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National Hog Farmer Weekly Preview
April 25, 2011
In this issue:
  Planting Progress Stymies Pork's Profit Prospects
  Lessons from the Cold Storage Report
  U.S.-Panama FTA Ready for Congress
  Missouri Law Seeks to Stop Never-Ending Ag Lawsuits

Planting Progress Stymies Pork's Profit Prospects
Pork producers’ profit prospects for 2011 (and into 2012) continue to dim slowly as grain prices/feed costs rise and hog prices pull away from their highs of late March.

Corn prices were up more than 10 cents per bushel across the board this morning (April 25) as planting progress lags behind last year’s pace and weather forecasts are not all that encouraging for this week. We must remember that comparisons to last year may be quite unfair as last year’s crop was planted unusually early. A new crop progress update is due out today at 4:00 p.m. (EDT), but it is unlikely to indicate any real catching up at this point. Anecdotal evidence tells us that little was accomplished in major corn-growing states last week.

My forecasts for breakeven costs for all of 2011 now stand at $86.47/cwt., carcass. While Lean Hogs futures prices continue to suggest record-high hog prices this summer, those prices are now $3-$5/cwt. lower than just a few weeks ago, meaning that per-head profit forecasts have fallen, too. Figure 1 shows estimates based on mid-session corn, soybean and lean hog futures prices on Monday, April 25.

This market is still offering 2011 profits of $6.27/head for average farrow-to-finish operations, but note that it is offering only $4.56 for the next 12 months (April 2011 through March 2012). Positive margins of $20 to $25/head this summer are substantially offset by losses of $10 to $14/head from November through January 2012. Costs are forecast to average over $88/cwt., carcass, over the next 12 months.


Lessons from the Cold Storage Report
Total red meat supplies were down 1% from the previous month, but they are up 13% from a year ago, according to the March cold storage report, the most recent available (see attached graph). In addition, frozen poultry stocks were down from a month ago by about 3%, but up 13% from a year ago. On the pork side, total pork supplies are up 12% compared to a year ago and up 1% from February. Hams were up a whopping 173% from a year ago, but pork bellies are down about 11% from a year ago.

What does this all mean? We have more meat in storage than a year ago, but pork prices are at historic highs, so why worry? The main concern is the greater the supplies of pork in cold storage, the harder it will be to hold those higher prices. Then there is the question of whether higher prices will reduce demand.

There is a significant difference between 2010 pork cutout values and 2011 values. The average pork cutout value for March 2010 was around $74/cwt., carcass, compared to March of 2011, which averaged over $90/cwt. Are we starting to get some pushback on pork demand because of the price? The trend is starting to tell us that may be the case, but we will have to wait and see how this plays out over the year. These are key indicators for us to watch over the coming months.

A Few Words of Caution
I have not seen nor heard of any real expansion in the hog business until recently. Now I am hearing of empty sow units that are looking to start up again. You can’t blame producers with empty assets to try to get some return on their capital investment. However, we must make sure we do not increase supply a great deal. How much of this is happening is a very good question.

There are many red flags going forward, and I want to remind people that not long ago this industry was under severe economic pressure. We also have one less packing plant today than we did back in 2009. There is talk of a new plant being built, but to date there has been no announcement. If hog numbers grow, we will need to increase processing capacity to make sure we can handle the added production, especially during the fourth quarter. I am not concerned about 2011, I am thinking more about 2012.


U.S.-Panama FTA Ready for Congress
The Obama administration announced that Panama had cleared the way for Congress to now move forward on the U.S.-Panama Free Trade Agreement (FTA). A new Tax Information Exchange Agreement (TIEA) has been implemented by Panama that will allow U.S. tax investigators to have access to information on possible tax evasion using Panamanian banks as tax havens. This was the administration’s major issue in moving the FTA forward. Panama in 2010 imported over $450 million of U.S. agricultural products, which has doubled since 2005. The top U.S. exports were corn, soybean cake and meal, wheat, rice and horticultural products. Key agricultural provisions of the FTA include:

• Immediately eliminates duties on half of U.S. farm exports, including high-quality beef, frozen turkeys, sorghum, soybeans, soybean meal, crude soybean and corn oil, almost all fruit products and tree nuts, wheat, most peanuts, whey, cotton and many processed products.

• Eliminates nearly all of the remaining tariffs on U.S. farm exports within 15 years.

• Immediately provides duty-free access through tariff rate quotas (TRQ) for specific volumes of standard grade beef, chicken leg quarters, pork, corn, rice and dairy products.


Missouri Law Seeks to Stop Never-Ending Ag Lawsuits
The Missouri House and Senate have overwhelmingly passed House Bill 209, the Agriculture Nuisance Reform Act, to end the stream of never-ending lawsuits that threaten the livelihood of the state’s farmers.

Under HB 209, if a neighbor proves to the jury that a farm is unreasonably harming their property rights, the neighbor can still recover the loss of their property values.

But once the party has recovered their full losses in court, they can’t sue repeatedly for the same losses.

The proposed legislation wouldn’t stop neighbors who are being harmed unreasonably from seeking an injunction to stop the nuisance and harm if it persists.


May 5-6, 2011: Animal Agriculture Alliance’s 10th Annual Stakeholders Summit, “United We Eat: Securing Animal Agriculture’s Future,” The Westin Arlington Gateway hotel, Arlington, VA. For more information contact: or (703) 562-5160 or

May 11-12, 2011
15th Distillers Grains Symposium Westin Crown Center, Kansas City, Missouri; For more information call 800-759-3448.

May 22-25, 2011: Alltech’s International Animal Health and Nutrition Industry Symposium, Lexington Convention Center, Lexington, KY. For more information contact:

May 24-26, 2011: Pork 101, hosted by the American Meat Science Association in cooperation with the National Pork Board, Texas A&M University, College Station, TX. For more information contact: Deidrea Mabry, program director, American Meat Science Association, 800-517-2672, ext. 12, or

June 8-10, 2011: World Pork Expo, Iowa State Fairgrounds, Des Moines, IA. For more information contact:



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.



"Weight Watchers" is the focus of the March 15 edition of National Hog Farmer. In this issue, pork producers learn that by doing a better job of picking the right market weight, they can add $3-5/pig in revenue. This issue also outlines eight factors to consider when making marketing decisions and how auto-sort systems challenge pigs' eating behavior. Go to to view the issue.

Join thousands of your peers for three days of learning, networking, training and fun at the 2011 World Pork Expo. From the world’s largest pork-specific trade show and America’s Best Genetics Alley, to lunch at the Big Grill, it’s all at the Iowa State Fairgrounds, June 8-10. Click here to register.


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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