Email bobfraser@execulink.com

As I look back over the past year here in Ontario, Canada I believe I see some growing optimism. Hopefully not “irrational exuberance” but a growing sense by the survivors, and certainly those who remain are nothing less. That if you stick with your plan and model and strive to continuously grow and improve. What has been a very good business, the pig business, to many farm families in Ontario can be once again.

In my totally unscientific survey of producers, customers and prospects I’ve visited with over last few months deem last year a reasonable one. As a high percentage of Ontario pork producers are also integrated to land, the crop looms large in their operations. Although I heard a tremendous range in corn yields of over 100 bushels from 140 bu/acre to 240 bu/acre, often not that great a distance from each other. Most producers deemed the crop considerably better than expectations, given the particularly wet spring for the entire province and then extended period of too dry for large parts of the province. As one in the agriculture genetic business I continue to be impressed with the strides made in corn genetics to handle the whims of Mother Nature and still achieve Midwest corn yields in Ontario.

Similarly hog price seemed to on balance be greater than expectations. Yes we continue to see great volatility with the combined yoyo of grain/feed prices against hog prices pressuring margins. However many Ontario producers appear to have figured out various methods to mitigate at least some of this. Whether it be the backbone of the Ontario industry the integrated model of land to corn to hogs to manure that for a time fell from favour looking increasingly handsome. For others it is refinement to their risk management skills or seeking out niches and systems where they can grow and prosper.

Conestoga Meats the Ontario packer owned by 3Ps (Progressive Pork Producers) a group of 130+ Ontario producers who had a dream to integrate further up the chain is one shining example of this. In a field strewn with the carcasses of similar attempts across North America, through tenacity and hard work Conestoga has evolved to as high as 15,000 hogs per week returning an enviably competitive price to its shareholder/suppliers this year.

This is just one example amongst natural, organic, antibiotic free, heavier carcasses and an assortment of options that have bloomed under the breaking of the marketing monopoly held in Ontario for many, many years by Ontario Pork. As necessity is the mother of invention, nothing stimulates innovation like competition.

As I look back over the progress of the Ontario pork industry I consider Genesus progress in the province. We placed the first Genesus gilts in Ontario a little over two and half years ago. We literally started from square one. In a time of virtually no growth with the only business you got was by taking it away from someone else. Also to producers who know hogs having in many instances fed hogs for multi generations. In most instances the prospect who is stroking the cheque is also doing chores. Therefore you may get the first sale on salesmanship or charm depending your perspective but you will only get the next sale on performance! This audience knows their hogs. I am humbled and gratified that to date everywhere in the province that we’ve had a producer try our gilts they have continued to buy our gilts.

On the sire side, two years ago we had 3 boars in OSI (the boar stud we work with in Ontario). Today we have 150 boars at stud with 60 more entering quarantine next week. As I suggested earlier how corn genetics has improved to perform in the face of the whims of Mother Nature so Genesus is performing in the bumps of pork production from feed challenges, hot weather, bug challenges etc. that can result in overcrowding or other less than ideal growing conditions. As Ontario producers adapt to the new realities of the marketplace that requires better pigs, more pigs, easier, they’re finding Genesus a very viable option.

Looking forward if we take a look at the OMAFRA Weekly Hog Market Facts compiled by John Bancroft, Market Strategies Program Lead, Stratford OMAFRA john.bancroft@ontario.ca   we see a solid $20+ improvement in price over the same time last year. An encouraging start to the New Year.

Finally as I look back and forward I have a particular reason for reflection.

Robert Arnold Lovat Fraser (June 3, 1920), who I am blest, to be able to call my Dad passed away Januay 12, 2012.

This is a son’s perspective of how I remember him and all he did for me. I don’t know if you ever fully know your Father. Seems there’s always a certain mystery of when he was young. Things you don’t know, can’t know, and won’t know…

However this are some of the things I remember and what defined him as a man to me.

It is difficult for a son to see his lion in winter. Therefore I’m going to dwell more on when the sun shone and he was strong.

My Dad wasn’t rich man or at least how we’ve come to usually measure it now. My Dad wasn’t a clever, sophisticated man at least in the formal, schooled academic sense. He only went to Grade 10 at the Continuation School in Thorndale. My Dad wasn’t a highly successful man or at least as some of todays society has come to measure it. He worked for 35+ years for the Dept. of Highways while he farmed which was his love & passion but I’m not sure that he ever particularly made a nickel at it. But that wasn’t the point it was how he defined himself.

As to what my Father wasn’t – neither a rich man nor sophisticated, highly successful, clever man… So what was he?    He was a Good Man.

A good man – Faithful to his God

A good man -Faithful to his Family

Finally a good man that gave me a great gift of showing me an agriculture that’s virtually gone now.

We threshed up until 1970 and although I didn’t fully appreciate it at the time to step into a 20 acre field a stook it up. I would give a very great deal to sweat in the summer sun again and feel the camaraderie and joy of bringing in a harvest.

Because of my Dad I’ve seen the wonder of calves & lambs born. Pigs farrowed in a straw stack and how if given the opportunity will build a nest better than a duck. The snugness of a barn in winter all cleaned out and freshly bedded down.

He taught me how to plough and respect and honour your stock such that always when we came home from anywhere you always went to the barn first. Even in your “Sunday best” to check the stock first!

So to close a good man that loved his God, his family, his farm and…butter tarts (a wonderful dessert I understand virtually unknown to our American friends). Towards the end Dad got so he couldn’t swallow and ultimately take anything by mouth. Such that in August he had a stomach tube inserted for nutrition. That nutrition doesn’t include butter tarts.

So in the words of the great Rolling Stones song which I’ve always felt should be a hymn. “you can’t always get what you want but if you try sometime you might find that you get what you need”.

And with that if you believe as I do, he goes where “they wipe away every tear” then they also have butter tarts. And he’s having one now…

Bob Fraser

bobfraser@execulink.com

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–Commodity markets rise broadly, support livestock

–Cattle futures rise despite building caution over packer demand for cattle

–Lean hog futures hit 2-month high

By Marshall Eckblad and Curt Thacker
   Of DOW JONES NEWSWIRES

HOGS COMPLEX

Lean hog futures rose to a 2-month high due to swelling hopes for a seasonal upturn in demand, spurred in part by building positions among outside investors.

February hog futures rose 1.07 cents, or 1.2%, to 87.52 cents a pound in trading at the Chicago Mercantile Exchange. CME April hog futures rose 1.72 cents, or 2%, to 88.87 cents a pound.

Wholesale pork prices closed higher on Monday for the first time in more than a week, up 65 cents a hundred pounds, to $83.91. Investors have been waiting for pork demand to follow a historical pattern of rebounding in January or February. Demand typically sags in the wake of the holiday season as consumers face leftover bills, higher home-heating costs and property tax payments. Prices for hogs typically rebound once processors begin filling Easter ham orders and as milder weather ushers in the spring grilling season.

Some participants said futures rose in part because of building activity by big investors–a possible sign of an impending upturn in prices–which in turn has attracted more buying.

Cash hog bids today were mostly flat compared to Monday’s quotes as some packers bought additional loads to be delivered later in the week. Although a few plants are nearly full for the week, the majority of the hogs that traded on Tuesday did so at or near steady prices, livestock dealers said.

The USDA’s weighted average prices, representing all negotiated sales for the day, can be volatile from day to day. The data depends upon the number of packers participating in the buying, the locations of the quoted prices, and the number of hogs purchases–a mix of variables that can vary widely.

Due to the fact some plants are close to being full for this week, the weighted average prices on USDA reports could vary considerably on a daily basis during the balance of the week, even if the participating packers pay mostly steady prices.

The terminal markets traded at steady prices, with top prices ranging from $59 to $62 per hundredweight on a live basis.

-By Marshall Eckblad and Curt Thacker, Dow Jones Newswires; 312-750-4070; marshall.eckblad@dowjones.com

(END) Dow Jones Newswires

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by Bob Short, PFGBEST

1-800-280-4566

rshort@PFGBEST.com 

Feb. 1, 2012 at 9:45 a.m. Central:

Hogs:

Last Thursday, the pork packers’ operating margin was a negative $16.40 per head. This was the worst margin in over a year and packers have responded by lowering last week’s harvest 2.5% from the week before. And, for the first two days of this week, they cut harvest another 4.4% from the first two days of last week. This reduction in harvest is forcing pork product higher as we have put $1.89 on product for the week against just $0.34 last year.

With constant worry that pork exports will be less than last year’s pace, traders have kept a normal basis premium out of hog futures. April went home last Friday with a 2-point premium to the lean hog index against a 130-point premium last year and a 6-year average of 691.

While weekly harvest is being curtailed, we are seeing a corresponding increase in pork product. Most of this is coming from hams (Easter business) and pork bellies (seasonal February retail featuring). In addition, pork product volume has been very good as last week’s total of 472 loads was 6.5% over the previous week and 50.3% over the same week in 2011. It remains to be seen what pork volume will do as up-money is put on product this week.

We talked last Friday of the possibility of a product rally this week; if futures rally with this product strength, we would look to the short side of April futures in the 8900 to 9050 area if/when pork product volumes decline on up-money. We are in the bottom side of this area and are watching another day for product strength. There is good resistance for April hogs in the 8935 area.

We are short three units of April hog futures against long June with a average somewhere around April at a 750 discount to June. We are waiting for a 3- to 5-day rally to add a fourth unit.

We are long two units of June hogs against short June cattle with a small loss of around 100 points. Liquidate this spread should June cattle trade 3030 over June hogs for more than one hour.

Cattle:

Last week, beef packers tried to help the almost record negative operating margins by pushing choice box beef $2.13 higher for the week. The problem is that this weekly box volume was reduced to just 924 loads – off 29% from the previous week and 9.3% less than last year.

Traders, seeing last week’s box volumes declining on up-money, and encouraged by Friday’s surprise $2.00 break in cash cattle (Texas price of $123), came into the market Tuesday short the market. As hog futures started higher, traders ran for the exits, giving us a 70-minute, 100-point rally with a 2-day decline in open interest of 2119 contracts.

I have no short-term ideas in trading cattle futures. January saw very light weekly boxed beef volume as prices declined 6% for the month. In spite of deteriorating operating margins, packers put $2 to $3 on cash cattle for the month. This combination of higher cash cattle and lower box beef prices has got beef packers looking at close to record negative operating margins.

Because of this one might look to sell near term rallies, but January and February are always “buy the bad news” months as traders are well aware of the strongest seasonal cash advances each year. Our normal advance in cattle futures into late March or early April is to put 12% to 15% on cash cattle from the August lows. This seasonal dictates a cash cattle market in late March-early April in the $128 to $131 area. April cattle futures went home last night at $128.57, and that gave us little room for a trade.

Weather models are predicting a 6-10” snow event for this weekend in the Midwest with heavy rains in the southern planes. This is potentially bullish as warmer weather next week will turn feedlots muddy. Mud clings to cattle, forcing them to shiver in an attempt to remove it. This extra energy that the cattle use as they try to remove the mud will cause them to have less weight gain daily. Traders will usually buy February futures as they believe this will produce fewer near-term cattle to be offered for sale as they are not weight ready.

We are short two units of June cattle against long June hogs for the last 3 to 4 weeks. January lower box beef prices were offset with higher cash cattle prices. The result is that this spread has done very little. From a seasonal standpoint, June is the weakest cattle futures contract (grilling business pre-booked) and June is the strongest month for hogs (BLT season and lower weekly harvest levels.) This is keeping us in the trade, but should June cattle trade over June hogs by 3030 for more than one hour, it is technically wise to liquidate the spread, taking a small loss and moving on.

There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction

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Des Moines, IA Fri Jan 27,2012 USDA-Iowa Dept of Ag Market News

National Direct Delivered Feeder Pig Report: Week Ending Jan 27
Weekly Summary of prices on a delivered farm to farm basis.

RECEIPTS THIS WEEK: 121,528 LAST WEEK: 129,624 LAST YEAR: 125,871

VOLUME BY STATE OR PROVINCE OF ORIGIN:
Manitoba 29.5%, Iowa 10.7%, Indiana 8.8%,
Oklahoma 7.2%, Illinois 6.8%, Ohio 5.8%,
Nebraska 5.3%, Missouri 4.8%, Colorado 3.5%,
Minnesota 3.5%, Ontario 2.8%, North Carolina 2.4%,
Saskatchewan 2.1%, Pennsylvania 2.0%, South Dakota 1.8%,
Arkansas 1.2%, Montana 1.1%, Wisconsin 0.9%,

VOLUME BY STATE OF DESTINATION:
Iowa 62.8%, Minnesota 14.0%, Indiana 7.0%,
Illinois 4.6%, Ohio 4.1%, Nebraska 3.3%,
Missouri 2.5%, South Dakota 0.9%, Kentucky 0.5%,
Michigan 0.4%,

TRENDS COMPARED TO LAST WEEK: Early weaned pigs steady to 1.00 per
head higher. Feeder pigs 1.00 to 4.00 per head higher. Early weaned
pig demand moderate for moderate offerings. Feeder pig demand good for
light offerings. Receipts include 41% formulated prices.

All Prices Quoted on Per Head Basis With An Estimated Lean Value of 50-54%

FORMULA FORMULA CASH CASH
Lot Size Head Range Wtd Avg Head Range Wtd Avg

EARLY WEANED Pigs 10-12 Pounds Basis:
600 or less 3738 35.70-43.79 41.01
600 – 1200 10406 39.00-62.18 49.16 5654 50.00-69.00 58.88
1200 or more 35187 33.48-62.18 42.90 51900 55.00-67.00 61.45
Total Composite 49331 33.48-62.18 44.08 57554 50.00-69.00 61.20

FEEDER Pigs 40 Pounds Basis:
600 or less 2250 64.50-74.50 70.17
600 – 1200 1018 69.41-69.41 69.41 4775 74.00-82.00 76.51
1200 or more 6600 72.50-84.00 81.59
Total Composite 1018 69.41-69.41 69.41 13625 64.50-84.00 77.92

Total Composite Weighted Average Receipts and Price (Formula and Cash):
All Early Weaned Pigs: 106885 at 53.29
All 40 Pound Feeder Pigs: 14643 at 77.33

NOTE: Prices are quoted on a per head basis delivered to the buyers farm.
These prices include freight and fees on a farm to farm basis. Most lots of
40-60 weight pigs have a sliding value from the negotiated weight basis which
is calculated on the actual average weight of the load plus or minus .25-.40
per pound. Some early weaned lots have a slide of .50-1.00 per pound. Early
weaned pigs are under 21 days old. Estimated lean value is projected to use
slaughter weights with normal confinement feeding conditions. Vaccination
and health program values are not included but health status should be
disclosed.

Source: USDA Market News Service, Des Moines, IA
Bruce Thomas 515-284-4460 Desm.LGMN@ams.usda.gov
24 Hour recorded market information 515-284-4830
www.ams.usda.gov/mnreports/NW_LS255.txt
www.ams.usda.gov/LSMarketNews

1400C BAT

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A hot point of discussion the past few weeks has been the status of packer margins in both the pork and beef sectors, write Steve Meyer and Len Steiner.

As you can see in the diagrams below, while margins have certainly tightened for pork packers, they have fallen off a cliff for beef packers.

As always, readers should note that the margins depicted here are GROSS margins. They do not estimate packers’ profits. They estimate the amount of money packers have to pay for plant, equipment, labor, transportation, energy and any other costs. Whatever is left over is net profit. We do not try to estimate packer costs because we have very little data and, based on our knowledge, those costs differ considerably from company to company and plant to plant.

What is surprising in that margins could get this bad this quickly after packers in both species have managed margins so well over the past few years. There have, of course, been many ups and downs — even more than these charts show since we use 4-week moving averages to smooth the data a bit. The raw weekly data is VERY noisy. Why the big declines?

The situation for pork packers is perplexing indeed, primarily due to its timing. Pork margins frequently get tight in the summer (as they did last year) when hog supplies decline. Packers need to maintain throughput to support labor forces, minimize unit costs of plant, equipment, etc., maintain customer relationships, etc. They chase the limited supplies hard, bidding up prices and damaging margins in the short run in order to manage their long-run business.

Hogs, though, have hardly in short supply this past fall. Pork packers, as a group, ran near capacity for much of the fall and meat margins (the difference between the cutout value and the cost of the animal) were above $10/head in late November. See the margin component chart on page 2. Meat margins began declining in December and were negative for the weeks of January 7 and 14, the last two weeks for which data are available.

Why have packers continued large slaughter runs (+4% and +2.5% from 2010 levels the past two weeks) at negative meat margins? Is there something coming on the demand side that will reward them for maintaining volume? Are they fighting to maintain market share in spite of short-term losses? All of those would explain this behavior. We think negative meat margins will be reconciled sooner rather than later, though, so expect some pressure on cash hogs unless stronger cutout values appear quickly.

The beef side is, in our opinion, much more of a capacitydriven situation. The beef packing sector has been over-sized relative to cattle numbers for some time. Some reconciliation has occurred over the past few years (Tyson’s closure of its Emporia, KS plant being the most notable) but there is still more capacity than can be profitably supported and that situation is going to get MUCH worse over the next 18-24 months. Just how much worse will be answered to some degree by this afternoon’s Cattle report.

This margin situation has been brewing for some time as well. The margin component chart on page 2 shows that meat margins for beef packers have been negative for the vast majority of weeks since mid-2010. The situation has become critical since October 1 when the beef margin hit -$105.89. The low, so far, was Christmas week at -$123.59. But there are more cattle in feedlots now than last year, you might say. Yes, but that doesn’t mean there are more market-ready cattle in yards.

Early placements of light-weight cattle began last winter when wheat pastures were short. They continued in a big way last summer when grass pastures failed. The flow of these light-placed cattle to market has been very difficult to predict and we would argue that packers’ behavior, slaughter levels late in 2011 (even considering the two snowstorms in the southern plains) and prices are evidence that market-ready supplies are tight. And they will get even tighter. One bright point for both species — and the saving grace for total packer margins — is the value of by-products. Exports of pork variety meats and a rebound in cattle hide values had by-products at record levels this fall and they should remain high in 2012.

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An Excerpt from CRB’S Futures Market Service.

 LIVE CATTLE

Cattle prices soared to a record nearest-futures high of $1.26375 a pound, the highest since cattle futures trading began in 1964.  Bullish factors include (1) the Cattle on Feed report that showed a -5.9% y/y decline in feedlot purchases of cattle, the biggest drop in 7 months, which fuels concern cattle inventories will tighten in Apr and May, right when seasonal demand improves, (2) strong foreign demand with Jan-Nov U.S. beef exports up +23% y/y, (3) slack future supplies as USDA estimates the number of calves born in 2011 will be 35.5 mln, the fewest since 1950, and (4) USDA’s Jul 22 bi-annual cattle report that showed the US cattle herd on Jul 1 fell -1.1% y/y to 100 mln head, the smallest since 1973.  Bearish factors include (1) record high prices that may curb demand, and (2) the cold storage report that showed beef cold storage stocks in Dec rose +2.2% m/m and +1.4% y/y.

Fundamental Outlook—Bullish—Cattle prices climbed to record highs as beef supplies continue to wane.  Bullish factors include (1) strong foreign demand with Jan-Nov US beef exports up +23% y/y and (2) slack supplies after the Jul 22 USDA bi-annual cattle report showed the total US cattle herd at a 38-year low.

LEAN HOGS

Hog prices posted a 1-3/4 month high but remain only modestly above last month’s 1-year low.  Bullish factors include (1) increased domestic demand after U.S. ham inventories as of Dec 31 tumbled -19% y/y to 55.4 million lbs, (2) strong foreign demand with Jan-Nov U.S. pork exports up +23% y/y, and (3) the prospects for increased US pork exports to Japan on nuclear concerns and to South Korea after it extended its tax-free pork imports until Mar 31 due to its 25% cull from foot-and-mouth disease.  Bearish factors include (1) increased output after the USDA said 2011 U.S. pork production rose +1.4% y/y to 22.8 billion lbs, (2) increased supplies after hog carcasses on Dec 30 averaged 211.5 lbs, a 1-year high and (3) the quarterly Hogs & Pigs report showing a +1.5% y/y gain in the total U.S. hog herd and a rise in pig litters to a record 10.02 pigs in the 3 months ended Nov 30.

Fundamental Outlook—Bear Market Correction—Hog prices are in correction mode as domestic and foreign demand remains strong.  The quarterly Hogs & Pigs report (Dec 23) showed a +0.4% increase in the hog-breeding herd to 5.803 mln sows and sows averaged a record 10.02 pigs per litter in the 3-months ended Nov 30.

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–Traders look ahead to Friday’s USDA inventory report

By Marshall Eckblad and Curt Thacker
   Of DOW JONES NEWSWIRES
-U.S. live cattle futures on Tuesday continued to reflect growing beliefs that cattle prices in coming weeks will continue to exceed expectations.

Cattle for February delivery rose 1.2 cents, or 1%, to $1.2580 a pound in trading at the Chicago Mercantile Exchange. April cattle traded higher by 1 cent, or 0.8%, to $1.2917 a pound. January feeder cattle rose 0.3% to $1.5232 a pound.

Cattle futures extended their recent rally during the session after being cheered higher by improving wholesale beef prices and expectations for a coming USDA supply report–which both added to lingering support from two-straight weeks of unexpectedly strong prices in cash cattle markets.

The recent bullish turn for the cattle complex has caught some investors by surprise, especially since wholesale beef prices and profit margin estimates for processors have been languishing for weeks. The surge in cash cattle markets is a sign that supplies of animals are tightening more quickly than expected, participants widely say, and the upward momentum of cattle futures has in recent sessions drawn a surge of fresh investments from managed funds.

Wholesale beef prices closed higher on Monday and opened higher yet again on Tuesday. The U.S. Department of Agriculture reported midday choice boxed beef prices up 80 cents at $184.32 and select up $1.21 to $178.98 a hundred pounds. Total sales were reported at 93 loads. Those values rose $1.52 and $2.21 on Monday, respectively.

Although the USDA wholesale prices capture a small fraction of the industry’s total sales, many investors watch the government reports for clear signs of direction.

Profit-margin estimates for beef processors remain a warning sign. The latest HedgersEdge packer margin index was minus $96.95 per head, compared with minus $102.05 the previous day. This is an estimate of packer returns on cattle slaughtered and processed expressed in the form of an index. Actual profit margins will vary by processor because the estimates don’t capture privately agreed-to contracts or export sales, which are generally more lucrative than domestic sales.

Cattle owners in cash markets are asking higher prices for their animals this week, fueled in part by strong gains in live cattle futures and advances in wholesale beef prices following strength in cash prices last week.

Owners in Texas, western Oklahoma and Kansas are pricing their cattle at $1.28 a pound or more on a live basis. Sales last week were from $1.25 to as high as $1.2725 a pound in Texas and mostly $1.26 a pound in Kansas.

In Nebraska, owners are asking mostly $2.08 on a dressed basis following sales last week from $2.00 to $2.05 dressed. Live sales prices there a week ago from $1.25 to $1.28 a pound.

Analysts predict packers will further trim their slaughter schedules this week from the 628,000 head estimated for last week. Through the first two days, slaughter stands at 248,000 head, down 14,000 from the same time a week ago.

No bids have been reported yet, and the first quotes are expected to be established Wednesday, though trading will likely not develop until late Thursday or Friday.

HOGS COMPLEX

Lean hog futures closed mixed as traders weighed a daily drop in wholesale pork markets against bullish signs for demand later this year.

February hog futures fell 0.45 cent, or 0.5%, to 86.02 cents a pound in trading at the Chicago Mercantile Exchange. CME April hog futures fell 0.65 cent, or 0.7%, to 87.85 cents a pound. Later-expiring contracts were higher.

Nearby contracts were pressured on Tuesday by a fall in wholesale pork prices.

The USDA’s pork carcass composite value, a measure of wholesale prices, on Monday fell 37 cents a hundred pounds to $85.27.

Later hog contracts added to recent gains as investors grow more confident that a flurry of industry fundamentals, from higher prices for competing meats to signs of stable supplies, will support prices well into 2012.

Hog futures have benefited from the recent sharp rises in cattle prices, which point to tighter inventories of beef this year after a drought in the southern plains forced ranchers across the region to severely shrink their herds. Poultry production, meanwhile, appears to be falling, adding to suspicions among analysts that rising prices for beef and chicken will drive consumers toward pork.

Bids in the Midwest direct cash hog markets on Tuesday were reported mostly steady. Light volume trading was reported through the morning hours but more active sales may occur before the day is through. Some plants reportedly needed additional loads to fill their slaughter schedules for later in the week, according to livestock dealers and market managers.

Buying interest may be somewhat limited during the second half of the week as packers are planning on a light Saturday slaughter, dealers said. Projections for the weekend figure range from 50,000 to 60,000 head, which if accurate would put the week’s total on target to reach about 2.19 million head.

The terminal markets traded from steady to as much as $1.00 higher today with top prices reported from $58.50 to $61 on a live basis.

The latest Dow Jones Newswires pork packer margin index was minus $4.10 per head, compared with minus $1.82 the previous day.

-By Marshall Eckblad and Curt Thacker, Dow Jones Newswires; 312-750-4070; marshall.eckblad@dowjones.com

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The impact of output reductions and higher exports for US beef and pork can be clearly seen when one considers the price-quantity relationships for 2011, writes Steve Meyer and Len Steiner.

Moreover, the situation for the poultry sectors can be seen in stark contrast to those of the “red” meats by considering the same graphics.

The scatter diagrams below show annual per capita consumption in retail weight on the X axes and deflated retail price on the Y axes. The consumption data come from the Livestock Marketing Information Center while the retail price data are the standard USDA weighted averages that are based on Bureau of Labor Statistics data.

The CPI for all goods is used to deflate the prices to 2005 dollars. As you can see, US domestic per cap consumption of beef and pork — which readers of DLR know is actually “disappearance” which, in turn, is actually “availability” — has fallen sharply in recent years.

Pork per cap consumption most recently peaked at 50.8 pounds in 2007. It is now estimated to be only 45.9 pounds for 2011, a decline of almost 10% with roughly a third of that decline occurring last year. Beef consumption was roughly 65 pounds per person for each year from 2003 through 2007 before it, too, fell steadily to last year’s 57.4 pounds, a decline of about 12%.

The prices of both “red” meats increased as domestic product offerings fell, suggesting that demand (which reflects consumer preferences through the price they are willing to pay for the quantity offered) has fared better than has consumption.

The scatter diagrams for chicken and turkey look much different, though. First, per cap consumption for both species is still nearer the high end of the historic range than at the low end. Second, 2011 did not see dramatic changes for domestic product offerings.

Chicken producers, of course, accomplished that stability by accepting prices that fell far short of costs for most of the year — a course of action that cannot continue. It is almost certain that the 2012 observation will involve a lower quantity but the question is whether we will finally see a higher chicken price to go with it.

The ‘11 P-Q observation for turkey suggests higher demand relative to recent years as deflated prices rose on hardly any decline in product offerings. Since 2005, chicken demand has fallen while turkey demand has grown.

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January 23, 2012

CORN PRICE SWINGS TO CONTINUE?

Since early October, corn prices have bounced in a wide trading range.  March 2012 futures have traded between about $5.75 and $6.75 while December 2012 futures have been between about $5.35 and $6.20.

The wide price fluctuations have reflected numerous changes in indications of underlying supply and demand for corn.  Those changing factors included USDA production and stocks reports, South American weather, the rate of exports and export sales, the rate of ethanol production, and expectations about the potential size of the 2012 U.S. crop.  Prices have also likely been influenced by the volatility in the financial, currency, and metals markets.  Currently, March 2012 futures are near the middle of the four-month trading range, while December 2012 futures are in the low end of the recent range.

Prices for the 2011 crop are currently being supported by a fairly rapid rate of consumption and on-going uncertainty about the size of the upcoming South American harvest.  Basis levels have been generally strong since harvest and are currently at record levels for this time of year in some markets.  While December 1, 2011 stocks of U.S. corn were larger than expected, they were at a 5-year low.  Year-ending stocks are projected to be a relatively small 6.7 percent of consumption.  Ethanol production in the first two weeks of January was nearly 5 percent larger than during the same two weeks last year.  The low price of ethanol relative to gasoline suggests that blending economics will remain favorable even without the blenders’ tax credit.  Ethanol export prospects also remain favorable due to reduced competition from Brazilian ethanol.  With 7 months remaining in the marketing year, there is potential for price relationships to change, but it appears that corn use for production of ethanol and co-products is well on the way to reaching the USDA projection of 5 billion bushels for the year.

Earlier in the month, the USDA increased the projection of marketing year U.S. corn exports by 50 million bushels, to a total of 1.65 billion bushels.  The increase was partially in response to reduced production and export forecasts for Argentina.  Recent weather in Argentina has been less stressful than in December and early January, but total precipitation since November has been well below average in most areas and less than in 2008-09 in some areas.  Further reductions in the forecast size of that crop would not be surprising.  The pace of exports and export sales of U.S. corn also supported the larger projection of marketing year exports.  As of January 12, 62 percent of the projected marketing year exports had been sold, slightly ahead of the pace of a year ago.  China has been a steady buyer of U.S. corn since September, with commitments totaling 136 million bushels as of January 12.  New sales to China averaged 6 million bushels per week for the past 19 weeks.  There were only two weeks when no new sales to China were recorded.  Even with implied feed and residual use of corn at a very low level, year-ending stocks of U.S. corn could be slightly smaller than the current projection of 846 million bushels.

March 2013 futures are about $.50 lower than March 2012 futures and the spread widened about $.20 over the last week.  The market is anticipating a larger U.S. corn crop in 2012 and some build-up of inventories by the end of the 2012-13 marketing year.  The larger crop expectation stems from expectations for an increase in acreage, motivated by high prices, and higher yields after two consecutive years of below trend yields.  Current expectations for planted acreage of corn appear to center on about 94 million, two million more than planted in 2011.  With favorable planting season weather, such an increase could be easily accommodated without a reduction in total acreage of other spring planted crops.  Total cropland acreage could increase substantially in 2012 as a result of maturing CRP contracts in September 2011 and a sharp reduction in prevented plantings from those of 2011.

Planted acreage of 94 million would point to acreage harvested for grain near 87 million, 3 million more than harvested in 2011.  An average yield near 160 bushels, then, would result in a crop of 13.92 billion bushels.  Corn consumption would have to increase by 1.28 billion bushels (10 percent) next year to prevent an increase in the size of year-ending stocks.  Unless expectations for a larger crop are altered by spring weather or by acreage estimates, prices for the 2012 crop will remain below the prices for the 2011 crop.  Prices for the 2011 crop are expected to remain within the range established over the past four months, at least for a few more weeks.

Issued by Darrel Good
Agricultural Economist
University of Illinois

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Examines supply, use, prices, and trade for feed grains, including supply and demand prospects in major importing and exporting countries. Focuses on corn; also contains information on sorghum, barley, oats, and hay.

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Des Moines, IA Fri Jan 20,2012 USDA-Iowa Dept of Ag Market News

National Direct Delivered Feeder Pig Report: Week Ending Jan 20
Weekly Summary of prices on a delivered farm to farm basis.

RECEIPTS THIS WEEK: 129,624 LAST WEEK: 96,725 LAST YEAR: 116,913

VOLUME BY STATE OR PROVINCE OF ORIGIN:
Manitoba 29.4%, Iowa 17.5%, Indiana 13.7%,
Nebraska 7.5%, Illinois 7.3%, Oklahoma 4.9%,
Colorado 4.8%, Ohio 3.2%, Missouri 2.6%,
North Carolina 2.2%, Ontario 1.7%, Montana 1.2%,
Wisconsin 1.0%, North Dakota 0.9%, Pennsylvania 0.8%,
Arkansas 0.8%, Alberta 0.4%,

VOLUME BY STATE OF DESTINATION:
Iowa 65.0%, Indiana 8.4%, Minnesota 7.9%,
Illinois 6.7%, Nebraska 4.4%, Ohio 4.0%,
Missouri 2.7%, Washington 0.4%, Kentucky 0.4%,

TRENDS COMPARED TO LAST WEEK: Early weaned pigs steady to weak.
Feeder pigs steady to 2.00 per head higher. Demand good to moderate
for moderate to heavy offerings. Receipts include 42% formulated
prices.

All Prices Quoted on Per Head Basis With An Estimated Lean Value of 50-54%

FORMULA FORMULA CASH CASH
Lot Size Head Range Wtd Avg Head Range Wtd Avg

EARLY WEANED Pigs 10-12 Pounds Basis:
600 or less 5279 35.70-55.00 45.25
600 – 1200 13399 42.64-53.16 48.21 7083 57.00-62.00 58.83
1200 or more 35096 33.48-48.77 40.64 44106 55.00-69.00 60.40
Total Composite 53774 33.48-55.00 42.98 51189 55.00-69.00 60.18

FEEDER Pigs 40 Pounds Basis:
600 or less 2608 58.00-74.50 67.17
600 – 1200 1021 67.33-67.33 67.33 4747 69.00-76.00 73.39
1200 or more 16285 65.00-83.00 75.45
Total Composite 1021 67.33-67.33 67.33 23640 58.00-83.00 74.12

Total Composite Weighted Average Receipts and Price (Formula and Cash):
All Early Weaned Pigs: 104963 at 51.37
All 40 Pound Feeder Pigs: 24661 at 73.84

NOTE: Prices are quoted on a per head basis delivered to the buyers farm.
These prices include freight and fees on a farm to farm basis. Most lots of
40-60 weight pigs have a sliding value from the negotiated weight basis which
is calculated on the actual average weight of the load plus or minus .25-.40
per pound. Some early weaned lots have a slide of .50-1.00 per pound. Early
weaned pigs are under 21 days old. Estimated lean value is projected to use
slaughter weights with normal confinement feeding conditions. Vaccination
and health program values are not included but health status should be
disclosed.

Source: USDA Market News Service, Des Moines, IA
Bruce Thomas 515-284-4460 Desm.LGMN@ams.usda.gov
24 Hour recorded market information 515-284-4830
www.ams.usda.gov/mnreports/NW_LS255.txt
www.ams.usda.gov/LSMarketNews

1400C BAT

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