The US corn ethanol policy has done wonders for people who want to push a meatless society. In 2007, 200.4 pounds total meat, poultry, and seafood (boneless equivalent) per capita, in 2012 it is projected to be 181.9 pounds per capita. That is a drop of about 10 per cent. High feed prices and financial losses associated with increased cost of production have cut supply. In 2008 US meat and poultry production was 93937 million pounds; in 2012 it is projected to be 90610. Over 3 billion pounds less while the US population has increased over 12 million people in the same time frame. Less meat available, more people to eat it and strong exports lead us to believe 2012 is setting up for the highest pork prices in history.

The hog supply for 2012 is almost all in place – 115 days gestation – 170 days to market = 285 days. Our calculations all hogs that will make it to market by October 2012 are bred. Nothing has happened to jack up pork supply. The US domestic meat per capita consumption is projected to be down 5 pounds in 2012 from 2011. We expect US pork export demand will stay strong. A total scenario that in our opinion could lead to the highest hog prices in history.

USA gets Advantage over Canada on South Korea Free Trade Agreement

Big win for the US pork industry, last week the South Korean Government passed a Free Trade Agreement with the United States. US pork is currently subject to a maximum 25 per cent import tariff, which will be gradually removed over the next 10 years under the Korea – US FTA. Total trade between the USA – South Korea last year was 90 billion dollars. US pork exports to South Korea have been 129,925 tons or 39 per cent of all pork imports.

The US free trade initiative is a big win for the US pork industry. Canada not so much – Canada has negotiated no free trade agreement with South Korea. Canada will send 300 million dollars in pork to South Korea this year. It is not hard to do the arithmetic if Canada does not get a free trade agreement. USA zero tariff, Canada 25 per cent tariff – Canada can kiss 300 million dollars in pork exports austa la vista, baby!

If Canadian hog producers want to maintain competitive market access to South Korea, it’s a good idea to push your member of parliament, minister of agriculture and minister of international trade to get negotiating sooner rather than later. Our experience leads us to believe politicians react to taxpayers concerns, don’t underestimate your influence. Make the call, don’t expect the Canadian Pork Council to get it done, individual taxpayers are way more effective with politicians than what is just one more lobby group to them.

Other Observations

• Chicago December corn closed last Friday at $5.82 per bushel, the lowest it has been since March.
• December Soybean Meal closed at $282 a ton last Friday. On 31 August it was $390 a ton.
• December Wheat dropped closing at $5.74 a bushel. The lowest price it has been in many years.

Wheat is pulling corn lower, soybean meal too, less global livestock to feed, and record wheat supplies will continue to keep corn prices under pressure. Lower feed prices are helping hog margins – last Friday’s breakeven for feeder pig purchasing (45 pounds) was $71.53 per head.

Conclusion

Lower US per capita meat and poultry supply, strong exports will both push hog prices to what we believe could be record high in 2012. Price pressure on grains and soybean meal could keep feed prices from rocketing higher. High hog prices – feed prices reasonable equals real good profits for 2012 - $25.00 per head?