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National Hog Farmer Weekly Preview
October 24, 2011
 
In this issue:
  Consider Payout before Expanding Your Hog Operation
  Unprecedented Times in the Pork Industry
  President Signs Free Trade Agreements
  Mexico Lifts Tariff On U.S. Pork

MARKET PREVIEW
Consider Payout before Expanding Your Hog Operation
By Steve Meyer, Paragon Economics, Inc., Des Moines, IA

When will the breeding herd really start to grow? That is a frequent question among producers and allied industry representatives these days. It’s the age-old question – how much prosperity can hog producers stand? History tells us that the industry has responded to good times with higher output, and has usually overshot the amount needed by consumers, resulting in losses. It’s that hog cycle thing.

Though the hog cycle has certainly diminished in recent years, it does not appear to be dead, at least from a profit standpoint. Figure 1 shows estimated per-head profits for Iowa farrow-to-finish operations as computed by Iowa State University’s (ISU) Department of Economics. The pattern of two or three good years followed by two bad years is pretty obvious.

The downturns of 1998-99 and 2002-2003 were clearly caused by supply responses. Growth in 1998 exceeded 10% from prior year levels. But the peak growth in 2002, which drove average losses to $17/head, was only 4-6%, depending on which quarter you look at. For the year, production was only 2.7% higher than in 2001.

But 2008 and 2009, were critters of an entirely different nature, both from the past and each other. Output in 2008 was 6.4% higher than in 2007, which was 4.2% higher than in 2006. Those numbers, of course, were driven primarily by the advent of circovirus vaccines that pushed slaughter sharply higher in Q3 and Q4 of 2007, a pattern that continued in 2008. Note that producers made a small profit in 2007, in spite of that increase, as feed costs were quite manageable in the first half of the year. Higher output and, more importantly, much higher feed costs eliminated those profits in 2008, which turned out to be the first year of the worst two-year period in history for U.S. pork producers.

FULL ARTICLE

FINANCIAL PREVIEW
Unprecedented Times in the Pork Industry
By Mark Greenwood, AgStar Financial Services

There has been an amazing run with pork prices, tipping over $100 cutout again last week. I have a chart (Figure 1 attached) that shows a historical view on cutout. As you can see, 2011 is a year for the record books. Even with higher feed costs, cash prices above $90 and a consistently strong cutout have made it a very good year for pork producers.

This situation has been fueled by export demand, which is on fire, and continues to keep prices high, even with slaughter numbers at pretty large numbers — over 2.3 million/week. The common question from producers is: How long will it last? With exports, you never know. Even though we are exporting pork at a record pace, we all know it could change quickly.

There is a fair amount of pork going to China. But remember 2008, when we were shipping a lot of pork to China and then it seemingly stopped overnight. Cash prices went from over $90, carcass, to the mid-$60’s in less than a 30-day period. I am not saying cash prices are going to drop, but in meeting with clients I emphasize how important it is to maintain a disciplined approach to margin management. We are seeing profits of between $20-$25/head for the next 12 months. It might be a good strategy to take part of that profit now. Don’t forget, on Labor Day, the same 12-month margin was less than $5/head. Market volatility will continue.

FULL ARTICLE

LEGISLATIVE PREVIEW
President Signs Free Trade Agreements
By P. Scott Shearer, Bockorny Group, Washington DC

President Barack Obama signed the Free Trade Agreements (FTA) with Colombia, Panama and South Korea. The U.S. Department of Agriculture (USDA) estimates that these three agreements will increase farm exports by $2.3 billion. Secretary of Agriculture Tom Vilsack said, “These agreements will support tens of thousands of jobs here at home, put unemployed Americans back to work, and open new opportunities for American businesses. For America’s farmers and ranchers, the trade agreements are an opportunity to strengthen U.S. agriculture, already a bright spot in our economy.” A coalition of 120 agricultural groups worked for months on the successful passage of these FTAs.

FULL ARTICLE

NEWS FLASH
Mexico Lifts Tariff On U.S. Pork
By Joe Vansickle, Senior Editor

The National Pork Producers Council (NPPC) has praised the U.S. and Mexican governments for following through on resolving a trade dispute over trucking. Mexico on Friday lifted tariffs on U.S. exports, including pork, and the U.S. government last week granted the first permit to a Mexican trucking firm to haul goods into the United States.

The two governments in July signed an agreement resolving the trucking issue, with the U.S. Department of Transportation (DOT) crafting a cross-border trucking program and the Mexican government cutting the retaliatory tariffs by 50%. The remaining tariffs were suspended Friday after DOT issued the trucking permit.

“America’s pork producers are very pleased that the United States issued the first Mexican trucking permit, which has led to the Mexican government removing the remaining retaliatory tariffs on our products,” says NPPC President Doug Wolf, a producer from Lancaster, WI. “Mexico is a very important market for the U.S. pork industry and for many other sectors. More than six million U.S. jobs depend on trade with Mexico.”

FULL ARTICLE

PORK INDUSTRY CALENDAR
Oct. 26-27, 2011: Antibiotic Use in Food Animals: A Dialogue for a Common Purpose, Hotel InterContinental O’Hare, Chicago, IL. For more information contact: National Institute for Animal Agriculture, www.animalagriculture.org or (719) 538-8843.

Oct. 27-28, 2011: Latinos in Agriculture: A Leaders’ Forum on Capitalizing Hispanic Talent El Tropicano Riverwalk Hotel, San Antonio, TX; (http://latinosinagriculture.org/leaders-forum/hotel-info/). For more information contact: Orlando Gil at (712) 240-0624.

Nov. 1-2, 2011: Meat and Poultry Research Conference, Kansas City Marriott Country Club Plaza, Kansas City, MO; To view the full agenda or to register, go to http://www.meatami.com/ht/d/sp/i/69917/pid/69917.

Nov. 8, 2011: University of Missouri Extension Commercial Agriculture Program, Stoney Creek Inn, Columbia, MO. For registration information, contact Travis Dixon of the University of Missouri Conference Office, (573) 882-6059 or dixontw@missouri.edu; for information on the program or speakers, contact Katrina Turner at the Commercial Agriculture Program, turnerka@missouri.edu or (573) 882-0378.

FULL ARTICLE

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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, Click here


 BLUEPRINT

The April 15, 2011 Blueprint edition of National Hog Farmer offers details on creating stable herd health by developing a herd health profile, provides a review of basic immunology and gives details on how to select the right vaccine. The final article looks at efforts by a consortium of swine disease researchers to understand genetic disease resistance. www.nationalhogfarmer.com.

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MINTREX® Cu helps optimize antimicrobial effects in the GI tract resulting in improved gut health, mineral absorption and nutrient utilization in pigs. Research indicates MINTREX Cu, fed at 80 parts per million through the finishing period, improves ADG and feed/gain ration while also generating heavier carcass weights.


 MAGAZINE HIGHLIGHTS

The October 15, 2011 Blueprint edition of National Hog Farmer tackles the new industry target of 30 pigs/sow/year (P/S/Y). As producers strive to achieve the lofty milestone, new challenges and new debates arise. With the push to increase reproductive efficiency, the health and dietary demands on sows becomes increasingly important, the impact on pig flow and facilities is magnified, and the bar to capture full genetic potential is raised. This special edition and more is posted at 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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