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
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.
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
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.
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.
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
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
for more information contact:Julie Kieffer at firstname.lastname@example.org or(515)
When two leaders come together, expect great things to happen.
One-dose protection from wean to finish. That’s Ingelvac®
CircoFLEX-MycoFLEX. The only circovirus and Mycoplasma vaccines
USDA-approved for mixing. The result? A true dose of confidence from two
powerful leaders. Call Boehringer Ingelheim at 1-800-325-9167 or
click here for more information.
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,