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April 6, 2007



Table of Contents
Studying the Weight Class Swings
Marketing More Pounds of Pork
U.S. & Korea Reach FTA Agreement
World Pork Expo Career Center

Market Preview
Studying the Weight Class Swings
In my Hogs and Pigs Report review sent earlier this week, I alluded to the big swing between the year-over-year change between the inventory of 120-179 lb. pigs (-0.1%) and the inventory of pigs weighing over 180 lb. (+3.8%). That 3.9% total change between successive inventory groups struck me as very large and I questioned whether our industry, with its "constant throughput" goals, would actually see that much variation. So I went back to the historical data to see just where these numbers fit.

Figure 1 shows year-over-year changes in the inventories of pigs of different weights. This graph compares one quarter's under-60 lb. inventories, for instance, to the under-60 lb. inventory for the same quarter one year before. Data for the four weight classes are included. A few conclusions can be drawn:
  • As with virtually every other measure of production in the U.S. pork sector, this one demonstrates a decreasing level of variation. Annual swings of 20% were common prior to 1980, and 10% swings persisted even through 1998-99. The largest year-over-year changes this decade have been just 4%, and even those swings appear to be a thing of the past.

  • The weight categories generally lead one another in a quite logical fashion. While the graph is pretty busy, the blue line representing under-60 lb. inventories always moves first and then is followed by the heavier inventories.

  • The magnitude of the percentage inventory changes are very close, but recent changes in the heaviest category appear to be getting larger than the changes in the lighter inventories.

That last finding was rather curious, so I computed the differences in percentage changes for successive weight classes in the same quarter. For instance, I compared the percent change in the under-60 lb. category to the percent change in the 120-179 lb. category for the same quarter. Comparing weight classes this way should capture the cumulative effect of changes in pig crops and survival for previous time periods. I expected to see these numbers get smaller over time.

One potentially confounding factor, though, is imports of weaner and feeder pigs from Canada. Their dramatic growth since 2000 would suggest that negative class-to-class shifts should be less frequent and positive shifts may be larger.

Figure 2 shows the frequency counts for changes of 3% or more for each pair of successive weight categories. As expected, the number of changes of 3% or more, regardless of direction, has declined dramatically over the years. But the frequency decline for the difference in the top two weight categories (i.e. 120-179 vs. 180+ line) has been much smaller than for the lighter weight categories.

The second portion of Figure 2 shows the frequencies of declines of 3% or more between the weight categories. These, too, have fallen over time due to the relative stability of today's high-investment production systems and the fact that our industry has generally been growing. But note that the decline in frequency is less for the 180 lb. and over category than for the lighter-weight categories.

More to Learn
So is there any lesson to be drawn here? I think so. Year-to-year and group-to-group variation in the U.S. pig supply is definitely smaller than it once was. That comes as no surprise. However, changes of 3% or more in the year-over-year shift in weight classes are still not rare, especially for the 120-179 lb. vs. 180+ categories.

I'm still a bit concerned about the shift from +3.8% to -0.1% for the two numbers in last week's report. Much of that concern, though, lies in the fact that porcine circovirus-associated disease (PCVAD) was causing widespread death losses and that porcine circovirus vaccine is now on the scene.

We shouldn't expect the decline in slaughter in mid-April to be as abrupt as the report suggests but, if those numbers are correct, slaughter totals should begin a pretty sharp decline soon. Federally inspected slaughter through Thursday was 1.4% lower than last week, but that's a far cry from 3.9%.




Click to view graphs.

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



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Production Preview
Marketing More Pounds of Pork
Last week Mark Greenwood used this space to discuss the need for pork producers to increase efficiency. As an example, he cited an increase in pigs weaned (and pounds marketed) per sow per year, since the annual cost per sow space is more or less fixed.

Following are some approaches to making the production improvements needed to increase efficiency:

With respect to improving the pounds of pork marketed/sow/year, two general approaches can be considered. The first, and arguably more straightforward approach, is to market pigs at heavier weights. This is feasible, given ample feed, ample finishing time and the genetic potential for late-finishing, lean carcass growth and an acceptable packer grid.

The second and more complicated approach to system improvement is to increase pounds of pork marketed/sow/year through an increase in the number of pigs marketed/sow/year. This improvement frequently starts at the sow unit by improving the number of pigs weaned/sow/year. This can be accomplished by improving preweaning survivability, increasing litter size, or improving the reproductive efficiency at the individual sow level.

The object of increasing pigs weaned/sow/year can be accomplished through a number of methods although they do not actually improve the system's net result. Examples include:
  • Weaning substandard pigs that won't survive the growing period.

  • Culling the bottom-end sows without replacement, such that herd records improve but the reduction in sow inventory results in fewer pigs weaned for the system.

  • Creative culling practices that reduce sow non-productive days without improving per-sow efficiency. An example would be removing a sow on paper before she is physically removed from the herd.
Of the three approaches to improving pigs weaned/sow/year, improvement of individual sow efficiency can be the most rewarding. This approach addresses non-productive days in the forms of delayed wean-to-first-service interval and conception and farrowing rates. For a herd averaging nine pigs weaned/litter, a 5% improvement in farrowing rate would be expected to increase pigs weaned/sow/year by more than one pig annually. Likewise, every one-day decrease in wean-to-first-service interval would be expected to improve annual sow output by approximately 0.13 pigs.

The potential to increase litter size varies across herds. Well-implemented genetic programs can help. Gilt acclimation programs (including a minimum number of estrous cycles before the first service and feeding programs) and lactation feeding programs that minimize the loss of body condition while follicles are developing are essential.

For well-managed herds, improving pre-weaning survivability can be challenging. The crate environment (cleanliness at farrowing, zonal temperatures, space available for the piglets), along with attention to sow milking ability, can make a difference in preweaning mortalities of between 8% and 12%.

No single effort is likely to take a herd from 20 up to 25 pigs/sow/year. Such gains are made through a multifaceted approach that pursues the best practices across the board.

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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Legislative Preview
U.S. & Korea Reach FTA Agreement
The United States and South Korea reached an agreement on the U.S.-Korea Free Trade Agreement (KORUS FTA). U.S. Trade Representative (USTR) Ambassador Susan Schwab said, "This is a historic moment for our two countries. The United States-Korea Free Trade Agreement will provide U.S. farmers, ranchers, manufacturers, and service providers exciting new market opportunities in a growing, dynamic country. It will contribute to Korea's successful transformation to a 21st century economic power." Korea is currently the United States' seventh largest trading party, with two-way trade valued at $72 billion in 2006.

KORUS FTA and Agriculture -- According to U.S. Trade Representative (USTR), agriculture will receive the following benefits under the free trade agreement (FTA):
  • "More than half ($1.6 billion) of current U.S. farm exports to Korea will become duty-free immediately, including wheat, feed corn, soybeans for crushing, hides and skins, and cotton, plus a broad range of high value agricultural products such as almonds, pistachios, bourbon whiskey, wine, raisins, grape juice, orange juice, fresh cherries, frozen French fries, frozen orange juice concentrate, and pet food.

  • "U.S. farm products benefiting from expanded market opportunities with two-year tariff phase-outs include avocados, lemons, dried prunes, and sunflower seeds.

  • "U.S. farm products benefiting from expanded market opportunities with five-year tariff phase-outs include food preparations, chocolate and chocolate confectionary, sweet corn, sauces and preparations, other foods and forage (alfalfa), breads and pastry, grapefruit, and dried mushrooms.

  • "Other U.S. farm products that will benefit from expanded market access opportunities through tariff rate quotas include skim and whole milk powder, whey for food use, cheese, dextrins and modified starches, barley, popcorn, and soybeans for food use.

  • "Market access was also expanded for beef and pork products, pears, apples, grapes and oranges."
Pork Supports FTA Agreement -- The National Pork Producers Council (NPPC) praised the US-Korea free trade agreement (FTA) agreement. According to NPPC, the agreement will "generate hundreds of millions of dollars in new pork exports and ensure that U.S pork exports to South Korea will be on an equal footing with pork from other countries." U.S. pork exports to South Korea in 2006 increased in volume by 52% and by 50% in value over 2005 exports. South Korea is the fourth largest export market for U.S. pork.

Beef Trade Must Flow -- The United States and South Korea failed to reach an agreement on the resumption of U.S. beef exports. This has caused a strong reaction by many in Washington, DC, indicating they will withhold their support for the U.S.-Korea Free Trade Agreement (KORUS FTA) unless Korea reopens its market to U.S. beef. Senator Max Baucus (D-MT), chairman of the Senate Finance Committee, said it was "an entirely unacceptable outcome." Congressman Sandy Levin (D-MI), chairman of the House Ways and Means Trade Subcommittee, had earlier written U.S. Trade Representative and USDA stating that the "FTA must include the resumption of full market access to U.S. beef prior to the conclusion of the FTA negotiations." The National Cattlemen's Beef Association (NCBA) said, "If we are not selling beef in Korea, the benefits of this trade agreement and the potential of the Korean market hold little value to U.S. cattle producers. Therefore, the NCBA is withholding support for the U.S.-South Korea FTA until commercially viable beef trade is occurring based on the internationally recognized guidelines established by the World Organization for Animal Health (OIE)." Similarly, the American Farm Bureau Federation (AFBF) said, "Commercially viable trade for U.S. beef based on World Organization for Animal Health (OIE) guidelines must be in place with South Korea before AFBF will consider supporting the U.S.-South Korea free trade agreement. South Korea continues to unjustifiably ban imports of U.S. beef without regard to international standards."

Judge Rules to Allow Packers to Test for BSE -- Last week, a federal judge said the federal government must allow individual meatpackers to test their animals for bovine spongiform encephalopathy (BSE). U.S. District Judge James Robertson ruled in favor of Creekstone Farms Premium Beef saying the government does not have the authority to regulate BSE testing. The American Meat Institute (AMI), who opposes allowing individual testing said, "Testing is an important tool for animal disease surveillance. Targeted BSE testing is one component of an effective, multiple hurdle BSE firewall system used to detect and eventually eliminate BSE from North America. Testing all animals will not make beef safer, and is unnecessary for both animal disease surveillance and food safety purposes." USDA is reviewing the ruling and has 60 days to determine if it will appeal.

Congressional Recess -- The U.S. House of Representatives is off for two weeks and the Senate is in recess this week. Many members of the House and Senate Agriculture Committees are planning on hosting a number of agricultural meetings back home in preparation for the farm bill.

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



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Career Center
World Pork Expo Career Center
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.


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