Feed Costs May Check Expansion
The recent upheavals in grain markets were threatening to
drive feed costs sharply higher. At least that was what we thought the
week before last when Russia’s wheat problems drove wheat and other
grain markets sharply higher.
All of that has settled down a bit, but last week’s USDA Crop
Production and World Agricultural Supply and Demand Estimates (WASDE)
reports did little to squelch concern. The reports’ key numbers were
bearish, but the markets reacted by rising sharply – carrying corn
prices to their highest level (except for the wheat-driven spike the
week before), since January. Near-time August soybean meal set a
contract life high as well.
So, what does this mean for pork producers? Higher feed costs, of
course. Not the ridiculously high feed costs of 2008 or even the sharp
run-up during 2009 planting season (Figure 1). But, still, the highest
levels since mid-2009 and, according to futures prices, yet higher feed
costs into next summer.
Those higher feed prices have, in turn, pushed projected production
costs steadily higher as 2010 has progressed (Figure 2). The increase
has not been huge, but it has put pressure on projected margins. My
model, based on Iowa State University’s (ISU) Estimated Costs and
Returns parameters and futures as of Aug. 11, predicts margins of
roughly $13/head for the rest of 2010 and $18.68/head for the first half
of 2011. A “normal” seasonal downturn in the second half of 2011
would leave profits for the year in the $13-$15/head range.
Should we be happy with these levels? I’ll let you be the judge of
that, but the ISU records since 1990 show the record annual profit was
$25.51 in 2005, followed by $22.56 in 2004, $17.83 in 1991 and $15.83 in
2006. The roughly $15/head that is now a likely outcome for all of 2010
would rank fifth, and a slightly lower result for 2011 would rank
Exports to Japan Rebound
After a slow start in 2010, U.S. pork exports to Japan
have recovered remarkably well in recent weeks. In fact, the mid-year
totals just released by USDA and compiled by the U.S. Meat Export
Federation (USMEF) show exports pulling ahead of the pace set in both
2008 and 2009. Japan set an all-time, single-market record for imports
of U.S. pork $1.545 billion in 2008. The market performed almost as well
the following year, totaling $1.54 billion.
In terms of value, no other foreign market has ever imported even half
as much U.S. pork. The closest was Mexico in 2009, at $762.3 million
– easily an all-time record for any market except Japan. Therefore,
while the global destinations for U.S. pork are quite diverse and
exports are performing well across the world, there is no denying the
importance of Japan as a high-value market that yields magnificent
returns for U.S. pork producers.
For these reasons, an early-2010 slump in pork exports to Japan raised
some significant concerns in the industry. January’s export value was
more than 25% below the year-ago level. By the end of the first quarter,
export value still trailed the 2009 pace by 13%. But April and May were
solidly in the “plus” column, exceeding year-ago values by 8% and
15%, respectively. June export value was an all-time monthly record of
$162.88 million, surpassing the June 2009 total by 44%.
Program Payment Limitations
Senators Chuck Grassley (R-IA) and Russ Feingold (D-WI)
have introduced legislation to limit farm program payments. The bill
establishes a limit of $250,000 for farm program payments to any
individual. The bill caps direct payments at $40,000; counter-cyclical
payments at $60,000; and marketing loan gains, loan deficiency payments,
and commodity certificates at $150,000/year. When introducing the
legislation, Senator Grassley said, “Rural America can’t continue to
withstand the pressure that unlimited payments create. The farm program
was never intended to help big farmers get bigger; instead, it was
created to help those who couldn’t withstand the political whims of
Washington or the fierce reckonings of Mother Nature. When 10% of the
nation’s farmers receive more than 70% of the payments, it erodes
public confidence in federal farm programs. This legislation is a way to
stop that trend from growing.” Program payment limits will be
addressed next year during consideration of the farm bill.
Livestock Competition Workshop — A reminder for those
interested in attending the Department of Justice-USDA competition
workshop on livestock on Aug. 27 at Colorado State University, Ft.
Collins, CO. It is recommended that you pre-register at www.colostate.edu/.
U.S Attorney General Eric Holder and Secretary of Agriculture Tom
Vilsack will participate in this fourth in a series of five workshops
focused on agricultural competition issues.
Virus Pandemic Declared Officially Over
The World Health Organization (WHO) has announced that the
H1N1 influenza pandemic has largely run its course and is now over.
Margaret Chan, director-general of WHO, says the world is now moving
into the post-pandemic period, meaning “based on experience with past
pandemics, we expect the H1N1 virus to take on the behavior of a
seasonal influenza virus and continue to circulate for years to come.”
Called many names since its discovery in the spring of 2009, the World
Organization for Animal Health (OIE) recommends the virus be referred to
as “North American influenza,” in keeping with the naming of other
outbreaks of influenza in the human population.
Aug. 19, 2010: George Young Swine Health
and Management Conference, Marina Inn (402-494-4000 or 800-798-7980),
South Sioux City, NE
for more information contact: http://georgeyoungswineconference.unl.edu
Aug. 24, 2010: “Doing Things Right: Farming for the
Future,” sponsored by the Coalition to Support Iowa’s Farmers
(CSIF), Best Western Starlite Village, Fort Dodge, IA
For more information contact: CSIF at (515) 225-5515 or firstname.lastname@example.org
August 30-31, 2010: Joint Strategy Forum on Animal
Disease Traceability, Renaissance Denver Hotel, Denver, CO
For more information go to: www.animalagriculture.org or
According to a head-to-head trial1,
LINCOMIX® (lincomycin) is equally as efficacious for
ileitis control at 40 g/T as Tylan® is at 100 g/T. That
means you’ll spend a whopping 40% less for comparable results. Contact
your veterinarian or your Pfizer Animal Health representative to learn
1. Data on file, Study Report No. 768-9690-0-CPC-97-002, Pfizer
NPPC and the National Pork Board have launched a program, We
Care, to promote pork producers' commitment to responsible pork
production. From animal care and the environment to food safety and
quality, pork producers demonstrate best practices daily.
For more on continuing the tradition of doing what’s right,
Social Networking For Pork Industry Professionals
National Hog Farmer content is available on Facebook, a social
networking tool increasingly used by pork industry professionals.
Interact with readers and editors, participate in discussions and keep
up-to-date with industry happenings. Become a fan of
National Hog Farmer is also on Twitter, a micro-blogging site that
provides brief status updates on people, groups or organizations. Users
can "follow" people or groups, including news organizations that they
want to keep up-to-date with.
National Hog Farmer on Twitter!