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National Hog Farmer Weekly Preview
September 27, 2010
 
In this issue:
  Few Surprises in Hogs & Pigs Report
  Dark Clouds Overhead
  Senators Urged to Pass Food Safety Bill
  Vilsack Pressured to Explain Position on Animal Antibiotics

MARKET PREVIEW
Few Surprises in Hogs & Pigs Report
Friday’s USDA Hogs and Pigs report was pretty much as expected. Table 1 contains the key data from the report, the average pre-report estimates of market analysts, and the differences between the numbers.

The differences between expected and actual numbers are less than 1%, with the exception of the 180-lb. and over category, although the USDA number for that category agrees almost precisely with slaughter levels since Sept. 1.

The market hog inventory and all weight class numbers indicate that supplies will, as expected, remain below year-ago levels for the remainder of this year and for most of Q1-2011. But note that the year-on-year percentages get larger as the weight classes get smaller – an indication that production is catching up to year-earlier levels over time. In my estimates, I have slaughter exceeding 2010 levels by June of next year.

USDA’s breeding herd estimate shows the herd getting smaller by 18,000 head since June 1. That was a bit of a surprise given the low levels of sow slaughter and no clear indication that fewer gilts were being marketed (based on a percent of total barrow and gilt slaughter). The report suggests a small buildup of sow numbers. While actual and anticipated profits no doubt encouraged some herd rebuilding, the risk cast over the hog business by rising feed prices and the proposed Grain, Inspection and Packers and Stockyards Administration's (GIPSA) rule has very likely caused some producers to delay taking action. According to this report, the sow herd is only 10,000 head larger on Sept. 1 than it was on March 1.

USDA revised some of its June numbers to reflect the lower slaughter this summer. Dec-Feb farrowings were lowered by 29,000 litters to 2.872 million and the Dec-Feb pig crop was lowered by 281,000 head to 27.592 million. The June 1 inventory of pigs weighing from 120-179 lb., which was over 5% lower than in 2010 in the original report was dropped by another 250,000 head, to 12.029 million. That 250,000 head is the lion’s share of the shortfall of actual vs. expected slaughter this summer, giving new credence to the beliefs of many that the pigs were never available in the first place.

FULL ARTICLE

FINANCIAL PREVIEW
Dark Clouds Overhead
I use this analogy as I sit in southern Minnesota, having received the news that my hometown of New Richland, MN, received nearly 10 in. of rain in a 48-hour period. Much of southern Minnesota was hit with very heavy rain this week – not good for this time of year when farmers are anxious to start the fall harvest.

Most pork producers have this “dark cloud” mentality as they consider any form of expansion in their hog operations. Most have zero interest in adding more sows, even though the economics have been good so far this year and some have the financial capacity to expand. This is the first time I can remember that the interest in expansion is virtually nonexistent. I am writing this before the USDA’s Hogs and Pig report is released on Friday (Sept. 24).

Whether you are a large or small producer, the deciding factor is the price of corn. If the average corn price on the board for next year is above $5/bu., you will need $143 to 147/head to break even. If you have to buy all of your corn, you will also be at the mercy of 2011 prices. For prices to stay at current levels and to ensure an adequate corn supply going forward, we will need very good planting and growing conditions.

For those who raise a lot of the corn needed, the question is whether you want to risk raising hogs or would it be less risky to just sell your corn out of the field? Your answer might depend on whether or not you currently have an empty hog facility. From what I have heard, these are the producers who are contemplating trying to find pig sources to keep their barns full. From a lender’s perspective, you still must have the right production model and risk management profile to be successful in the long term. To expand merely to fill up empty barns is not the right reason, in my opinion.

FULL ARTICLE

LEGISLATIVE PREVIEW
Senators Urged to Pass Food Safety Bill
Food industry and consumer groups are urging the Senate to consider the Food & Drug Administration’s (FDA) Food Safety Modernization Act (S. 510) before Congress recesses for the fall elections. In a letter to the Senate leadership, the groups stated, “Strong food-safety legislation will reduce the risk of contamination and thereby better protect public health and safety, raise the bar for the food industry, and deter bad actors.” The legislation establishes a risk-based approach to inspection, improves traceability, requires food companies to develop a food safety plan, and improves the safety of imported food and ingredients. Groups signing the letter included American Beverage Association, Consumer Federation of America, Consumers Union, Food Marketing Institute, Grocery Manufacturers Association, International Dairy Foods Association, National Association of Manufacturers, National Restaurant Association, U.S. Chamber of Commerce and U.S. Public Interest Research Group. The House of Representatives passed FDA food safety reform legislation last year.

Improving Corn-Ethanol Energy Efficiency — A new USDA report, “2008 Energy Balance for the Corn-Ethanol Industry,” indicates the net energy gain from converting corn to ethanol is improving in efficiency. The report measured all conventional fossil fuel energy used in the production of one gallon of corn ethanol. According to the report, ethanol has made the transition from an “energy sink (more energy used than energy produced), to a moderate net energy gain in the 1990s, to a substantial net energy gain in the present. The net energy balance of corn ethanol has increased from 1.76 BTUs to 2.3 BTUs of required energy since the last study was completed in 2004.

FULL ARTICLE

NEWS FLASH
Vilsack Pressured to Explain Position on Animal Antibiotics
Agriculture Secretary Tom Vilsack is being asked to explain comments he made earlier this month regarding his position on antibiotic use in food-producing animals.

Rep. Louise Slaughter (D-NY) and Sen. Dianne Feinstein (D-CA) sent a letter Sept. 15 to Vilsack seeking clarification of remarks he made at a National Cattlemen’s Beef Association meeting.

Responding to a question about legislation Slaughter and Feinstein have proposed, Vilsack reportedly said the use of antibiotics in livestock production can’t be banned. “USDA’s public position is, and always has been, that antibiotics need to be used judiciously, and we believe they already are,” he said as reported by Food Safety News.

FULL ARTICLE

PORK INDUSTRY CALENDAR
Sept. 28-30, 2010: Livestock Biotech Summit, Sheraton Sioux Falls Hotel, Sioux Falls, SD; contact: www.bio.org/livestockbiotechsummit.

Oct. 5-6, 2010: Food System Summit, InterContinental O’Hare Hotel, Chicago, IL; contact: www.foodintegrity.org.



Nov. 4-5, 2010: : Iowa State University Swine Disease Conference for Swine Practitioners, Scheman Building, Iowa State University
Ames, IA
for more information contact:Julie Kieffer at kiefferj@iastate.edu or(515) 956-3201.



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

 MAGAZINE HIGHLIGHTS

The Sept. 15th edition of National Hog Farmer magazine features a special report, sponsored by Phibro Animal Health, Pork Checkoff and National Hog Farmer, which highlights the 2010 Environmental Stewards award winners. In addition, you will find a special feature explaining oral fluid collection using cotton ropes as a simple, inexpensive disease screening method for various swine diseases. These and additional production-based articles may be found at http://www.nationalhogfarmer.com.

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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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