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March 23, 2007



Table of Contents
Slaughter Levels Perplexing
Records Hold Key to Averting Bottom-Enders
Farm Payment Limitations
Wanted: Boar Stud Manager

Market Preview
Slaughter Levels Perplexing
One of the big questions in recent weeks is how much of a challenge is being posed by recent slaughter levels? It's a very good question as we approach USDA's March Hogs and Pigs Report, due to be released on Friday, March 30.

Large slaughter runs (Figure 1) the past two weeks and, a slaughter run that is another 1.8% larger through Thursday of this week, have many wondering just where the hogs are coming from. We all know that some marketings have been delayed by weather in recent weeks. But 5% year-over-year increases are just a bit out of the norm these days. And, should that 1.8% week-over-week increase hold for the remainder of this week, Federally Inspected (FI) slaughter will be 11% larger than one year ago.

I'm not alarmed yet. The fact is that we have seen slaughter below the levels expected from the December Hogs and Pigs Report for most weeks this year. That report said that slaughter should have been about 0.6% larger than last year. The cumulative totals for the year were still below that level (0.4%) until last week and is now at 0.9% - and apparently due to grow this week. But larger imports of market hogs from Canada (up 11% YTD from last year) have added about 0.2% to slaughter thus far in 2007. Had those been flat, the total increase in FI slaughter would have been 0.7%, very close to expected levels.

The next few weeks will be critical. Should slaughter remain significantly higher, it will imply substantially improved productivity and that could have important implications for supplies the remainder of this year. A key factor will be how quickly the porcine circovirus associated disease (PCVAD) vaccines become available. All reports indicate that the vaccines are very effective and will significantly reduce death losses. The rate of adoption/availability will be very important.

Meat Stock Supplies Down
Thursday did see some positive supply news for all meats, as the inventory of frozen meat and poultry as of Feb. 28 were 2.3% smaller than one month ago and nearly 15% smaller than one year ago.

Leading the decline on both measures were chicken stocks, which fell to 626.4 million pounds, their lowest level since March 2004. That number is nearly one-third less than the 923.7 million pounds in inventories one year ago. The largest reductions were in legs, leg quarters and thighs that usually enter export markets. These cuts, though, can have significant negative impacts on pork prices when they become very cheap, as they will enter least-cost formulations on many processed meats such as hot dogs and luncheon meats. Leg quarter prices recently went above $0.40/lb., nearly double the price of one year ago.

Chicken breast stocks fell again in March and are now nearly 20% lower than one year ago. These reductions in inventories and the year-to-date reductions in broiler output have pushed boneless/skinless breast meat prices back above $1.50/lb.
That price is nothing to write home about, but it is far better than prices near or below $1.00/lb. that we saw on two occasions last year.

Lower chicken stocks, lower chicken production and higher chicken prices will be positive for pork demand.

Pork inventories were virtually unchanged from last month and 9% lower than one year ago. Belly inventories came in just less than analysts' pre-report estimates and were actually smaller than at the end of January - where the January to February change is normally positive. The draw down was a main reason that trade observers prediction on Thursday afternoon was that the report would be supportive to Pork Belly and Lean Hogs futures.

Stocks of bellies, loins, ribs and butts were all significantly lower than one year ago, with their percentages ranging form 78.3% to 89.7% of last year. In addition, inventories of bellies, loins and butts were down from Jan. 31 levels. These are noteworthy because these four cuts usually enjoy a good deal of seasonal demand strength as spring and summer arrive. Lower stocks bode well for the need for product from daily slaughter in coming weeks.

To Hedge, Or Not
Chicago Mercantile Exchange (CME) Lean Hogs futures price are still higher than I had predicted based on the December Hogs and Pigs Report, so I am still saying that hedges appear to be a wise move.

Will better hedging opportunities arise? Good question. Producers must now weigh the higher slaughter totals of recent weeks and the negative price pressure that continued high slaughter may exert against the long-term tendency of June, July, August and October futures prices to rise in April.




Click to view graphs.

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



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Production Preview
Records Hold Key to Averting Bottom-Enders
Recently, I visited a unit that was experiencing difficulty in getting weaned pigs off to a good start. Pig health was generally good and the herd was negative for porcine reproductive and respiratory syndrome (PRRS) virus, Mycoplasma pneumonia and no signs of influenza were apparent.

Problem groups were intermittent, so the likely suspects -- feed, health, nursery workers, etc. -- were ruled out.

We were left with the question: What are the differences between the groups that start well and those that are problematic? Finding an answer to this question posed a sizeable challenge, however.

The structure of most recordkeeping systems is segmented by phase. We have the capacity to maintain great detail in sow records, yet we begin to lose detail even before pigs are weaned. True age gets lost with fostering, for example.

After weaning, we describe the pigs in terms of group average (i.e., weight, age). Such simple descriptions overlook the variation that occurred in piglet birth weights, wean weights, true age at weaning and maternal immunity. Only when pigs are slaughtered do most records return to the individual level.

Why is this important? It is fair to argue that records that will never be used may not be worth keeping. When all is well, detailed records may seem like an additional burden. But, because of the limiting nature of the segregated record systems, this herd found its options to be quite limited.

To answer the question about group differences, this farm could take a research approach (i.e. uniquely identifying each pig at birth and tracking it through farrowing, weaning and the nursery). This would permit them to distinguish the differences in outcome across factors such as true age at weaning, weaning weight, and attributes of the farrowing or nursing sow.

The alternative approach is to assume that the weaning records from the sow unit accurately describe the characteristics of the weaned pigs. However, this can be risky, as fostering practices and the use of nurse sows cloud one's ability to describe the weaned pigs.

There is no easy answer for this situation. The reality is that in order to improve nursery and finisher performance, we need to be able to accurately describe a small portion of the animals -- the bottom-enders. And, in order to modify the outcome of those animals, we need a description that incorporates those critical, early life events.

At this point, the prospect of following individual animals from birth to death seems unrealistic. However, the effort to follow all animals during a select period of time could provide a herd with key insights into the risk factors associated with bottom-enders. Only when those risks are understood can actions be taken to mitigate them.

Stephanie Rutten, DVM
University of Minnesota
rutt0011@umn.edu
Editor's Note: For all your agricultural news, markets and commentaries, go to www.farms.com.



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National Hog Farmer and the National Pork Producers Council are excited to announce the 2nd Annual Career Center at this year's World Pork Expo. Career Center will be held June 7 & 8 (9:00 a.m.- 3:00 p.m.) at the Iowa State Fairgrounds in Des Moines, IA. You will have the opportunity to meet representatives from pork production companies to learn about career opportunities they currently have available. There will also be representatives from colleges that offer swine production programs for those interested in pursuing more education.

The May issue of National Hog Farmer will feature the companies who are participating in this Career Center. If you represent a company that would like to participate and/or have questions, please e-mail Lisa Peterson at lisa.peterson@penton.com for more information.

Legislative Preview
Farm Payment Limitations
Senators Chuck Grassley (R-IA) and Byron Dorgan (D-ND) have introduced an amendment that would place a limit of $250,000 on the amount of farm payments an individual can receive. Senator Grassley said, "It's good policy and a nice way to help the Agriculture Committee dig into the $15 billion on offsets it needs for the farm bill. This proposal has always been popular and the reality is that with 72% of the payments going to 10% of farmers, we've got a serious problem on our hands." The amendment is estimated to save $486 million over five years and $1.07 billion over 10 years. Grassley and Dorgan indicate the savings would be used for renewable energy/rural development, conservation and nutrition. The Senators plan to offer the amendment during Senate consideration of the budget resolution. They also plan to introduce legislation for consideration during the farm bill debate.

Agriculture Supports MAP & FMD -- The Coalition to Promote U.S. Agricultural Exports urged Congress to renew and increase the support for the Market Access Program (MAP) and Foreign Market Development (FMD). The Coalition testified before the Senate Agriculture Committee saying that the recent independent study of the MAP and FMD programs showed the benefit of these programs to U.S. agriculture. The USDA study, conducted by Global Insight, found these programs increased the United States share of world trade since 2001 by over one market share point to 19% or $3.8 billion in additional U.S. agricultural exports. According to the study, the programs improves farm income by increasing farm cash receipts by $2.2 billion and increased annual farm net cash income by $460 million. The coalition is asking Congress to increase the funding for MAP from the current $200 million to $325 million and increase FMD funding from $34.5 million to $50 million. Members of the coalition include: American Feed Industry Association, American Meat Institute, American Sheep Industry Association, American Soybean Association, National Association of Wheat Growers, National Cattlemen's Beef Association, National Chicken Council, National Cotton Council, National Pork Producers Council, National Turkey Federation, The Catfish Institute, USA Rice Federation, U.S. Apple Export Council, and U.S. Meat Export Federation.

Administration Threatens Veto on Supplemental Spending Bill -- The Administration stated its strong objections to the House of Representatives FY '07 supplemental appropriations bill because of the language concerning the pullout of U.S. troops from Iraq and also over the additional spending for non-defense items. The bill contains $4 billion in agricultural disaster assistance. The administration's statement said, "Because of the excessive and extraneous non-emergency spending" that President Bush "would veto the bill." The House of Representatives is to vote on the bill this week.

Korea FTA & Beef -- The American Meat Institute (AMI) testified at the House Ways and Means Committee's hearing on the U.S.-Korea Free Trade Agreement (FTA) negotiations. AMI told the committee that full restoration of beef trade with Korea should be a prerequisite for a U.S.-Korea FTA. "The current Korean import requirements for U.S. beef do not come close to a first stage of reopening trade. The beef industry is united and has informed USTR (U.S. Trade Representative) and USDA that they will not support an FTA with Korea if U.S. beef exports are not normalized." Other key issues that must be resolved in the negotiations are rice and automobiles.

House Budget Resolution & Agriculture -- The House Budget Committee began work this week on the fiscal year 2008 budget resolution. Congressman John Spratt (D-SC), chairman of the committee, is proposing $20 billion in new agricultural spending over five years, if offset. The Senate Budget Committee's resolution proposes a $15 billion reserve fund for agriculture with offsets.

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



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Help Wanted
Wanted: Boar Stud Manager
Boar Stud Manager
Circle Four Farms, a successful pork production division of Murphy-Brown LLC and Smithfield Foods, has an immediate opening for a Boar Stud Manager for its Southern UT (near Beaver and Cedar City) operation which includes more than 400 employees. Requirements include: Minimum 2 years boar stud experience with college degree in animal science, business administration or related field preferred; must be PQA certified; must have excellent organization, leadership, computer, and verbal & written communication skills; must have ability to mathematically solve problems and interpret the metric system. Competitive salary and benefits package. Resumes accepted through April 27, 2007. There is also a need for Head of Department positions at a Boar Stud within Murphy-Brown.

Circle Four Farms
PO Box 100, 341 South Main
Milford, UT 84751
(435) 387-2107 Phone
(435) 387-2530 Fax
lacydavis@murphybrownllc.com
EOE



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