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China Suspends Some U.S. Pork Imports
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The China Connection
Smithfield's announcement of the sale of 60 million
pounds of pork to China last Friday was welcome news for the U.S. pork
industry. After several months of rumors about Chinese interest in U.S.
pork and several weeks of discussion indicating their wishes to restrict
pork from hogs fed ractopamine, it was good to finally get solid news of
a shipment. We hope it will be the first of several over the next few
months as China tries to provide pork to its consumers in the wake of
large death losses in its domestic herd.
But just how big is this sale? 60 million pounds sounds like a lot of
pork, but consider the following facts:
China's ban on ractopamine is certainly an obstacle for other packers to
overcome. We are confident that Smithfield's vertically integrated
structure made it easier for them to meet this demand, but we also
believe that other packers will follow Smithfield's lead if there is
more business to be had.
- 60 million pounds amounts to 29,956 tons and that amount will
be shipped between now and the end of the year.
- 60 million pounds represents roughly 15% of one week's U.S.
carcass-weight pork production at present, and will represent about 13%
of the likely peak weekly production this fall of around 460 million
- 7,480 tons/month will be about 70% of a recent monthly total for
shipments to China/Hong Kong (see Figure 1), but only about 18% of July
shipments to Japan.
- This shipment could be filled by three-fourths of one day's normal
slaughter, assuming that China buys cuts in the same proportion that
they are produced. We don't think that is likely since China will want
to stretch limited dollars over as much product as possible.
I think segregating ractopamine hogs and maintaining product identity is
a bigger issue that the availability of ractopamine-free hogs. Many
producers pull one or two loads of hogs from a barn before they put
ractopamine into diets, so there are hogs out there to meet the Chinese
demands. The trick is getting them grouped into one day's (or a
portion of one day's) slaughter operations and then maintaining the
identity of that product through the plant. Again, Smithfield may be in
a better position to do that because of their ownership of pigs but
other packers will figure it out quickly if there is a buck to be made.
Could this be a dry run for mandatory country-of-origin labeling
(MCOOL)? I think so. The operational issues appear to be much the
same. It will be interesting to see how much the "ractopamine-free"
methods actually cost.
Domestic Demand Shows Signs of Strength
While the China business has hopefully kick-started export business, the
news for domestic demand through July was much more positive. Professor
Glenn Grimes' demand index calculations for January-July show a 1.4%
improvement in U.S. consumer-level pork demand in just one month. That
is a very large jump in this index and it mainly reflects record-high
retail pork prices. The indexes for beef and chicken improved as well
in July, with chicken demand increasing by 2.1% from June. Indexes for
all three species appear in Figure 2.
July's average retail pork price of $2.936/retail weight pound was 3.3%
higher than last July. The price increase was good for both packers and
producers as the farm-wholesale spread grew by 2.6% and producer prices
were nearly 7% higher.
We think this recent jump in retail prices and, consequently, the demand
indexes is a lagged impact of what has been happening since late winter.
Wholesale pork demand has been very strong for much of this year in
spite of soft exports and what appeared to be very soft consumer demand.
We are pretty confident that the time lag of USDA's retail price series
was the real reason for the difference. We think the same was true for
chicken. It appears the data have now caught up with reality.
U.S. hog slaughter resumed its growth last week, increasing 3% from the
same week last year (see this week's North American Pork Industry Data
table below). It appears that USDA's July inventory of market hogs was
low but not by a large amount. The culprit in comparing this year's
data to last year's is an increase in market hog imports from Canada --
165,000 more from June 3 through Aug. 26.
The June report suggested that slaughter from July 1 through last week
should have been 2.1% higher than last year. That actual figure was
3.2%, but the larger numbers of Canadian market hogs account for over
half of the difference. The larger number of Canadian feeder pigs
imported up to June 1 would have been included in the June 1
inventories. Deducting the Canadian pigs leaves adjusted slaughter
+2.5% for June 3 through last week; not much larger than USDA's
predicted 2.1%! Let's hope it stays that close through fall.
Click to view graphs.
Steve R. Meyer, Ph.D.
Paragon Economics, Inc.
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
A Volatile Month
On Friday, Aug. 3, we had cash markets in the low- to
mid-$70s and every futures month was on the board at $70 or above. The
rumor was that China was in the market for buying lots of U.S. pork.
Life was good. It seemed that even though we had more hogs coming to
market, prices were going to profitable. At the same time, grain prices
were coming down and corn in southern Minnesota was below $3/bu. It
looked like we were going to have realistic corn prices even with the
Now, three weeks later, futures have dropped in some months by $10 to
$12/head, the cash market has dropped over $15/head, and corn prices are
up by at least 25 cents/bu. Unfortunately, I think these wild swings in
the marketplace will be the norm for a while. There are currently more
dynamics that can affect producers' margins and they will have to be a
little lucky, and prudent, with their marketing decisions.
I've had several conversations with producers looking for advice on what
to do. I stress to them that it depends, first, on their financial
situation and, second, how much market stress they can handle. If you
are leveraged, you cannot afford to take the risk that prices are going
to be great forever. If there is a margin that looks acceptable for your
business, act on it and don't look back.
Finishing Space is Tight
The tight supply of finishing spaces in the Midwest is a sign that the
pipeline is full. Warm summer weather has backed up gains, while
significant productivity gains have been made in the sow herds. Add to
that the effectiveness of the circovirus vaccines in reducing finishing
mortalities and it is very difficult to find any empty finishing sites
at this time.
It will be interesting to see the fall slaughter numbers. I have seen
many systems weaning close to a 10-pig average dealing with mortality
levels greater than 10%, which are now down to 6% or lower. If you do
the math, that could equal a lot of pigs placed on feed. The question is
-- can we keep moving the product? Our exports are down (especially to
Mexico) and we are hoping that China will be our salvation. Time will
A New Era
I believe the volatility in the markets will create a separation of
producers over the next 12-24 months. There are not packer agreements to
assure profitability. Producers will need to manage their feed risk and
their market risk.
I recently reviewed the profits of five clients for last year. One made
over $20/head, while another lost money! Some of the difference had to
do with herd health issues and the amount of revenue received, but part
of it was how each producer managed risk. In the future, the ability to
manage risk will separate the best from the rest.
Swine Industry Consultant
Contact Greenwood at email@example.com
Introducing the new PIC Camborough® Family
You asked for greater lifetime reproductive performance and longevity.
You asked for more pounds of pork marketed per sow. You asked for a
higher percentage of market pigs in the full-value pay box.
Take another look at our new Camborough family, we think you will like
what you see--after all, it is just what you asked for.
for New Livestock and Crop Disaster Programs
USDA has announced sign-up dates for the new Livestock
Compensation Program, Livestock Indemnity Program and Crop Disaster
Program aimed at providing benefits to producers who suffered losses
caused by natural disasters in recent years.
Additional information on these programs can be found at www.fsa.usda.gov; click on Disaster
- Livestock Compensation Program & Livestock Indemnity
Program: Eligible livestock producers can apply to receive benefits
under the Livestock Compensation Program (LCP) and Livestock Indemnity
Program (LIP) beginning Sept. 10. LCP compensates livestock producers
for feed losses occurring between Jan. 1, 2005 and Feb. 28, 2007, due to
a natural disaster. LIP compensates livestock producers for livestock
losses between Jan.1, 2005 and Feb. 28, 2007 that resulted from natural
disasters, including losses due to blizzards that started in 2006 and
continued into January 2007.
- Crop Disaster Program: Eligible producers can sign-up
beginning Oct. 15, if they suffered quantity losses to their crops.
USDA will announce Crop Disaster Program (CDP) sign-up for quality
losses later. CDP provides benefits to producers who suffered "quantity
and quality losses to 2005, 2006 or 2007 crops from natural disasters if
the crop was planted before Feb. 28, 2007, or in the case of prevented
plantings, for crops that would have been planted before Feb. 28, 2007."
Korea Reopens Market to U.S. Beef -- South Korea has reopened
its market to U.S. beef effective Aug. 27. The market was closed in
July because some shipments contained ribs, which are prohibited under
the current agreement. Efforts are being made by USDA and U.S. Trade
Representative to negotiate with Korea to allow for the shipment of
bone-in products from animals less than 30 months of age.
Appeals Court Rules Against R-CALF -- The United States Court
of Appeals for the Ninth Circuit ruled against R-CALF in its efforts to
overturn USDA's rule allowing the import of Canadian cattle and beef
less than 30 months of age. R-CALF had objected to USDA's rule because
of its concerns over bovine spongiform encephalopathy (BSE). The court
said, "Having reviewed the merits of this case, we conclude that the
agency considered the relevant factors and articulated a rational
connection between the facts found and its decision to designate Canada
a minimal-risk country." The American Meat Institute said, "This
decision will help clear the way for fully restoring cattle trade with
Canada, which is good for both of our countries."
Congress Returns Next Week -- Congress will return next week
after its August recess with a full agenda. Key items for Congress will
be trying to finish appropriation bills prior to Sept. 30. The Senate
Agriculture Committee is expected to begin work on the 2007 farm bill.
Senator Tom Harkin (D-IA), chairman of the Senate Agriculture Committee,
is expected to release his chairman's mark of the farm bill as early as
P. Scott Shearer
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.
Pork Industry Calendar
Sept. 6, 2007: Midwest Swine Nutrition
Conference, Indiana Farm Bureau Building, Indianapolis, IN; contact: Tip
Cline, Purdue University by phone (765) 583-2831 or e-mail firstname.lastname@example.org.
Sept. 9-12, 2007: 13th Discover Conference
on Food Animal Agriculture: Sow Productive Lifetime, The Brown County
Inn, Nashville, IN; contact: the American Dairy Science Association by
phone (217) 356-5146, fax (217) 398-4119, e-mail email@example.com or
log onto www.adsa.org/discover.
Click here to get National Hog Farmer's
complete pork industry calendar.
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as 10 days. And with its small dosage -- 35 grams tiamulin/ton -- and
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on the Denagard logo to learn more.
Cargill Meat Solutions is looking for a Pork Field
Manager. This position will work directly with a designated group of
contract pork producers to assist them in trouble shooting problem
areas, provide solutions for improving production, help manage customer
relationships as well as provide documentation of on farm reports. This
position is responsible for working with the Production Manager to
arrive at solutions and make decisions that will impact their area and
business units profitability. Through farm visits, producer meetings and
information sharing, the successful candidate will aid the producers in
finding the most successful ways of maximizing production on their farm.
The successful candidate should have a BS/BA degree and a minimum of 5
years experience in pork production.
Interested candidates should apply online at www.ichoosecargill.com
referencing job #MIS00010. EOE
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