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August 10, 2007 A Penton Media Property



Table Of Contents
Fall Numbers May Test Slaughter Capacity
Canada Rises to the Top
Swine Flu Presents Complicated Picture
Senators Support Trade Programs



What's new on National Hog Farmer?
- Great Britain Reports FMD Outbreak
- California Animal Cruelty Bill Filed
- GAO Report Spots Weaknesses in ID Plan
- Read the full July issue

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Market Preview
Fall Numbers May Test Slaughter Capacity
With the possibility of large numbers of hogs hitting the market this fall, packing capacity could once again become a critical issue for the U.S. pork industry. While the situation should not be nearly as critical as in 1994, and especially in 1998, taking a look at our ability to process hogs in a timely and efficient manner seems especially prudent. I have spent several days calling pork packers across the country to update the work I have done since 1995 tracking hog slaughtering capacity.

Every update has brought new knowledge and insight into the packing sector and this year's is no different. With last spring's closure of the Bryan Foods/Sara Lee plant in West Point, MS, and John Morrell's decision to close a shift at its Sioux City, IA, plant, I fully expected to see a reduction of U.S. slaughter capacity from the 420,875 head/day that I had reported in last year's update. But just as pork producers do the little things to maximize pig throughput, so pork packers have found new ways to increase their efficiency. Those efforts have resulted in an increase in slaughter capacity in spite of the two large losses last spring.

Comparing Apples to Oranges
Figure 1 shows the top 15 pork packing companies in the United States and their capacities. The total as of this past week is 424,835 head/day. That compares to 420,875 head/day last year -- but that comparison is apples to oranges. Allow me to explain.

When I started this project in 1995, I knew I did not have all of the plants accounted for in the United States, but felt I had enough of the large ones to allow us to simply add a "pad" for those generally smaller plants that I was missing. The "pad" then amounted to about 14,000 head/day and that worked well for awhile -- even through 1998.

However, as the business continued to consolidate, it became more and more possible to list virtually all of the plants in the United States. So in 2004, I added a number of plants to my list (See the footnote on the table). With the help of several industry contacts, I added another group of plants this year and have been able to confirm capacity of 3,930 head in seven additional plants. I still have not been able to confirm the capacities of 13 plants -- but believe they are small and would add no more than 2,000 head or so to this total.

So, the apples-to-apples comparison would be to deduct the 3,930 head of capacity from newly added plants to get a capacity of 420,905 head/day that is directly comparable to last year's number. The net gain is 30 head/day, and that is not a bad result considering that the two large losses amounted to 12,700 head/day.

Packer Growth Led by Smithfield Foods
Notable in this table is the growth of Smithfield Foods' capacity. That growth is mainly the result of acquisitions -- first of Farmland Foods in 2004 and then of Premium Standard Farms this year. Smithfield also increased the capacity of its Tarheel, NC, plant in 2000 when it received permits for increased wastewater treatment. A similar increase was recently granted for that plant. It has no impact on daily capacity, but does allow the plant to run full for six days/week.

Hormel's growth from 2004 to 2005 was the result of buying Clougherty Packing of Los Angeles and Triumph Foods' 2005 entry into the business, and rapid ramp-up of its second shift has added 17,500 head/day since 2004.

All of the other changes among these top 15 companies have been accomplished through plant expansions, new technology such as blast chillers or simply new operating procedures that allow higher throughput. Sara Lee remains at number 15 in spite of the closure of the Mississippi plant due to its large sow slaughter operation at Newbern, TN.

Will this capacity be sufficient for the larger slaughter runs I expect this fall? I think so but it could be tight.

Figure 2 shows my early-July forecasts of weekly slaughter based on the June Hogs and Pigs Report and my belief that we would see 1.0% to 1.5% more hogs the remainder of 2007 due to effective vaccines for circovirus. That increase is beginning to look a little low, but I don't expect the extra pigs to push weekly slaughter totals much over 2.3 million head this fall.

My estimated daily capacity of 424,835 head could handle the 2.3 million/week slaughter projection using 5.42 full days/week. That level of utilization has not historically put much pressure on hog prices beyond the normal downward pressure of the large meat supplies. Much more than that, however, could put producers in a decidedly disadvantageous position in selling hogs, and cause hog prices to decline more than would be suggested simply by the increase in meat output.

Look for a more detailed discussion of U.S. pork packing capacity, including a full listing of the top 50 pork packers, in the Sept. 15, 2007 issue of National Hog Farmer magazine.




Click to view graphs.

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



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Production Preview
Canada Rises to the Top
As reported by PigCHAMP, the Canadian sow herd appears to be more productive than the American sow herd, a reflection of what we've seen in the past.

There is a higher number of pigs/sow/year in Canadian herds in the PigCHAMP database and each of the contributing variables is also higher. Particularly significant is the difference in farrowing rate and the number of nonproductive sow days per year.

Some attribute this difference to climate, though there's little evidence of such a major effect. Some argue that the contrast can be attributed to differing financial pressures, with a lower potential of profitability within Canadian herds. This seems like a logical premise.

Another popular theory is that farms selling weaned pigs are more likely to maximize their output. This may be due in part to the fact that they do not face pressures to stabilize output, at least not at the same level as some swine units, and, perhaps, because they can focus on a very narrow range of technologies for specialization in reproduction. Canada has a large number of farms that specialize in raising and selling weaned pigs and these appear to be the leaders in reproductive output.




Click to view graphs.

Sukumarannair S. Anil and John Deen, DVM
deenx003@umn.edu
Editor's Note: For all your agricultural news, markets and commentaries, go to www.farms.com.



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Animal Health Preview
Swine Flu Presents Complicated Picture
Life was much simpler a decade ago, when we had only one strain of swine influenza virus (SIV) in North America -- a stable, predictable and mostly seasonal H1N1 strain.

Influenza subtypes are categorized using a classification system based on two surface proteins that are key components of antigenicity (the ability to stimulate an immune response): hemagglutinin (H) and neuraminidase (N). There are 16 known H subtypes and nine N subtypes in the influenza A group.

Presence or absence of receptors for specific subtypes determines whether an animal can be infected by a particular strain of influenza. Mammal and bird species have different receptors for these subtypes, limiting the range of species that can be infected with a particular combination. Pigs have receptors for a mix of human and avian influenza subtypes.

Just under 10 years ago, the swine influenza landscape changed dramatically with the introduction and rapid dissemination of an H3N2 swine influenza in 1998.
Since 1998, multiple subtypes involving variations of H1N1 and H3N2 have emerged that include gene segments from human and avian influenza viruses (reassortants).

The new subtypes have become the predominant influenza viruses identified in North American pigs, with new subtypes characterized each of the past four years.
These reassortant subtypes have complicated the diagnosis and control of swine influenza because serology and PCR (polymerase chain reaction) tests have to be updated to match the changes in the virus, and vaccines using "old" subtypes sometimes don't provide immune protection against the new subtypes.

Diagnostic tips:
SIV is cleared rapidly in pigs -- nasal swab or lung samples should be taken from pigs showing early clinical signs, specifically pigs with a fever and serous nasal discharge.

Serology using homologous virus is useful in cases where new subtypes are present and cross-reaction with earlier subtypes is limited. This requires isolation of the virus subtype involved and communicating with your diagnostic laboratory for this specialized testing.

Management tips:
Control of SIV requires an understanding of the age of pigs affected, the probable source (vertical vs. horizontal transmission) of the influenza virus, and the subtype involved, to be successful in selection of the proper tools from the repertoire of intervention strategies available.

Since SIV is known to spread within geographic areas, it is helpful to keep track of subtypes circulating in the area.

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

Editor's note: Animal Health Preview is the newest addition to the North American Preview e-newsletter. This new column will feature insights on disease trends and alerts of regional disease outbreaks. The column will appear monthly, written alternately by Jerry Torrison, DVM, University of Minnesota Veterinary Diagnostic Laboratory and Kent Schwartz, DVM, Iowa State University Veterinary Diagnostic Laboratory.



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Legislative Preview
Senators Support Trade Programs
Senate Majority Whip Dick Durbin (D-IL) and 10 other senators have sent a letter to the Senate Agriculture Committee urging the committee to increase the funding for the Foreign Market Development (FMD) program to $50 million and the Market Access Program (MAP) to $325 million. The letter stated: "The MAP and FMD Programs effectively leverage public and private resources to invest in activities that overcome trade barriers, establish and build export markets overseas and increase farmer profitability.

A recent cost-benefit analysis of the MAP and FMD programs prepared for the USDA found that industry contributions now account for 59% of the program, up from 46% in 1996 and less than 30% in 1991. In addition, the report estimates that increases in funding for the MAP and FMD programs in the 2002 Farm Bill will result in a total of $3.8 billion additional export activity through the end of 2008." Senators signing the letter were: Durbin, Gordon Smith (R-OR), Barbara Boxer (D-CA), Maria Cantwell (D-WA), Byron Dorgan (D-ND), Diane Feinstein (D-CA), Mel Martinez (R-FL), Patty Murray (D-WA), Bill Nelson (D-FL), Barack Obama (D-IL) and Ron Wyden (D-OR).

Farm Payments to the Deceased -- The Government Accountability Office (GAO) found that USDA has made farm payments to estates for more than two years after recipients died without determining whether the estates were kept open to receive payments. In the study, GAO found that USDA did not conduct any eligibility determinations in 40% of the cases reviewed. For 1999 through 2005, USDA paid $1.1 billion in farm payments in the names of 172,801 deceased individuals. Of this total, 40% went to those who had been dead for three or more years, and 19% to those dead for seven or more years. The GAO recommends that USDA conduct all required annual estate eligibility determinations.

The study said, USDA should "implement management controls to verify that an individual receiving program payments has not died and determine if these payments have been made to deceased individuals or to entities that failed to disclose the death of a member." USDA agreed and has started implementing the GAO's recommendations. The House of Representatives passed an amendment during the farm bill debate that directs USDA to investigate which estates have been fraudulently receiving farm subsidiaries payments from the federal government and to recoup the funds paid in the name of deceased farmers.

Top Congressional Farm Payments -- The Environmental Working Group in analysis of farm payments found that the districts represented by members of the House Agriculture Committee received 42% of farm payments from 2003-2005. The top 10 congressional districts were: Nebraska, 3 (Congressman Adrian Smith), Kansas, 1 (Jerry Moran), Texas, 19 (Randy Neugebauer), Iowa, 5 (Steve King), South Dakota -- at large (Stephanie Herseth Sandlin), North Dakota -- at large, (Earl Pomeroy), Minnesota, 1 (Tim Walz), Minnesota, 7 (Collin Peterson), Illinois, 15 (Tim Johnson) and Nebraska, 1 (Jeff Fortenberry).

Summer Recess -- Remember Congress is in recess until after Labor Day. Members will be in their districts, and this would be a good time to visit with them on key issues concerning the farm bill and agriculture. Contact your senator or congressman's offices and ask for their schedule for town hall meetings.

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



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