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August 16, 2010
 
In this issue:
  Higher Feed Costs May Check Expansion
  Pork Exports to Japan Rebound
  Farm Program Payment Limitations
  H1N1 Flu Virus Pandemic Declared Officially Over

MARKET PREVIEW
Higher 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.

Acceptable Margins?
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 sixth.

FULL ARTICLE

PORK EXPORT PREVIEW
Pork 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%.

FULL ARTICLE

LEGISLATIVE PREVIEW
Farm 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.

FULL ARTICLE

NEWS FLASH
H1N1 Flu 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.

FULL ARTICLE

PORK INDUSTRY CALENDAR
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 rcook@supportfarmers.com .


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 www.usaha.org..

FULL ARTICLE
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1. Data on file, Study Report No. 768-9690-0-CPC-97-002, Pfizer Inc.

 BLUEPRINT

As positive margins return to pork producers’ ledgers, owners and managers are recounting the hard lessons learned as they redouble efforts to improve risk management skills, measure and manage production variance with greater precision, and produce quality pork in a safe and sustainable manner. At the heart of the 50th edition in the Blueprint series, published April 15th, 2010, is a focus on new and improved pathways to profitability.

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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, click here.


 MAGAZINE HIGHLIGHTS

The July 15 edition of National Hog Farmer features 10 “practical, common sense” new products that found favor with our independent review panel. Four industry experts – a pork producer, a swine veterinarian, a swine nutritionist and an Extension agricultural engineer – reviewed 19 new products nominated and introduced at the 2010 World Pork Expo in Des Moines. To read the full story, go to: http://nationalhogfarmer.com/mag/wpx2010-new-product-tour-0715/.

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 POSTERS

FREE SELECTION GUIDES AND MANAGEMENT POSTERS
National Hog Farmer offers 10 posters targeting key production areas, offering guidance in critical areas such as feet and leg soundness and reproduction traits soundness in replacement gilts. Others include pig anatomy, heat detection, sow condition, etc. All posters are in English. Select posters are translated to Spanish, Chinese and Japanese.

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