Time is a
Common Denominator in Pork Supply/Demand Puzzle
When will consumers back away from high-priced pork?
That’s a question that I have heard frequently the past few weeks. It
comes mainly from producers who see today’s $100/cwt., carcass, quote
on June futures and wonder just how much retail price pressure their
ultimate customers will withstand. I’m sure packers and processors
are thinking the same thing as they see their potential hog costs rise
The answer, as with most economic matters, is “it depends.” It
depends on the reason for higher prices, the prices of substitutes,
consumers’ income levels, and their propensity to spend money on food,
in general, and meat and pork in particular.
Prices can rise for many reasons, but they basically fall into two
well-known categories: supply issues and demand issues. Isn’t that a
Supply issues generally focus on productivity and production costs and
depend on the prices of inputs, technology, management, health and a
host of other factors. When costs rise, supply decreases. That is –
the quantity that producers are willing and able to sell at each
alternative price gets smaller. The supply curve shifts up and to the
right as Figure 1 shows. When this happens, lower output is the reason
for higher prices.
Enteric Disease Trends
Transmissible gastroenteritis (TGE) incidence is seasonal,
with the winter of 2010-11 proving to be similar to past years (Figure
1). TGE is a cold-hardy virus that penetrates compromised biosecurity
efforts during cold weather, which probably explains a very consistent
seasonal occurrence dating back at least 50 years.
Ileitis (porcine proliferative enteritis caused by Lawsonia
intracellularis) cases this year increased compared to previous years
(Figure 2). A rise in the number of cases in the fall has been typical
for the past eight years (Figure 3).
Salmonella isolation from enteric disease cases at the Iowa State
University Veterinary Diagnostic Laboratory (ISU VDL) is common (Figure
4). Although fewer cases were reported as positive for salmonella in
2009 and 2010, this is an artifact of case reporting by the ISU VDL.
Salmonella remains very common in pigs as well as in virtually all
vertebrates and their droppings.
In addition, salmonella is hardy in the environment. Consequently, the
source of salmonella infections to pigs are innumerable, including:
other pigs; contaminated environment; rodents, birds and other farm
varmints; contaminated feed; or tracked in by vehicles, machines or
people. Taken together, these factors make elimination
Agriculture Coalition Urges Passage of Korean FTA
A group of over 60 agricultural trade groups and companies
sent a letter to the leadership of the Senate and House of
Representatives urging quick passage of the Korea-U.S. Free Trade
Agreement (KORUS). The letter highlighted the fact that our competitors
have not been waiting on the sidelines and if the United States
continues to wait there will be consequences. The letter said, “Risks
for U.S. agriculture – and they are extremely serious – arise if the
KORUS FTA is not implemented. If this agreement is rejected, we stand to
relinquish our export sales to countries that have implemented their own
FTAs with Korea.” Currently, there are 13 such agreements in place or
in the works involving some 50 countries around the world. They include
major agricultural competitors Chile, Australia, New Zealand, Canada,
the European Union (EU), Mexico, Mercosur (Argentina, Brazil, Paraguay
and Uruguay) and Peru. An example is pork. Korea’s current 25%
tariff would remain in place while the EU’s tariff would be eliminated
over time. Iowa State University has estimated the United States would
be eliminated from the Korean market in 10 years. Once the FTA is
implemented, two-thirds of U.S. agricultural exports become duty-free
(wheat, corn, soybeans for crushing, whey for feed use, hides and skins,
cotton, cherries, orange juice, etc.). The tariff on beef (40% on
muscle cuts, 18-27% on offal) would be eliminated over 15 years. The
American Farm Bureau Federation estimates that U.S. agricultural exports
to South Korea would increase by $1.8 billion once KORUS is fully
implemented. Those signing the letter included: American Farm Bureau
Federation, American Meat Institute, American Soybean Association,
International Dairy Foods Association, National Association of Wheat
Growers, National Cattlemen’s Beef Association, National Chicken
Council, National Corn Growers Association, National Meat Association,
National Pork Producers Council, National Turkey Federation and United
Egg Producers. The White House has encouraged Congress to pass KORUS by
Smithfield Divests Oklahoma Operations to Prestage
Smithfield Foods announced it has sold its hog production
operations in Texhoma, OK, to Prestage Farms Inc., based in the
southeastern United States.
Included in the Texhoma operations are 20,000 sows and 71,000 nursery
and 172,000 finishing spaces.
“Although vertical integration continues to be a key point of
difference for Smithfield, these farms do not supply any of the
company’s pork processing plants,” explains CEO C. Larry Pope in a
news release about the sale. “The sale of these operations
demonstrates our continuing commitment to shed non-core businesses with
a greater focus on return on invested capital.”
Feb. 1, 8 and 15, 2011: Employee
Management Workshop for Agricultural Operations (three-part workshop),
Northeast Iowa Community College Calmar, IA; for more information
contact: Russ Euken, extension livestock specialist, by phone (641)
923-2856 or e-mail email@example.com or Mark Storlie,
swine field specialist, by phone (563) 425-3331 or e-mail firstname.lastname@example.org.
Feb. 8-9, 2011: Ohio Pork Congress, Crown Plaza
North, Columbus, OH; for more information contact: www.ohiopork.org.
Feb. 15-16, 2011: Illinois Pork Expo, Peoria Civic
Center, Peoria, Ill; contact: Illinois Pork Producers Association at
(217) 529-3100 or go to www.ilpork.com.
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