2009 IPC: Pork Industry Economic Update

Managing Inputs and Marketing: Where Do We Go From Here? Dr. Steve Meyer, Paragon Economics, Inc., from the 2009 Iowa Pork Congress, January 28 - 29, Des Moines, Iowa, USA.

Feed ingredient costs have fallen from record highs last summer but supplies remain tight and costs remain very volatile as we enter the 2008-2009 crop year. Surprisingly good hog prices were a big help to pork producers' bottom lines in 2008 but can those prices remain in the face of the economic slowdown? Steve's session will address these issues and present some ideas and tactics to help you weather another potential economic storm in 2009.

This is the presentation slide set without audio

Optimal Exports as a Portfolio Problem

If you think about it, each dollar of expected pork revenue, as we look at 2009, has a variance around it. That is to say, not every lb of forecasted sales has the same likelihood of being realized. It is safe to say that the anticipated level of demand from domestic consumption is well known and relatively low variance. The demand which originates from the export markets is highly variable and can come from surprising places. Because of this, there is no doubt that the expected income variance is much higher for export sales than it is for domestic purchases and as you might suspect, it has a higher expected value. Those two attributes tend to go together.

Falling Exports Vs. Falling Supply: Which Will Win?

     The total demand for US Pork can be conveniently broken down into two components: domestic demand plus net exports.  Net exports is the excess of exports over imports of pork for the US.  We seem to know that US production of pork will be falling in 2009.  I say seem to know since this is based on projections by USDA (Hogs and Pigs Report).  What we do not know is if the projections are correct (what is their error variance) and what will happen to productivity increases to offset this decline in farrowing intentions from last fall.  We can surmise that the sows leaving the industry are the poorest performing ones (least productive) and that productivity gains from the remaining farms is likely to rise.

Swine Industry Update for February 2009

Mark Greenwood
February 2009

SwineCast 0375, Managing for profitable production and a look at the Canadian pork industry

SwineCast 0375 Show Notes:

  • Canadian correspondent Bruce Cochrane logs in with interviews from Banff.  Peace Pork's Rocky Morrell shares his thoughts on managing for profitable production.
  • Jerry Bouma of Toma and Bouma Consulting looks at the future of the Canadian industry and significant changes that will need to be made

SwineCast 0372

SwineCast 0372 Show Notes:

  • Presentation on the unsustainability of current U.S. fiscal policy from the American Farm Bureau Federation Convention...  The Deficit Wakeup Tour

U.S. Pork Exports Are Setting Up for a Tough Time in 2009 but Cross Your Fingers

     We are facing the first year-over-year decline in net exports since the U.S. industry became a net exporter in the mid 1990s.  Even with the potential prospect of fewer total pigs slaughtered in the U.S. in 2009, due to a potential decline in both U.S. production and imports of weaned pigs and finished animals from Canada, 2009 seems to be setting up to be a very tough year.  Here are the reasons for caution and why the spring futures prices may fall to meet the slogging cash prices.

     First, we now know that all of the major countries which are key importers of U.S. pork are facing substantial declines in GDP, declining land and home values, increased unemployment and in one case, the potential descent into political chaos. 

Here is All You Need to Know About MCOOL

     According to the USDA talking points released yesterday (1/12/2009) regarding the final estimates for implementing country of origin labeling:

1. The first year implementation costs for directly affected firms is estimated to be 2.629 billion dollars.

2. Costs per firm are estimated to be $370 for each producer, $48,219 for intermediaries, and $254,685 for each retailer.

3. The estimated cost in higher food prices and reduced food production in the tenth year after implementation is 211.9 million dollars.

     Now for the benefits expected:

     "The expected benefits from the implementation of this rule are difficult to quantify.  The Agency's conclusion remains unchanged, which is that the economic benefits will be small and will accrue mainly to those consumers who desire country of origin information." 

2009 and Beyond Part II

     Worldwide demand for natural resouces, value-added food items and consumer goods is down sharply as a dramatic slowdown of the world's largest economies continues.  The contraction phase of this worldwide recession is still underway at the beginning of 2009 and will likely continue well into at least the first quarter. 

     One of the reasons it is hard to predict when the recession will bottom out is that there are most likely still "land-mines" of hidden corruption yet to be exposed and absorbed as losses by the remaining productive sectors.  These losses occur in business processes and supply chains that are linked, so that a kind of domino effect or snowballing contraction must take place before the full impact of each phase of the slowdown is fully realized.  This takes time and tends to come in waves, as tipping points are finally breeched.

Syndicate content