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September 21, 2007 A Penton Media Property



Table Of Contents
Hog Runs Raise Concerns
Getting to the Root of Problems
Johanns Resigns to Run for Senate



What's new on National Hog Farmer?
- News: Agriculture Secretary Resigns
- North Carolina Finalizes Swine Lagoon Ban
- 10 Steps to Manage Odor
- September Issue's Focus: Manure Management Technologies

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Market Preview
Hog Runs Raise Concerns
Last week's U.S. federally inspected (FI) hog slaughter total of 2.226 million head was the fourth-largest ever and a bit of a shock that it came so early. The three weeks that now stand ahead of that total on the all-time rankings all occurred in December, a time that we typically expect weekly highs to occur.

If Friday and Saturday's slaughter runs just equal those of last week, this week's total will be 2.240 million head and it will rank as the third-largest slaughter week ever. It is very likely that Friday's total will exceed that of last Friday and Saturday's run may do so as well. I don't think the total will be large enough to eclipse the current No. 2 week on record, with 2.258 million head processed the week of Dec. 18, 2004. The all-time high is 2.265 million the week of Dec. 19, 1998, when some plants worked on Sunday. We all remember how much fun that week was!

What Lies Ahead?
All of this begs the questions: "Where is this thing headed and just how alarmed should the industry be?"

I don't think there is any doubt that slaughter totals are headed upward this fall and that they will exceed what was predicted in the June Hogs & Pigs Report. We will get a fresh read on the supply situation on Sept. 28 when the next Hogs & Pigs Report comes out. I hope it gives us a much better feel for market hog inventories.

The increase in slaughter was dramatic back in March (see Figure 1) and, while it has jumped around a bit, we have had only one week below 2006 slaughter levels since then. The six-week average of year-over-year change is stabilizing between 3.5 and 4%, so that looks like a good range for the fourth quarter.

The shock comes in seeing where 4% more hogs leave us for weekly slaughter totals (see Figure 2). Only one week exceeds 2.3 million head, but four of those fourth-quarter weeks will break the current record for weekly slaughter total. And that is if 4% is large enough to capture the increase in supplies.

I don't think anyone should be alarmed, but I think everyone should be concerned. The announced resumption of a partial second shift at Morrell's Sioux City, IA, plant will add 3,200 head of daily capacity and leave the U.S. total at 428,035 head. At 5.4 days/week and allowing for 7,000 head/day more "push-them-through" capacity, U.S. packing plants could handle 2.35 million head weekly. Hog prices would be under some pressure at that operating rate, but the pressure should not be huge.

Adjustments Will Be Made
What can be done? The first steps are in place.
Packers have added capacity and are ready to push animals through. There is no real altruism in that as they expect to make a profit. That is not a bad thing and they are fulfilling their role in the system.

It appears that retailers have many pork features planned for this fall given the relatively high prices of both chicken and beef. That is very good news, but packers and processors need to push for retailers to extend those features over both time and product selection.

Don't expect any more help out of foodservice than is already in place. That has nothing to do with their desire to help. It is just based on the fact the foodservice operators have planning horizons of six months to a year. They may do some featuring, but they cannot change menus in the short run. The bulk of the extra product will have to go through retail and to export markets.

Exports were better in July and, we think, have been better in August. However, heating them up a bit would be a big help. While getting hogs through the packers is an issue, we also have to move the meat and there is just so much that can be done in the U.S. market without deep price cuts. The best solution will be a recovery of our exports. China could be a big part of that, but some recovery in shipments to Mexico would be a huge help, too.

Market weights suggest that we are relatively current at present, but producers need to keep that up in order to not back hogs up when the runs get even bigger. Hog prices are not likely to get much better as we go through this quarter, so there is little incentive to hold them. Get hogs moving when they reach ideal marketing weights and think ahead. Packers will be getting booked earlier and earlier and you will probably have to plan at least one week out in scheduling deliveries.

Finally, all of you loyal North American Preview readers can prepare to enjoy counting the money you will make this fall on those October and December Lean Hogs futures that you sold back in the summer. You did sell some, didn't you?




Click to view graph.

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



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Production Preview
Getting to the Root of Problems
I recently had the opportunity to participate in several discussions about the challenges of finding good employees. When things aren't going well, it's easy to conclude, "It's all about the people."

But is it? Without question, reliable, responsible employees are more pleasant to work with. However, human nature often leads to greater attribution, whether positive or negative, than what people actually deserve.

At an industry meeting recently, a prominent veterinarian noted several examples of system failures leading to human failure. Young weaning age was a major contributor to poor conception rates and elevated nursery mortalities. Likewise, until recently, circovirus-associated disease mortalities were attributed to poor stockmanship in finishers.

In other industries, efforts have been made to find and apply processes that are robust to sources of variation. McDonald's, for example, is often cited for its ability to deliver the consistent products from franchises around the globe, even with a minimally educated workforce.

Producing pigs is not exactly analogous to preparing hamburgers. After all, we deal with living beings that are sensitive to disease, environment and the needs for food and water. But this does not mean that we cannot make our processes more robust (a topic for a future discussion).

In our expectations of employees, it is my observation that we often underestimate the value of a positive experience. For example, if an employee is trained on how to treat animals, yet few of the treated animals respond, the employee is likely to perceive the effort as useless.

Similarly, if employees are trained to inseminate sows, but have no sense as to which or how many inseminations generate a litter, there is little incentive to refine their skills. It is the rare employee who aspires to be "the worst." However, without constructive training and feedback (from people and pigs), lowly motivated employees can often default to that position.

Among the tools that Toyota uses to address problems, one is referred to as "the 5 whys?" To address a problem at the root cause, they don't ask "why?" just once -- they ask it five times.

Suppose we have a problem with nursery mortality. If we ask "why?" once, we might conclude that the employee isn't treating pigs. But if we persist and ask, "Why isn't the employee treating pigs?" We may find that the pigs haven't been responding to treatment.

The three remaining "why" questions are then aimed at getting to the root of the problem:
  • "Why aren't the pigs responding to treatment?" Answer: The pigs have been weaned too young, and it is the young pigs that are the source of the higher mortality.

  • "Why is the sow unit weaning young pigs?" Answer: There are insufficient numbers of bred sows.

  • And finally, "Why are there insufficient bred sows?" Answer: The sow unit does not have adequate inventory to meet breeding targets.
In the end, another nursery employee might be willing to treat more pigs, but the underlying problem would still remain.

When expectations have not been met, if we are willing to look beyond the people, we may indeed find that good employees are not such a rarity, but good processes are.

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.



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    Legislative Preview
    Johanns Resigns to Run for Senate
    Secretary of Agriculture Mike Johanns resigned this week. Johanns is expected to announce next week that he is running for the Nebraska Senate seat that opened by retiring Senator Chuck Hagel (R-NE). President Bush, in accepting Johanns' resignation, said he had "brought focus and energy to the department." Chuck Conner, Deputy Secretary of Agriculture, has been named as Acting Secretary. Johanns in his resignation letter to the President said, "I can assure you that I leave the farm bill finalization in supremely capable hands. Deputy Secretary Chuck Conner has been intimately involved in the deliberations -- from the development of our proposals to his attendance at virtually every hearing during the House mark-up. Few people are as knowledgeable and insightful about farm bill policy. He is supported by some of the most dedicated civil servants in the federal government." Conner grew up on a family farm in Benton County, Indiana. He served as staff director of the Senate Agriculture Committee in the mid-90s and was Special Assistant to the President for Agriculture prior to being appointed Deputy Secretary of Agriculture.

    U.S. Expands Market to Canadian Beef -- USDA released its much-anticipated final rule to expand the list of beef products allowed into the United States from Canada. USDA said, "This rule is firmly based in science and ensures that we continue to protect the United States against bovine spongiform encephalopathy (BSE). It also is consistent with our commitment to promote fair trade practices and further normalizes trade with countries that institute the appropriate safeguards to prevent the spread of BSE." The rule allows for the importation from Canada of:
    • Live cattle and other bovines (bison) for any use (including breeding) born on or after, March 1, 1999, which Animal & Plant Health Inspection Service (APHIS) has determined to be the date of effective enforcement of Canada's ruminant-to-ruminant feed ban;

    • All beef and beef products;

    • Blood and blood products derived from bovines, collected under certain conditions; and

    • Casings and part of the small intestine derived from bovines.
    The rule will take effect on Nov. 19, 2007. Additional information is available at www.aphis.usda.gov.

    U.S. Red Meat Export Values Up -- According to the U.S. Meat Export Federation and USDA, U.S. red meat exports posted higher values through July of this year, compared to the same time period last year. U.S. pork and pork variety exports were up 5% in value to $1.7 billion. However, volume of these products decreased 5% to 774,552 tons. U.S. beef and beef variety exports increased 27% in value to $1.42 billion and 16% in volume to 467,933 tons.

    ITC Investigates Global Beef Trade -- The U.S. International Trade Commission (ITC) is beginning an investigation of the effects of animal health, food safety, tariffs, quotas, import licensing and distribution systems and other issues on U.S. beef exports. The ITC will hold a public hearing on Nov. 15 in Washington, DC. The ITC is to submit a report of its findings to the Senate Finance Committee on June 6, 2008.

    NPPC Fall Legislative Action Conference -- Pork producers from throughout the United States were in Washington, DC this week to meet with Congressional members and administration officials to discuss key issues affecting the U.S. pork industry including the 2007 farm bill and the various trade agreements pending before Congress. The producers were a part of the National Pork Producers Council's Legislative Action Conference.

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



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    Pork Industry Calendar
    Oct. 3, 2007: SowBridge Program on Heat Detection; contact: Sherry Hoyer, Iowa State University, by phone (515) 294-4496 or fax (515) 294-5698.

    Oct. 11-12, 2007: Employee Management for Production Agriculture Conference, Airport Marriott Hotel, Kansas City, MO; contact: Sarah Fogelman, Kansas State University research and Extension economist, (620) 431-1530.

    Click here to get National Hog Farmer's complete pork industry calendar.



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