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Pork Commentary: US Swine Industry Faces Major Profit Challenge

by 5m Editor
1 June 2011, at 9:16am

US - In this week's Pork Commentary, Jim Long writes about the US swine industry.

US corn a bushel closed last Friday at $7.58. That is 80¢ a bushel higher than 3 weeks ago. Higher corn prices are making it very hard for producers purchasing their feed to make money. As we look out at Lean Hog Futures for the next year the average price is currently projected at around 85 cents lean per pound. At current feed prices below break even for most producers. Certainly it is not something to get all fired up with enthusiasm about.

  • The profit challenge can be seen in the average cash price of early weans $18.61 (13 – 26) and 40 pound feeder pigs $48.76 (41-60). We expect most early wean and feeder pig producers are losing about $20 per head at these prices. A couple of months ago cash small pig prices were $20 per head higher than contract small pigs. Contract early weans last week averaged $39.08 and 40 pound feeder pigs $70.13. It seems everyone gets a chance in the wheel barrow.

  • One positive last week was Iowa – S. Minnesota barrows and gilts average weight of 270.9 pounds similar to a year ago 270.8 pounds. For the last few months year over year weights averaged around 5 pounds greater than the previous year. Weights that have reached the same level is a positive as it reflects marketing’s are current. We probably pulled hogs ahead in the last few weeks getting weights down.

  • Let’s hope corn plantings get done soon and the crop gets going. The architects of the US corn ethanol programme should be happy if their vegetarians because the high feed prices are doing no favours for livestock and poultry producers.

COOL

It was reported last week the World Trade Organization ruled that US Country of Origin Labeling discriminates against foreign suppliers. At some point this means Canada – Mexico will have the legal right to put punitive tariffs on US imports. Large punitive tariffs on pork to Mexico and Canada would not be beneficial to US pork producers. In trade wars like all wars people get hurt. Hopefully some common sense will prevail and the US government will not be swayed by the R-Calf cattle lobby that has truly an inward mindset.

We talked to an aide of Senator Harkin of Iowa and several years ago. He told us COOL came out of the failure to get legislation to control packer ownership of hogs. Senators like Harkin were thrown the bone of COOL in late night negotiations. From what I gathered the implications of COOL had not been thought out. Now we have a legacy that is counterproductive.

What’s the most fearful sentence in the English language: “We are here from the Government and we are here to help!“

Chemical Castration of Pigs

Pfizer is putting on a big push to get the swine industry in the United States and Canada to consider using Improvac for chemical castration. They might be running into some road blocks as we have heard at least two of the major US packers have indicated they won’t purchase chemically castrated pigs.

We are glad to hear this but we fear the housewives of America will not be too keen to serve pork from chemically castrated pigs. How will this affect their children? Who knows but not eating it guarantees no problems. As an industry we can’t be playing defense again. We saw what H1N1 misnamed swine flu did to us. Why risk the chance. When all is said and done the cost of Improvac will only leave pennies in returns to the producer. Multinational drug company, Pfizer will be the winner not the producers of America. Thankfully some packers who are closer to the consumer recognize the danger to the pork industry.

Summary

Feed prices are pounding pork producer margins even though hog prices are strong. Lean hogs had reached $1.00 plus for the summer months and some producers took advantage to sell ahead at those prices.