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Sow
Slaughter Finally Takes Upward Path
U.S. federally inspected (FI) sow slaughter finally went
above year-ago levels the week of Aug. 15. That’s one of those
occurrences that is hoped for and lamented at the same time. It means we
may have turned the corner to the liquidation that is needed to restore
profitability to our business. But it also means that some friends and
perhaps neighbors will not be in the business to see those profitable
days.
Figure 1 shows weekly sow slaughter for 2008 and 2009 as well as the
weekly averages for 2003-2007. August 15 marks only the third week this
year in which U.S. sow slaughter has been larger than one year ago. The
others were the weeks of Jan. 10 and July 25.
The same pattern holds true if one considers sow slaughter as a
percentage of the breeding herd, which is probably a better measure of
sow herd change, since we should expect lower numbers of slaughter sows
with a smaller breeding herd. The week of Aug. 15 was the
second-highest percentage of the breeding herd (1.16%) this year, second
only to January 8 (1.18%). Through Aug. 15, 26.6% of the breeding herd
has been slaughtered thus far in 2009, compared with 29.6% in
2008.
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When Will
the Hog Market Get Better?
I can’t tell you how many times I have been asked this
question over the past 12 months. In 2007, the industry had strong
profits and strong balance sheets. That was a long time ago.
The bottom line is this – if demand remains sluggish, it could take
until 2011 for the pork industry to be consistently profitable again. We
will eventually get supply down, but it will take a while longer for
this to occur.
In our last severe downturn (1998-99), a good portion of the industry
could exit the business and turn back to crop farming. Some actually
became a contract grower for someone else. The current issue is the
swine industry has become more specialized. The top 30 producers
represent almost 70% of the industry. Pork production is their
livelihood. If they decide to get out of the business, it’s likely
they do not have another option to turn to. This is why it’s taking so
long for the industry to contract. The swine industry is very good at
producing 115 million pigs. However, with current demand, we only need
105-107 million pigs – a reduction of 5-7%. We will get there, but
unfortunately it will be a slow and painful process.
A Challenge to All Pork Producers – I have spoken to several
groups this past year and every time I have urged people to become an
advocate for the industry. I believe this is our biggest Achilles heel.
We are great at production, but we need to do a much better job of
“rebranding” our industry. We need to take steps to make the
industry better – not only from a profitability standpoint – but
also from a public perception standpoint. We can no longer set back and
just raise pork. Here is my challenge for each of you:
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Ten-Year
Budget Deficit to Reach $9 Trillion
The Obama administration has announced it expects the
10-year budget deficit to reach $9 trillion. This is approximately $2
trillion more than was estimated earlier this year. The administration
said the deficit is a “result of a deeper-than-expected recession,
certain spending programs (such as unemployment insurance and food
stamps) are projected to automatically increase and revenues are
projected to automatically decline, compared to our previous
projections.” Congressional members were raising concerns earlier
this year about the increasing deficit. This could have an impact on
the health care debate when Congress returns after Labor Day.
Farm Storage Facility Loan Program — USDA announced changes to
the Farm Storage Facility Loan (FSFL) program as a result of the 2008
farm bill. This will allow producers of eligible commodities to obtain
low-interest financing to build or upgrade farm storage and handling
facilities. The maximum principle amount of a loan through FSFL is
$500,000. Participants are required to provide a down payment of 15%,
with the Commodity Credit Corporation (CCC) providing a loan for the
remaining 85% of the next cost of the eligible storage facility and
permanent drying and handling equipment. Loan terms of 7, 10 or 12
years are available depending on the amount of the loan. Interest rates
for each term rate may be different and are based on the rate which CCC
borrows from the Department of the Treasury. Corn, grain, sorghum,
rice, soybeans, oats, peanuts, wheat, barley or minor oilseeds harvested
as whole grain are the commodities that are eligible for the
program.
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Time
Magazine’s Cover Article Draws Pork Industry Rebuttal
National
Pork Board President Tim Bierman has sent a strongly worded letter
to the editor of Time magazine for its recent cover story,
“America’s
Food Crisis and How to Fix It.”
For starters, there is no food crisis in America, he says.
“Americans have access to abundant, safe and affordable food that is
the envy of the rest of the world. It is produced by caring farmers
using methods that are supported by science and backed by
experience,” Bierman responds.
“Unfortunately for Time’s readers, the food plate of the
article’s author, Bryan Walsh, is half empty. He blames modern pork
production for much of what he considers to be today’s environmental
concerns. He says pigs eat too much corn-based feed, which in turn,
relies on too much commercial fertilizer.
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Sept. 1, 2009: Carthage Veterinary
Service (CVS), Ltd. 19th Annual Swine Conference, Western Illinois
University, Macomb, IL; contact: CVS at (217) 357-2811 or visit www.hogvet.com.
Sept. 10, 2009: Midwest Swine Nutrition Conference,
Indiana Farm Bureau Building, Indianapolis, IN; contact: Tip Cline at
Purdue University at tcline@purdue.edu or visit www.swinenutritionconference.com.
Sept. 15-16, 2009: 70th University of Minnesota
Nutrition Conference, Holiday Inn, Owatonna, MN; contact: http://www.ansci.umn.edu/mnc.html.
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