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October 12, 2007 A Penton Media Property

Table Of Contents
Weekly Record Hog Slaughter Continues
Tackling Sow Lameness
Senate Committee Passes Ag Package

What's new on National Hog Farmer?
- News: Pork Board Continues Quest to Lower Pork's Suggested Cooking Temperature
- News: AASV Refutes Legislation that Would Ban Livestock Antibiotics
- 10 Steps to Manage Odor
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Market Preview
Weekly Record Hog Slaughter Continues
If there were any doubters out there regarding the potential for large hog supplies this fall, last week's record weekly estimated slaughter run of 2.321 million head should serve as a dose of very cold water. This week could well exceed those numbers, with slaughter through Thursday up 7,000 head or 0.4% from one week ago. Another 423,000 head run on Friday (in line with this week's daily runs) and 218,000 on Saturday (the same as last week), and we would see another record - -this time at 2.352 million head (see Figure 1).

Those numbers are certainly doable, especially given the fact that gross packer margins recovered somewhat last week after being quite tight the week of Sept. 29, when the cutout value fell by more than did hog prices (see Figure 2). I expect gross packer margins to get back above average very soon at these kinds of slaughter rates. One thing to remember, though, is that packers can actually make good money at lower gross margin levels (which is what is represented in Figure 2), since these large slaughter runs drive average fixed costs down by spreading plant, labor, etc. over more animals. Packing plants get very cost-efficient at these throughput levels.

Pork Exports Rebound
USDA's Foreign Agricultural Service released data for August pork exports this morning, and the news was definitely good for hog producers and pork packers. August exports on a product weight basis were 10% higher than one year ago. Year-to-date pork exports are still 3.3% lower than last year, but that is a big improvement from July when pork exports were 4.9% lower, year-to-date, than in 2007. See Figures 3 through 6.

More important for hog demand, though, is the status of export value. The number for export value grew by 14.7% vs. August 2007, and is now 5.9% higher year-to-date, improving from 4.7% higher through July. Added value for pork exports gives packers the ability to bid more for hogs. It is not a guarantee, but at least it makes higher bids possible.

Pork shipments to Hong Kong were up 462% in August vs. one year ago, while shipments to China were up 73%. Year-to-date, pork shipments to Hong Kong are 118% higher than in 2006 and shipments to China are 73% higher. Combining the numbers shows growth of 85% in pork shipments this year.

By-Product Export Growth
The good export news also applies to pork variety meats (or by-products). August variety meat shipments were up 5.5% in volume and 13.5% in value relative to one year ago. Those positive numbers drove year-to-date numbers to -0.7% for volume and +6.2% for value. That compares to -1.6% for volume and +5.2% for value at the end of July.

Is there any wonder that the average drop value per head has been at record levels this summer and contributed mightily to packer margins and live hog demand?

China and Hong Kong were the major drivers of August variety meat export growth. Shipments to Hong Kong were 212% larger than last year and those to China were 97% larger. The values of those shipments were 180% and 128% higher than last year, respectively. Russia was also an active customer in August, purchasing 22% more variety meats that was valued 22% more than last year.

Mexican Trade Concerns
Mexico continues to take fewer products than one year ago, but the year-over-year monthly decline was less in August (-23.8%) than it has been since February. Shipments of U.S. pork to Mexico are still down 30% in volume and 26% in value this year.

Variety meat shipments to Mexico (which is our largest variety meat customer) were down 13.6% in volume and 1.8% in value in August compared to August 2006. That performance was a bit disappointing since July saw year-over-year growth in both of those numbers.

My guess is that higher variety meat prices in August due to heavy interest by China/Hong Kong had an adverse impact on Mexican sales, especially given the price-sensitive nature of the Mexican market.

I have written several times that the problem in Mexico has been two-fold: higher tortilla prices which have reduced the amount of money consumers have to spend on meat, and higher domestic pork supplies due to liquidation caused by high feed prices. It appears from my contacts that these have been, on balance, about equal in their impact on U.S. exports. It still appears that the liquidation will slow this fall as hog numbers reach somewhat of a minimum and feed prices fall a bit. It certainly does not appear that Mexican demand for U.S. pork had improved much as of August, however.

Export Shining Stars
And after all of that, let us not overlook excellent performance in our other two big export markets. Shipments to Japan were up 15.5% in volume and 17% in value in August, while shipments to Canada were up 24% in volume and 30% in value.

The August data are definitely good news for the U.S. pork industry. I have sometimes felt a little silly predicting that we were still going to set a 16th-consecutive annual export record when the news, through July, was pretty bleak. But I think that is definitely within reach given these data and the fact that supplies will be ample this fall. Export markets are price-responsive, too, and lower prices will help move volume -- and we are going to need all the help we can get on that count!

Click to view graphs.

Steve R. Meyer, Ph.D.
Paragon Economics, Inc.


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

Production Preview
Tackling Sow Lameness
Lameness is a common condition in pigs and it is often linked to compromised animal well-being as well as economic loss to the producer.

The economic impact of lameness is associated with the premature removal of sows before they attain peak production. Locomotor problems are reportedly a major reason for culling sows -- second only to reproductive inefficiencies.

In a recent study in a commercial herd, researchers observed that sows having no lameness during the periparturient period (including lactation) were less likely to be removed within 35 days, post-farrowing, compared to lame sows, when controlled for factors such as parity, lactation feed intake, lactation length and number of piglets born alive.

In the same study, it was also observed that the performance of sows retained despite their welfare problems (such as lameness) was adversely affected in terms of the number of sows subsequently farrowed and in the number of piglets born alive. This suggests the long-lasting effects of conditions like lameness on herd performance.

Unlike reproductive reasons, the removal of a lame sow may not be by culling alone. Depending on the frequency of culling and/or euthanasia, the death rate due to lameness may vary from farm-to-farm. The welfare impact of lameness is not uniform across herds. Often, sows culled because of lameness are removed at a younger age than those removed for other reasons. This has serious economic implications for the producer.

Early removal of sows before they attain maximum litter size may have a negative impact on average litter size, litters/sow/year and pigs weaned/sow/year. All effectively raise the cost/weaned pig.

Given the economic effects of lameness in sows, minimizing the incidence and consequent sow removals may increase the proportion of higher parity sows in the herd and improve overall herd litter size and farrowing rate.

The causal factors for lameness in sows vary, however, the most common is the flooring. Nutritional deficiency is reported to be a major cause of lameness in sows, also.

The integrity of the claws is another related factor. Severe claw lesions may be painful and cause lameness, besides acting as an entry point for infection. Unlike dairy cattle, studies on claw lesions and their association with lameness in pigs are relatively rare. Not all types of claw lesions in pigs may be associated with lameness.

Recent studies at the University of Minnesota have established an association of white line lesion with lameness. We also demonstrated that claw lesions are more prevalent in group-housed sows compared to individually confined sows, which is alarming given the industry trend to move to group housing systems for breeding sows.

The adverse welfare and economic effects of lameness are maximized when lame sows are left to die. The number of non-productive days, and thus, the number of litters/sow/year is influenced by the interval between a production event and the removal of a sow. Therefore, timely and adequate culling of at-risk sows is of great importance.

This may not always be possible, especially before weaning, given the management and economic implications of removing a lactating sow and the welfare of piglets.

In any case, lameness in gilts and sows should be prevented or treated. Selection of gilts on the basis of conformation, floor type, provision for bedding, group size and structure, and nutrition are important factors in a preventative strategy. If treatment is not an option, lame sows should be culled or euthanized immediately.

by Sukumarannair S. Anil, DVM
Editor's Note: For all your agricultural news, markets and commentaries, go to


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Legislative Preview
Senate Committee Passes Ag Package
The Senate Finance Committee passed a $16 billion agricultural tax package that will assist the Senate Agriculture Committee in proceeding with the 2007 farm bill. The legislation establishes a $5.1 billion permanent agricultural disaster program. Producers will be given the option of either cash payments or tax credits for certain conservation programs. It provides tax credits for cellulosic ethanol and reduces the current ethanol blender's tax credit from 51 to 46¢/gal. Key highlights of the bill include:
  • Permanent Ag Disaster Assistance Trust Fund: Creates a trust fund for disaster relief that would cover the "shallow losses" not covered by crop insurance. Farmers and ranchers will be required to purchase crop insurance in order to be eligible for disaster assistance.
  • Conservation Tax Credits: Producers would have to choose between regular cash payment or a tax credit for participation in the Conservation Reserve Program, Wetlands Reserve Program and the Working Grasslands Protection Program. Currently, producers receive cash payments.
  • Tax Treatments of CRP Payments: Provides that Conservation Reserve Program (CRP) payments to retired or disabled individuals are to be treated as rental payments for tax purposes and are excluded from self-employment taxes.
  • Small Producer Credit for Cellulosic Alcohol: The proposal creates a new production tax credit for cellulosic alcohol of 50¢/gal. (in addition to the current 51¢/gal. credit and 10 ¢/ for up to 60 million gallons of cellulosic fuel production in a taxable year.
  • Expand Expensing for Cellulosic Ethanol Facilities: The proposal expands the eligible property qualifying for the 50% expensing to include alcohol produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis.
  • Small Ethanol Producer Credit: The proposal extends for two years (through Dec. 31, 2012) the 10¢/gal. tax credit on the first 15 million gallons of ethanol production for producers with annual capacity of not more than 60 million gallons.
  • Fossil-Free Alcohol Production Credit: The proposal creates a new, small producer alcohol credit of 25¢/gal. for facilities that produce ethanol through a process that does not use a fossil-based resource available through Dec. 31, 2012.
  • Biodiesel Tax Credit: Extends for two years (through Dec. 31, 2010) the $1.00 and 50¢ production tax credits for biodiesel. It extends for four years (through Dec. 31, 2012) the 10¢/gal. tax credit on the first 15 million gallons of biodiesel production for producers with annual capacity of not more than 60 million gallons.
  • Renewable Diesel Incentives: Extends for two years (through Dec. 31, 2010) the $1 tax credit for diesel created through a thermal depolymerization process and caps, on a per facility basis, the $1 credit at 60 million gallons/year.
  • Alternative Fuels Excise Tax Credit: The proposal extends through 2010 the alternative fuel tax credit for non-coal-based transportation fuels. The proposal modifies the credit to include biomass-gas-based versions of liquefied petroleum gas and liquefied or compressed natural gas.
  • Alternative Refueling Station Tax Credit: The proposal extends the 30% alternative refueling property credit (capped at $30,000) for non-hydrogen property for one year (through Dec. 31, 2010).

The energy-related offsets include:
  • Five-cent reduction in ethanol credit: This proposal reduces the 51¢/gal. tax credit for ethanol by 5¢ beginning with the first calendar year after the year in which 7.5 billion gallons of ethanol has been produced. The 7.5 billion target matches the renewable fuel standard passed by Congress in the 2005 Energy Policy Act.
  • Extension of Tariff on Ethanol: The proposal extends the tariff on imported ethanol for two years (through Dec. 31, 2010).
  • Elimination of Certain Refunds of Duty Imposed on Ethanol: Present law allows duties paid upon import to be reclaimed at a later date if the same or similar product is exported. Current law treats ethanol blended with gasoline the same as jet fuel. The proposal terminates that treatment. Any drawback for ethanol blended with gasoline is still allowed.
  • Exclusion of denaturant from alcohol fuels credit: The proposal excludes the volume of denaturant (a substance used to render alcohol toxic or undrinkable) in the fuel for purposes of calculating the volume of alcohol eligible for the alcohol fuels credit.
  • Alcohol and biodiesel as taxable fuel: This proposal adds qualified alcohol fuel mixtures and qualified biodiesel fuel mixtures to the definition of taxable fuel as a type of diesel fuel.

Stop Canadian Cattle Over 30 Months -- Senator Byron Doran (D-ND) has introduced a "Resolution of Disapproval" to block the administration's rule to allow for the importation of Canadian cattle and beef products from animals over 30 months of age. Senator Dorgan said, "The Bush Administration based its decision to allow these imports to resume on overly optimistic assumptions regarding the scope of Canada's mad cow problem and the effectiveness of Canada's efforts to control, prevent and eradicate it. The American people deserve to know, without question, that the food they put on the dinner table is safe." Other cosponsors of the resolution include Senators John Barrasso (R-WY), Sherrod Brown (D-OH), Kent Conrad (D-ND), Mike Enzi (R-WY), Tim Johnson (D-SD), John Tester (D-MT) and John Thune (R-SD). The rule is to take effect Nov. 19 and will allow the importation of: live cattle and other bovines for any use born on or after March 1, 1999; 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.

Public Attitude Towards Trade Declines -- In a new survey by the Pew Research Center, the American public has grown more skeptical about the benefits of trade. According to the survey, 59% of Americans believe that trade is good for the economy. This compares to 78% five years ago.

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


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Pork Industry Calendar
Oct. 16, 2007: The Farm Foundation Forum series, First Floor Conference Room, Resources for the Future Building, Washington, DC; contact: May Thompson, Farm Foundation director of communications at

Oct. 26, 2007: Healthy Hogs Seminar, Sampson Community College, Clinton, NC; contact: Karla McKinney at North Carolina State University at (919) 515-4000.

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


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