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National Hog Farmer Weekly Preview
December 6, 2010
In this issue:
  Understanding the Purpose of Hedging
  An In-Depth Look at AI Breeding
  U.S. and Korea Reach Agreement
  U.S.-South Korea Conclude Free Trade Agreement

Understanding the Purpose of Hedging
This week’s column covers some familiar territory for many, but I thought some of our readers would appreciate a review of the basics of hedging.

In its simplest terms, hedging is taking equal and opposite positions in two positively correlated markets. The result of taking such a position is it establishes a firm price in one of the markets, since any losses incurred there will mean that profits are earned in the correlated market, or any gains incurred in the primary market will be offset by losses in the correlated market.

The key factor determining whether the price that a hedger establishes when he/she places a hedge (i.e. expected price) is realized is whether the difference between the prices in the two markets (i.e. the basis) behaves as expected.

The reason hedging works is, for highly correlated markets, the variation of the basis is less than the variation of the prices. It matters not to a hedger how much a price changes, as long as the relationship of the price of interest to the correlated market remains less variable and reasonably predictable.


An In-Depth Look at AI Breeding
For this review, we chose 22 farms in the database that recorded Semen Batch Code and AI Technician, and ran the data through two of Swine Management Service's (SMS) specialized reports, the In-Depth Breeding Analysis and the Breeding Technician Report.

These reports look at farrowing rate by AI technician, semen batch code, parity, number of services, number of matings, days to first estrus, days to estrus return, day of week breed, lactation length, the time of day of breeding, etc. In this analysis, the last 51 weeks of breeding results were used to ensure the records were updated and all bred females farrowed. The data represented 122,000-plus services. The farms involved were of different sizes, different genetic lines and different geographical locations. Two of the three variables of the SMS Breeding Triangle, the semen and the AI technician, were selected for analysis. The overall farrowing rate was 85% for the 51-week period of time.

In looking at the farrowing rate of semen batches, we selected batches with a minimum of 10 doses per batch to a maximum of 99 doses. This gave us 1,840 batches of semen for Farrowing Rate by Semen Batch (Table 1). The table was broken down by ranges of 5% in farrowing rate and the number of batches of semen in each farrowing range. A total of 6.3% of the semen batches had a farrowing rate of 100%, down to 1.4% of the batches which had less than 50% farrowing rate, and 31% of the semen batches had less than 80% farrowing rate.


U.S. and Korea Reach Agreement
President Barack Obama announced that the United States and Korea reached an agreement on the Korean-U.S. Free Trade Agreement (KORUS), noting it is “expected to increase annual exports of American goods by up to $11 billion and support at least 70,000 American jobs.” According to the American Meat Institute (AMI) when the free trade agreement (FTA) is fully implemented, beef and pork exports to South Korea could increase by $2 billion and result in more than 26,700 new American jobs. The effective date for zero tariffs on some pork products was moved to Jan. 1, 2016, from the originally negotiated Jan. 1, 2014. The National Pork Producers Council (NPPC) commented: “With the date for a zero tariff moved back, we will lose some market share in the South Korean market to Chile. But as the low-cost producer of pork in the world, we’ll hold our own. We still will go to zero six months prior to the European Union. This is still a good deal for us.” (See “News Flash” below for more details on the agreement). According to the U.S. Trade Representative, Korea’s existing 40% tariff on beef will be eliminated over time. The National Cattlemen’s Beef Association (NCBA) estimates $325 million in annual tariff reductions once the tariffs are completely phased-out. The agreement will be sent to Congress next year for consideration.

Senate Passes FDA Food Safety Bill
The Senate overwhelmingly passed S.510, the Food & Drug Administration (FDA) Food Safety Modernization Act, by a vote of 73-25. This legislation provides historic changes to the FDA’s food safety policy. Key provisions include:


U.S.-South Korea Conclude Free Trade Agreement
The U.S. Meat Export Federation (USMEF) is calling Friday’s announcement by President Obama very welcome news that the United States and South Korea have reached consensus on a free trade agreement (FTA).

There will be significant benefits reaped under the FTA from gradual elimination of duties on pork and beef exports to Korea, according to the USMEF.

“I would like to take this opportunity to personally congratulate the U.S. negotiators for their dedication and commitment to pursuing these discussions to a successful conclusion,” says USMEF President and CEO Philip Seng.

This agreement provides a good opportunity for U.S. agriculture and is great news for Korean consumers.


Dec. 13, 2010: Illinois Farm Economics Summit, I Hotel and Conference Center Champaign, IL. For more information contact: Sue Esposito by phone (217) 333-5506, fax (217) 333-2312 or e-mail

Dec. 14, 2010: Illinois Farm Economics Summit, Center for Agriculture Sycamore, IL. For more information contact: Sue Esposito by phone (217) 333-5506, fax (217) 333-2312 or e-mail

Dec. 14, 2010: Pork Quality Assurance Plus Advisor Recertification Session, Iowa Pork Industry Center (IPIC) at Iowa State University, Room 2215 Veterinary Medicine, Ames, IA. Application deadline is Dec. 13; contact Jane Runneals at IPIC at (515) 294-4103 or go online at

Dec. 15, 2010: Illinois Farm Economics Summit, Best Western Prairie Inn Galesburg, IL. For more information contact: Sue Esposito by phone (217) 333-5506, fax (217) 333-2312 or e-mail



The October 15 Blueprint edition of National Hog Farmer provides guidelines for building a sound replacement gilt program, including nutritional considerations to maximize genetic potential and the importance of an effective herd health management program. In addition, the issue offers a special section on screening replacement gilt candidates for skeletal and reproductive soundness.

How can Compost-A-Mats clear up scouring litters?
  • Upon identifying scouring piglets, place a Compost-A-Mat directly under a heat lamp in the farrowing crate.
  • This will create a clean and warm area for piglets to dry up and help overall farrowing house performance.
  • The Compost-A-Mat should remain in the crate for seven days or until piglets have stopped scouring.
  • At this point, the Compost-A-Mat will contain fecal material and can be broken down for feedback.
For more info click here


The Nov. 15, 2010 edition of National Hog Farmer summarizes a four-year, University of Minnesota study to validate the effectiveness of air filtration as a safeguard against porcine reproductive and respiratory syndrome (PRRS). In addition, the swine health focus provides a report on periweaning failure to thrive syndrome (PFTS), a disease that continues to befuddle pork producers and swine veterinarians. The impact of foot health on sow culling rates, the return of rotavirus as a cause of baby pig scours, and the possible link between DDGS in sow diets and mulberry heart disease in young pigs are also featured.

NPPC’s grassroots organization trains industry stakeholders to tell the story of U.S. pork. As a LEADR you will help lawmakers understand how their decisions affect your business, your family, your community and your ability to provide consumers with safe, affordable and healthy pork. Click here to learn more.


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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