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Pork Commentary: Volatile Markets Continue!

by 5m Editor
5 July 2011, at 9:16am

US - This week, Jim Long comments on the US market.

  • Last week USDA reported that the US has planted 4 million more acres of corn this year compared to last (92.3 vs. 88.19). The 92.3 million acres was also 1.5 million more acres than the average guess by obviously very average forecasters.

  • The USDA also increased the estimated 1 June inventory of corn to 3.67 billion bushels. That is 350 million more bushels than the average guess, by the obviously very average guessers.

  • The repercussions in the corn market of more corn acres and more corn inventory were sudden. The September corn price had a bushel high on the CBOT for September was $6.97 a bushel on 29 June. The report was released the morning 30 June. When the dust settled Friday, June 1st September corn was $6.06 a bushel a high to low in 48 hours of 91 cents a bushel. That’s what you call freefall!

  • Some arithmetic the 3.67 billion bushels (less corn used) on 1 June inventory dropped 91 cents a bushel – that would be well over $3 billion decline in value in just 48 hours.

  • Since 10 June, September corn has declined about $1.50 a bushel. This has lowered cost of production of hogs of about $12 per head or 6¢ lean per pound.

  • We used to see corn move less than 50 cents a bushel in a year. Now we see 50 cent in some single days. The volatility is very difficult to manage.

  • Why were there more corn acres? We are farmers, the highest price in history is always going to increase production, domestically and ultimately globally.

Chicken

  • A few weeks ago the US Chicken Industry was expanding with egg sets and chick placements over 3 per cent year over year. The Chicken Coop crew obviously never saw the feed price spiking higher. Composite 12 city broilers on 27 June were 80.74 cents per pound, a year ago they were 87.71 cents. Feed prices are up 40 per cent year over year + Lower chicken prices = really bad time for chicken producers.

  • Repercussions-a week ago egg sets were down 6 per cent (199 million) year over year, chicken placement down 4 per cent (161 million).

  • This will result in 7 to 12 million fewer chickens coming to market a week or between 3500 and 6500 fewer refrigerated tractor trailer loads of chickens a week – less chicken means less meat protein – always price supportive for hog prices. Fewer chickens also eat less corn.

Dumb and Dumber

Recently we have written of our concerns of the possible use of the chemical castration vaccine – Pfizer’s Improvac. Our main concern centers on the blow back we could get from consumers concerned about the safety of pork which uses this product to shrivel the testicles of boars.

We also saw what happened to our industry when H1N1 was misnamed swine flu. Consumers in fear cut pork demand. Our industry lost 2 billion dollars due to it. We can’t afford such a trauma again.

This is not about science, we are for science. We are against jeopardizing our industry. For the record since our first article we have had numerous packers tell us our position is correct. To put it bluntly their pork salesmen have no interest trying to explain chemical castration vaccine to Wal Mart and/or McDonalds. One also added that if Pfizer tries to initiate a programme that their chemical castration vaccine is more welfare friendly when current castration programmes have no consumer problems, they will take a lead to boycott all Pfizer products.

The bottom line: We believe utilization of Pfizer’s Improvac is a slippery slope with little upside for the producers or our industry.

Dumber – Enviropig

What do you get when over a decade ago the University of Guelph researchers using genetic material from rodents (mice) injected into fertilized embryos found they could alter the output of the salivary glands of their experimental hogs so they excreted less phosphorous in the manure. Four years ago these rodent gene carrying pigs were submitted to the US Food and Drug administration and the Canadian government for evaluation for entry into the food chain.

If chemical castration isn’t enough will we soon have to defend the rodent pig? Won’t that be a wonderful marketing moment? Best thing would be the enviro-pig population at the University of Guelph being destroyed before it gets into the food chain.

One other real sad part is the Ontario Pork Marketing Board who takes money from 2000 producers is funding the research and owns the Enviropig trademark, Ontario Pork needs a new slogan, "We have found the enemy, it is us!" Go to the Ontario Pork website – read all about it – Enviropig = Nightmare marketing.

Dumb and Dumber – Pork has 46 per cent of the world’s meat protein consumption. Why do we want to further risk our business with either of these programmes?