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Export-Driven Demand Likely the Best Ever for Pork
By Steve Meyer, Paragon Economics, Inc., Des Moines, IA
If I had to pick one word to describe the pork industry in 2011 – it would be "exports"! While a lot of other words come to mind, exports have been as huge this year as they were in 2008, when record exports simultaneously bailed the industry out of a porcine circovirus vaccine-driven supply glut and an ethanol-driven cost increase (Figure 1).
The Livestock Marketing Information Center’s forecast for 2011 pork exports currently stands at 5.022 billion pounds, carcass weight equivalent. That would be a 19% increase from last year and set a new annual record by over 350 million pounds. The 19% increase pales in comparison to 2008’s 49% growth, but we must realize that large percentage increases become less and less likely as the absolute level of exports grow. In fact, the 19% figure is larger than I ever expect to see again.
What is more shocking is that the 5.022 billion pounds forecast could be low, given the performance of U.S. exports in September and October (Figure 2). As of October, U.S. exports stand at 4.195 billion pounds, carcass weight equivalent. Looking back to last year, pork exports in November and December 2010 totaled 806.9 million pounds, so duplicating those levels would put us right at the 5.022-billion-pound level. But September and October shipments this year totaled 9.242 billion pounds. Duplicating those sales would put the 2011 total firmly above 5.1 billion pounds, which is just over 22% of currently projected pork production for 2011.
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2011 in Review
By Mark Greenwood, AgStar Financial Services
As we look back over the last 12 months, I think most pork producers would agree that 2011 turned out to be a very good year. As we’ve reviewed the information received from clients through October and projected what November and December earnings will be, our estimate is that most producers will average around $15/head profit for 2011. Even with higher feed prices, revenue for producers has been at an all-time high.
Pork producers have had a nice run of profits over the last two years. Here's our best guess on what we believe most producers' financial year end numbers will look like:
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Average owner equity should be close to 50%. This is a GAAP number – Generally Accepted Accounting Principles – that uses a factor of lower cost and/or market. I believe this is a conservative estimate.
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Average working capital per sow equivalent more than $700. This is a very important measurement. It is based on a farrow-to-finish operation. If, for example, you have 2,000 sows, you should have a minimum working capital amount of $1,400,000. Working capital means current assets less current liabilities.
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Senators Want COOL Ruling Appealed
By P. Scott Shearer, Bockorny Group, Washington DC
A bipartisan group of 19 senators are asking the administration to appeal the recent World Trade Organization Dispute Settlement Panel's (DSP) ruling against the United States' mandatory country-of-origin labeling (COOL) regulation. The senators' expressed concerns are that the ruling would hurt consumers' right to know where their food comes from and producers' ability to sell their high-quality products. In a letter to Secretary of Agriculture Tom Vilsack and U.S. Trade Representative Ron Kirk, the senators said, "The DSP validated the statutory authority for the United States to require such labeling; however, the panel also found that the manner in which the program was implemented treats cattle and hogs from those countries less favorably than U.S.-origin livestock. While we are pleased that the DSP affirmed our right to require such labeling, we are concerned about the impact that the DSP’s ruling will have on our ability to continue providing such information to consumers." Senator Tim Johnson (D-SD) said, "I want the administration to appeal the decision because people want to know if the beef or pork they are eating was raised in the USA." The administration has until early next year to decide whether to appeal the case. Senators Johnson and Mike Enzi (R-WY) organized the letter. The case against the United States was filed by Canada and Mexico.
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CAFO Comment Period Extended
By Joe Vansickle, Senior Editor
National Pork Producers Council (NPPC) Vice President Randy Spronk met last week with Secretary of Agriculture Tom Vilsack and Environmental Protection Agency (EPA) Administrator Lisa Jackson to discuss several key environmental issues.
The National Air Emissions Monitoring Study (NAEMS) of emissions from livestock and poultry operations was conducted by Purdue University with EPA oversight.
EPA intends to hold a series of meetings to examine how the agency will interpret the data and the method it will use to convert the data into usable emission factors to help pork producers determine their compliance with federal clean air laws.
FULL ARTICLE
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March 19-21, 2012: Annual meeting of the Midwestern Sections of the American Dairy Science Association and the American Society of Animal Science, Hy-Vee Hall and Veterans Memorial, Des Moines, IA. For more information contact: http://adsa.asas.org/midwest/2012.asp.
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U.S. pork producers must be able to compete in foreign markets without restrictive tariffs or sanitary barriers to trade. NPPC’s mission of gaining and expanding access to markets through free trade agreements is paramount to the continued success of the U.S. pork industry — Click here to learn more.
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