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Market Preview
Pork Export Trend
Unsettling
Yesterday's U.S. pork export data was again
disappointing, showing June shipments were 11% lower than a year ago.
That makes the fifth consecutive month that U.S. shipments have been
below 2006 levels. That run of negative reports has now pulled
year-to-date shipments down 5.5% on a product weight basis.
The biggest trouble spot for exports continues to be Mexico. June pork
exports south of the border were 44% lower than last year and business
with our second-largest pork export market is now 26% lower than last
year. The value of shipments to Mexico was down 40% for June and the
year-to-date (YTD) total value is down 26%.
I still believe that the two big factors that are driving this reduction
in trade with Mexico are tortilla prices and the liquidation of a
portion of the Mexican hog herd due to high feed costs. The liquidation
can't go on forever and some analysts believe it will have run its
course by this fall. That would ring especially true if corn prices
continue to moderate. The same moderation, of course, could allow
tortilla prices to fall as well.
The other big negatives for U.S. pork exports were Russia (-15% in June
and -24% YTD) and Taiwan (-3.2% in June and -37% YTD). Shipments to
South Korea are still slightly positive for 2006, but June shipments
were nearly 30% smaller after May shipments were down 24%. I'm not too
surprised by the difficulties with South Korea -- mainly because last
year was such a huge growth year. I am, however, concerned about the
magnitude of the recent reductions as beef exports begin to flow.
Even shipments to Japan were down (by 1.5%) in June vs. one year ago,
although YTD trade with our largest volume and value customer is still
up 8.5% for the year.
China is still the wild card in this export picture. June shipments to
Hong Kong-China were 161% larger than in 2006 and YTD shipments exceed
2006 by nearly 53%. As a footnote, I should clarify that I combine the
two since there is some slippage of the Hong Kong volume into China.
Altin Kalo, an analyst with Steiner Consulting Group, wrote in Tuesday's
edition of the Chicago Mercantile Exchange's Daily Livestock Report that
business with China is going to have to be very good to make up for the
decline in trade with Mexico. He pointed out that June shipments to
Mexico this year were 8,000 metric tons (8,800 tons) smaller than last
year. In fact, YTD shipments to Mexico are 38,596 metric tons (42,456
tons) smaller -- a number larger than virtually all of the rumored
purchase quantities for China.
The value of U.S. exports remains larger than last year through June --
by 4.8%. June, though, marked the third straight month of lower monthly
export value, though the declines have been small.
See Figures 1-3 for graphic presentations of this export information.
Through 2001, I marveled at how the United States could continue to set
pork export records as the U.S. dollar got stronger and stronger against
the currencies of our three main international competitors (see Figure
4). The rise of the greenback made our products more and more expensive
but we just kept shipping more.
That trend has now reversed. In spite of an ever-weakening dollar,
which makes U.S. product less expensive relative to that of Canada,
Europe and Brazil, our shipments are falling. Of course, there are
many, many factors that affect foreign trade but, as is true in many
markets, price frequently trumps everything else. Unfortunately, that's
not the case now.
Click to view graphs.
Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
e-mail: steve@paragoneconomics.com
Advancement in PRRS Research Award.
Boehringer Ingelheim is awarding $75,000 annually to fund three
research proposals to help solve the PRRS mystery.
Entries due January 1, 2008.
Visit www.PRRSresearch.com
Production Preview
Control Variation to
Improve Quality
In the context of a new year's industry benchmarks,
we'll use this column to consider one man's approach to improving
quality.
In the words of Dr. Genichi Taguchi, "To improve quality, don't measure
it." To some degree, this may seem counterintuitive. After all, how
can you improve if you don't know where you are?
But Taguchi argues that while measures of defects or failures (i.e.,
death loss, pigs failing to meet the target market window) indicate the
need for improvement, they offer no information about how to improve.
Instead, he suggests that measures used for quality improvement
incorporate both customer objectives and the relationships between
quality and cost.
In practicality, quality improvement requires a balancing act between
meeting customer specifications and the cost of meeting those
expectations. As well, achieving quality is best addressed through
variation.
From the pork production perspective, we can appreciate that it costs
the producer more to hold the tail-end pigs in the barn until they make
market weight than it would if the producer accepted the discounted
value of marketing those animals at group close-out. We can also
appreciate the role of variation in creating those marketing challenges.
Taguchi argues that it is far more efficient to control variation in a
system than it is to address the symptoms that variation causes. One of
the greatest challenges our industry faces with respect to causes of
variation is the presence of interactions. An interaction can be
described as the effect observed when two or more factors are combined.
This effect is different than what would have been observed if we
considered only one factor at a time.
As an example, if a farm has a minimum weight requirement for piglets at
weaning, but does not factor in their age, we may find that the nursery
has more pigs fail to start on feed than it would have had with a
minimum age requirement. This is because the intestinal tracts of
piglets mature with age, and not weight, and their ability to adapt to
solid feed is associated with gut maturity.
Consequently, if a farm runs a feed trial to determine the best diet
program for their production system, they need to account for piglet age
across the different trial groups. If they do not, the farm could very
easily associate superior performance with a diet instead of with piglet
weaning age. Similarly, they could find that the optimal diet program
differs according to weaning age.
Experts have long proclaimed that quality improvement includes
minimizing variation. Because of the biological nature of pig
production, variation will naturally be greater than that of a
controlled manufacturing environment. However, by considering the role
of interactions in pig production systems, we will be better able to
address variation's underlying causes.
Stephanie Rutten-Ramos, DVM
University of Minnesota
rutt0011@umn.edu
Editor's Note: For all your agricultural news, markets and
commentaries, go to www.farms.com.
Make ileitis disappear?
Denagard® (tiamulin) 10 is approved to control ileitis in as little
as 10 days. And with its small dosage -- 35 grams tiamulin/ton -- and
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controlling ileitis.
Click
on the Denagard logo to learn more.
Legislative Preview
House Passes
Agriculture Appropriations
The House of Representatives passed its fiscal year 2008
agriculture appropriations bill prior to leaving for its summer recess.
The bill includes $18.817 billion in discretionary spending, which is
$1.002 billion more than last year's bill. Key items in the bill
include:
- Animal identification -- Does not provide new funding for
the animal identification program. According to the House Appropriations
Committee, USDA "cannot justify money already appropriated. Drastic
action is required as this program is far too important to be allowed to
continue to flounder. The agency is directed to develop a detailed plan
with measurable goals."
- Food Safety and Inspection Service (FSIS) -- Provides $930.1
million for FSIS, which is $38 million above fiscal year 2007. This
will help address vacancies in federal meat inspector positions.
- Imported poultry products from China -- Prohibits USDA from
establishing or implementing a rule allowing poultry products from China
into the United States.
- Country-of-origin-labeling -- Provides an additional $2 million
to USDA's Agriculture Marketing Service (AMS) to implement mandatory
country-of-origin-labeling (COOL). Benchmarks are established for USDA
to meet in developing a final rule to implement mandatory COOL.
- Trade programs -- Provides full funding for the Foreign Market
Development (FMD) program at $34.5 million and the Market Access Program
(MAP) at $200 million.
- Packer audit -- Encourages USDA's Grain Inspection Packers and
Stockyards Administration (GIPSA) to conduct its own audits of large
packers instead of relying on company level audits. Provides an
additional $2 million to provide for additional employees to "strengthen
enforcement and promote voluntary compliance."
- User fees -- The bill does not include the administration's
proposed user fees for meat, poultry and egg inspection.
Canadian Producers Oppose COOL -- The Canadian Cattlemen's
Association and the Canadian Pork Council have formed a coalition called
Canadian Livestock Producers Against COOL. The coalition is seeking
changes to the U.S. House of Representatives passed farm bill provisions
on mandatory country-of-origin-labeling (COOL). The changes are to have
COOL conform to international trade agreements. The coalition believes
the provisions in the farm bill violate U.S. trade obligations under the
North American Free Trade Agreement (NAFTA) and the World Trade
Organization (WTO).
Mandatory Price Reporting -- USDA's Agricultural Marketing
Service (AMS) has published a proposed rule to reestablish the mandatory
price reporting regulations for swine, cattle, lamb and boxed beef.
Public comments on the regulatory aspects of the proposed rule are due
by Sept. 7, 2007. Comments concerning the information collection and
recordkeeping provisions are due by Oct. 9, 2007. The proposed rule is
available at www.ams.usda.gov/lsmnpubs/mpr/LMRPR.pdf.
P. Scott Shearer
Vice President
Bockorny Group
Washington, D.C.
 Hermitage NGT
Hermitage NGT offers their North American clients:
- Breeding Stock (GGP/GP/Parent stock)
- Semen-fresh & frozen
- Closed herd breeding programs
- Genetic monitoring through the Hermitage BLUP recording system
Talk with our team of specialists in genetics, reproductive physiology,
nutrition, veterinary medicine, pig production management and A.I. to
design a program to allow you to take advantage of these exciting
genetics.
www.hermitagengt.com
Pork Industry Calendar
Aug. 21, 2007: ManureTech 2007, Dairy Forage
Research Center Farm, Prairie du Sac, WI; contact Randy Fonner,
University of Illinois at (217) 333-2611, refonner@uiuc.edu or log onto www.imanuremgt.org.
Aug. 23, 2007: "Managing Prices for Optimal Returns," Hilton
Garden Inn, Johnston, IA; contact: Ali Smith, Iowa Pork Producers
Association, at (515) 225-7675, (800) 372-7675 or asmith@iowapork.org.
Click here to get National Hog Farmer's
complete pork industry calendar.
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Help Wanted
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Corby Barrett * (806) 435-5935
cbarrett@texasfarmpork.com
www.texasfarmpork.com
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