIZONA -- Production Manager -- New
multi-complex site under development with the capacity of 140,000 head
of wean to finish pigs. This position will train and develop new
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The Production Manager will be responsible for the financial performance
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timely production data. He/she will also be responsible for effluent
management, coordinating market loads, interacting with complex owners
and assuring bio-security is maintained. Bi-lingual (English/Spanish)
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Dale Miller, Editor, National Hog Farmer
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