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Pork Commentary: Limping Market

by 5m Editor
17 January 2007, at 1:13pm

CANADA - This weeks North American Pork Commentary from Jim Long.

Market prices of 55.61 lean per lb and corn near $4.00 per bushel is not a scenario for profitability. Actually, it is a prescription for red ink. The only silver lining to this dilemma is that lean hog futures show a steady uptrend with February closing at 60.37 last Friday, while April ended at 64.35 and May at 71.70. The difference between last Friday’s cash and May’s futures is $30.00 per head. Not much if you say it fast.

The next two weeks will be telling, as we get a full two weeks away from the short kill weeks inflicted on the industry by the holidays. We expect Iowa-Minnesota’s lean hog price will be 60¢ per lb plus within the fortnight.

Iowa Pork Congress – the Premier Winter Pork Congress is January 24-25 in Des Moines, Iowa. Do not miss this opportunity to see and hear what’s going on in your industry.
www.iowaporkcongress.org

The Corn Dilemma

The Canadian government announced, a week ago, that it was going to take the United States before the World Trade Organization because of unfair corn subsidies. Good timing Einsteins. There are no subsidies, to speak of, currently being paid to US corn farmers. The ethanol boon dangle has driven cash corn prices higher than government support levels. The last thing anyone needs to worry about now is cheap corn being dumped anywhere. Most livestock producers in Canada and the US are fearful of $5.00 corn not $2.00 corn. Leave it to a government to try to shut the barn door after the cattle got out.

A recent calculation by the Agriculture & Trade policy group (IATP) calculates that, if all proposed ethanol plants are built in the US Midwest, the current 2.7 billion bushels of corn per year being exported would become a need to import 400 million bushels. Begs the questions - What are the current importers of the 2.7 billion bushels going to do for feed? How is it going to affect world meat production?”

The US grew 78.5 million acres of corn in 2006. $4.00 corn will get at a lot more acres planted in the US in 2007 (and the rest of the world). The big question – How many more acres in 2007? We expect the high end of expectations of almost 10 million more acres. Why? We are farmers. Farmers can’t help but farm. High prices, high levels of equity and the equipment to get it done are in play. Growing corn isn’t very hard. It’s not like building a barn and looking after hogs 365 days a year. We could be wrong but we expect $4.00 corn will produce 12 billion plus bushels of corn in 2007. If oil drops below $50 per barrel, there will be less enthusiasm for ethanol. We are all in and know the commodity business. What goes up always comes down – it’s just a matter of when.


The 2006 USA-Canada hog slaughter was about 500,000 head more than 2005, or about 10,000 more a week. Not exactly a big continental expansion. We expect marketings to be similar in 2007 with Canada’s total production decreasing with the US showing a slight increase. Prices should track very closely to 2006, with some upside.

New Congress

The US congress now has a democratic majority. There could be changes in direction.

  • Senator Grassley of Iowa is initiating farm bill changes that would include efforts to slow and to roll back packer integration, lower limits on farm and conservation payments, prohibit mandatory arbitration clauses in livestock contracts and greater oversight on agribusiness mergers.
  • Renewed interest in country of origin labeling
  • A tilt towards greater protectionism
  • With tight federal budgets, the extent of farm aid could be challenged. The $8 billion a year subsidy to the ethanol industry could be a target

30.02

Thirty. It’s a magical number in the hog industry. It’s a number top end producers have been striving for, for a decade. There are reports that 30 has been achieved in Europe. But interestingly, the swine genetic companies that claim it there have failed to get it done in North America. Getting 30 isn’t all about genetics. It is a balance of people, nutrition, health, facilities and genetics, but it’s mostly people. It’s always people.

This commentary is focused on markets. Sometimes they are good, sometimes bad, but the surest way to economic prosperity is top-end production. No one has ever gone broke producing 25 pigs a year.

We see it with our genetic customers as 25 plus pigs gets the bills paid and makes life easier. In 2006, we had 50 herds achieve 25 plus pigs and for the first time a customer got 30 – actually 30.02. The first herd in North America to achieve 30 in a calendar year. We are proud to be associated with Woodland and congratulate them for this remarkable accomplishment. Pig production is hard. It takes people with intelligence, determination and resourcefulness to be a top producer. Success is predicated by people making the right choices. The Woodland people choose Genesus.

There are 7.5 million sows in Canada and the United States on 40,000 plus farms The latest annual PigCHAMP data mean indicates pigs weaned/female/year is 20.63.

5m Editor