‘Grain & Meat Outlook’ webinar series offers strategies for livestock producers

Register to attend the first installment of a three-part "Grain & Meat Outlook" webinar series for 2014. This webinar is part of the 2014 WATTAgNet Webinar Series and will be presented by WATT Global Media on April 11 at 10 a.m. CDT.
Register for the webinar at www1.gotomeeting.com/register/682638592.
Webinar attendees can expect to learn:

• The most current information regarding the U.S. feed market for 2014
• Key observations regarding planting intentions and grain supply estimates for 2014
• Strategies for feed users
• Wholesale meat and poultry supply and pricing for 2014
Speakers
Tim Brusnahan, vice president of consulting, Richard A. Brock & Associates Inc.; and Dr. Tom Elam, president, FarmEcon LLC, will present estimates for the spring planting season and the impact of the projected plantings on grain supply, price and availability in 2014. The impacts of the projected harvest on the meat and poultry sectors will be forecast, including expectations for meat and poultry supply and prices for the remainder of 2014.
Richard A. Brock & Associates is a commodity trading adviser and commodity pool operator that provides commodity price forecasting, research analysis, hedging and procurement strategies for farm producers, dairy producers and end users of hedgeable and non-hedgeable commodities. Richard A. Brock & Associates serves as an adviser to many of the nation's largest farm operations, agribusiness firms, financial institutions and Fortune 500 companies. Brusnahan has been a stable influence in the sometimes volatile commodity industry. Prior to his employment with Brock Associates, Brusnahan was registered as an associated person with Gerstenberg & Co., a commodity retail brokerage firm in Chicago.
Elam has been working in the area of grain and livestock economics for more than 35 years. His professional career spans service to the University of Illinois, the Economic Research Service of USDA and Elanco Animal Health. In a 24-year career at Elanco, Elam was primarily engaged in global market research and strategic business planning. As a result of that experience, he has broad capabilities in the areas of agricultural price outlook, agricultural production, food marketing, and animal health economics. After retirement from Elanco in 2003, Elam founded his own company FarmEcon LLC.

Falling feed prices bring pigs back to profitable

U.S. pig production is becoming profitable again as feed prices drop post-2012 drought, according to Purdue Extension agricultural economist Chris Hurt.
"This year, the hog outlook is almost the opposite of what it was last year," said Hurt. "Feed prices, especially corn, have been falling sharply. The hog outlook is profitable, so producers are more likely to be retaining or building the breeding herd and weights are expected to increase as producers hold onto market hogs longer to gain profits on every pound."
The most recent hog numbers available from the U.S. Department of Agriculture, from the September Hogs and Pigs Report, showed that hog inventories are unchanged to somewhat larger compared to 2012 numbers. "Yet slaughter in recent weeks has been very low, seemingly indicating a divergence from USDA's reading," said Hurt.
Between mid-August and the end of September, slaughter rates dropped by an average of more than 5 percent and weekly slaughter rates have been down anywhere from 3 percent to 10 percent. But, perceived low slaughter rates could be a skewed perception based on an aberration in the slaughter numbers in 2012, when producers slaughtered more of their stock earlier to try an recoup coming losses due to prices affected by the drought. Now that the outlook has improved, according to Hurt, breeding herd expansion has likely started and hogs are being held to higher weights. These factors mean that fewer animals are headed to market right now and prices have strengthened.
"Given low slaughter numbers, cash prices of hogs have been sharply higher than in the same period in 2012 when they averaged $55 per live hundredweight," said Hurt. "With lower slaughter this year, they have averaged about $68 since mid-August."
Higher cash hog prices combined with lower feed costs are the important drivers for a profitable outlook over the next 12 months. According to Hurt, eastern Corn Belt live-hog prices are expected to average in the mid-$60s in the final quarter of 2013 and the first quarter of 2014. Spring and summer prices are expected to move slightly higher.
With the cost of production estimated at $57 per hundredweight, Hurt said cash prices in the mid- to high-$60s would mean profits of more than $20 per head.

Poultry industry looks for new norm amid volatile feed prices, meat demand

After experiencing six consecutive years of feed grain market turmoil, the poultry industry is wondering if grain stocks will rebound and poultry demand will be strengthened in 2013. The article, "Grain prices and poultry demand: Searching for the new norm," which can be found in the April edition of WATT PoultryUSA and online, takes a look at the industry's economic factors.
High on the list of economic concerns is the inventory of corn in the United States and the supply's impact on feed prices. Some don't see the levels of U.S. corn stocks being high enough to lower the cost.
"In order to fulfill the 15 billion gallon (Renewable Fuel Standard) mandate for ethanol, to produce to meet the potential demand for meat and dairy products in this country, and to restore U.S. supply for export markets to about 2.2 billion bushels a year, we need corn crops of 95 million-plus acres at 165 bushels an acre in every year as far as the eye can see. That's not going to happen. There is not the potential in corn agriculture to make it happen," said industry economist, Dr. Thomas Elam.
But Terry Barr, senior director of industry research at CoBank, has a more optimistic look at feed prices. "Significant amounts of new production of coarse grains are beginning to come into the market, so inventories may be rebuilt faster than thought," Barr said.
The WATT PoultryUSA article also takes a look at the poultry industry's other financial factors including a potentially higher demand for animal proteins, poultry's price advantage over red meats, and the relationship between disposable income and meat consumption. 

Lower feed use, exports mean higher US corn ending stocks

U.S. corn ending stocks for 2012-13 are projected at 757 million bushels, showing an increase of 125 million bushels from the previous month. The latest figures were part of the United States Department of Agriculture's World Agricultural Supply and Demand Estimates report, released on April 10.
The increase in corn stocks was largely reflected in a projected 125 million bushel decline in corn feed and residual disappearance.
"Feed use wasn't quite as great as many had anticipated," said USDA chief economist Joe Glauber during a USDA broadcast report.
Corn exports were also projected at 25 million bushels lower at 800 million bushels, which Glauber noted is the lowest they have been since 1972-73. The adjusted export projections reflect the continued sluggish pace of sales and shipments, as well as more competition from South America and other nations.
The World Agricultural Production report, also released by the USDA on April 10, forecast Brazilian corn production at a record 74 million tons, up 1.5 million tons from the previous month and up 1 million tons from the previous record set a year ago. The forecast does not reflect any increases in acreage, but yield estimates were increased because of consistent rains since late February.
Also mentioned in the World Agricultural Production report was an upward adjustment of corn production in the European Union, which is now at 56.1 million tons, up 1.4 million tons from the previous month's projections. Those increases were specifically reported in Poland, Hungary and Spain. 

Farmers intend to plant more feed grains in 2013

Poultry and livestock producers got a bit of welcome news as farmers are expected to plant more feed grains for the 2013 seasons. All of the major feed grains will increase in acreage in 2013, according to the U.S. Department of Agriculture's Planting Intentions report, with the exception of soybeans, which will decrease less than 1 percent.
"If these early planting and yield projections are realized, corn and soybeans stocks will increase, which would ultimately lead to lower feed costs for livestock and poultry farmers," said American Farm Bureau Federation crops economist Todd Davis.
The combined acreage of corn and soybeans listed in the report, released on March 28, would make 2013 the highest year on record, said USDA chief economist Joe Glauber.
Corn
Growers are expected to plant 97.3 million acres of corn, which is up just slightly from the 97.16 planted in 2012. The 2013 estimate is a 6 percent increase from 2011. If the 2013 projection is realized, this will be largest acreage in the U.S. since 1936, when an estimated 102 million acres were planted.
The state with the biggest percentage increase in corn production is Georgia, where acreage is expected to jump from 345,000 acres to 495,000 acres — a 43 percent leap. It drops the most in California, but that is only an 8 percent decrease from 610,000 acres to 560,000 acres.
Iowa, the nation's leading corn-producing state, will stay steady at 14.2 million acres.
Soybeans
The projected 7.71 million acres of planted soybeans is only 72,000 acres less than planted in the U.S. in 2012, but if realized it will still be the fourth-largest year for soybeans in U.S. history.
Planting in the Great Plains is expecting to decline, with the exception of Illinois and North Dakota, which are expecting large increases, according to the report. Illinois leads all states in total anticipated acreage at 9.4 million acres.
Georgia, while not a major soybean-producing state, will have the largest increase, going from 220,000 acres in 2012 to 280,000 in 2013.
Wheat
An estimated 56.4 million acres of wheat will be planted in 2013, which would be a 1 percent climb from 2012.
Iowa is expected to have the biggest increase in acreage percent-wise, going from 18,000 acres to 40,000 acres. Kansas, the nation's top wheat-producing state, will drop about 2 percent, going from 9.5 million acres to 9.3 million acres. North Dakota, which ranks second, will also see a 2 percent drop. Oklahoma and Texas — also top producers — are expected to have near-equal acreage.
Sorghum
Sorghum acreage will grow by a larger percentage in 2013 than any other feed grain. It will jump 22 percent from 6.2 million acres in 2012 to 7.6 million acres.
Texas is expected to surpass Kansas as the nation's leading sorghum producer, going from 2.3 million acres to 3 million acres. However, Kansas is also expected to increase its production, going from 2.5 million acres to 2.9 million acres.
Arizona and Missisippi — neither large producers of sorghum — are the only two states whose acreage is expected to decrease.
Oats
Oat production in the U.S. will see a 5 percent jump from 2.76 million acres to 2.9 million acres.
The biggest mover in terms of percentage is Nebraska, which will see an 80 percent increase to reach 135,000 acres. Texas, the nation's largest producer, will jump 20 percent in acres planted, going from 500,000 acres to 600,000 acres. Oklahoma, its neighbor to the north, will decrease from 75,000 acres to 40,000 acres, the largest drop nationwide.

Poultry market conditions improving, Rabobank reports

The global poultry industry continues to operate in a challenging market place, but conditions for 2013 are improving; a reduction in corn prices in recent months has been a welcome break for an industry that saw margins shrink in many parts of the world throughout 2012. According to Rabobank, the poultry industry’s pricing power should improve, with continuing high prices for competitor meats such as pork and beef leading consumers to choose the cheaper poultry option, and an improving supply discipline in some key producing countries.
“Despite the positive picture, this outlook is very fragile and dependent upon risks related to feed costs and supply discipline," said Rabobank analyst Nan-Dirk Mulder. “As grain and soybean stocks remain low, supply discipline will be a key tool for the industry to maintain margins. This has been demonstrated in Brazil, where production cutbacks have paid off in improved margins. Regions with inadequate market balance, such as South Africa and India, need to reconsider production levels in the next few months. This is also the case for producers in the EU where performance worsened throughout 2012, although Q4 did see some improvement.”
Global poultry industry performance has been affected by the increasing feed prices and local market supply/demand balance. Companies active in countries with a relatively good or improving local market balance have been the first to benefit from an improved market situation. Brazil, in particular, has benefitted from more disciplined supply management. The opposite is still the case in South Africa, India and Thailand, where industries are still exposed by oversupply, although signs are that in Thailand and India things are improving slightly. The best performing local industries are still in Russia and Ukraine, with ongoing high margins and a good local supply situation with growth in local demand, although prices in Russia have tended to decline recently.
The performance of poultry companies in 2013 will depend, to a large extent, on how well they are able to deal with volatility from grain and oilseed prices. Although the current outlook suggests a slowdown in feed price increases, uncertainty remains due to low stock levels and an uncertain production outlook for grains and oilseeds. The industry should therefore be prepared for any change in input prices. It has been proven that an optimal supply management system will be a key element here. In addition, further optimisation of industry structure should become a higher priority for companies in which elements such as market power, efficiency and risk mitigation are key for 2013.

Grain prices to remain high, animal feed prices still volatile

The new normal for animal feed costs will be at least $5 corn and $300 soybean meal, according to Thomas Elam of FarmEcon during his presentation on the Economic State of the Industry. He was speaking at the Meat and Poultry Research Conference held at the 2013 International Production and Processing Expo. The conference was co-sponsored by the American Meat Institute, U.S. Poultry & Egg Association, the American Meat Science Association, and the Poultry Science Association.

Grain prices
“Will we see $10 corn and $650 soybean meal?” Elam questioned. “It’s very possible. Also, $5 corn and $300 soybean meal is equally probable.” But, he believes those are minimums in the future. “We will continue to see volatile feed costs for the next 18-20 months,” Elam continued. “There will be no significant change through March and April. Then, it will depend on the weather this summer. If there is no rain again this year, we’re in serious trouble. And, there has not been enough snow this winter so far. Then, there is the ethanol squeeze.”
From 1950-2005, for meat and poultry producers, consumer demand was the major driver, Elam explained. Now, feed cost is the driver, and consumer demand has slowed. And, it is slowing the recovery from the recession, because more personal income is required for food.
On the positive side, “exports have held up incredibly well. However, there are always opportunities,” Elam remarked. “They include product innovation, distressed asset sales, more flexible price contracts, up-selling export markets, and continued cost cutting for increased efficiency.”

Antibiotic-free broiler production
Also on the program, Dr. David Wicker, Fieldale Farms, discussed antibiotic-free broiler production. “Why do we do it? Because that’s what the customer wants,” he said. “Antibiotics are not used in the feed or water and are not injected into the egg. We use an all-vegetarian diet, with no meat meals and no animal fats.”
Wicker listed several factors that impact antibiotic-free broiler production. The immunity level of the parents is important, particularly the parent hen immunity. The breed strain plays a role, and less density can be another requirement.

Organic food production
Miles McEvoy, with the USDA Natural Organic Program, examined regulatory standards and requirements for natural and organic food production. He said that organic agriculture has grown substantially in the last twenty years, from negligible to $31 billion in 2011. “The reasons vary,” he remarked. “Why organic? Things like environmentally sound, biodiversity, less toxic, animal welfare, rural development, and economic opportunity.”
The 1990 Farm Bill established national organic standards through the Organic Foods Production Act. McEvoy said certification is very important in organic agriculture. Consumers can choose production methods, and it protects consumers, establishes a level playing field, and ensures that products are produced without prohibited methods. It is also scale-neutral, in that all operations must meet the same requirements.
The food production categories that can be certified include crops, wild crops, livestock, and processed products. There is a fee for certification. and the cost depends on the size and scope of the farm. The average is $1,000, and annual recertification is required.

Processing challenges
Processing challenges were addressed by Kevin Myers, Hormel Foods. He focused on natural high pressure processing of ready-to-eat meats to reduce pathogens. He said that high pressure processing has been around 100 years, but has seen rapid growth in the last ten years. He listed the technical differences from other processing techniques. Myers said it also may impact things like shelf life and sometimes flavor but is a viable and growing option.

Outlook on Latin American feed ingredients for 2013

There are good corn and soybean harvests in South America, but there was a drought in the U.S.; the price of fishmeal is rising, so the supply of rendering products is again attractive to the poultry industry. So where do amino acids come in? These are some of the possibilities on the market this year. Industria Avícola of WATT Publishing will present a Spanish-language webinar about what to expect from these raw materials on Tuesday, February 26 at 9 a.m. Central Time. Three prominent speakers include:

• Dr. Ricardo Celma, Agri Trends and Services, SC, will discuss the outlook for corn and sorghum
• Dr. Carlos Lopez Coello, National Renderers Association, will tell us what happens to rendering products
• Dr. Jorge Gonzalez, Novus International, will describe the market for amino acids used in poultry
You can expect to learn:

1. What to expect of the corn market, as the main ingredient, and sorghum in the markets in which it is used, and its implications in poultry nutrition
2. The convenience of using rendering products in poultry feed conditions compared with fishmeal and soybean meal
3. The way the use of main ingredients may affect the use of amino acids in poultry feeds and what we can expect in this market
Sign up for this webinar at www.WATTAgNet.com/Upcoming_Webinars.aspx.

National Council of Chain Restaurants urges renewable fuel standard repeal

The National Council of Chain Restaurants is urging a repeal of the U.S. Environmental Protection Agency's renewable fuel standard based on a 32-page report it commissioned that shows the mandate could cost chain restaurants up to $3.2 billion annually.

According to the report, quick-service restaurants could see cost increases up to $2.5 billion, and full-service restaurants could see increases upward of $691 million. “The use of corn-based ethanol required by the federal renewable fuel standard mandate has dramatically distorted the market and increased costs throughout the food supply chain,” said National Council of Chain Restaurants Executive Director Rob Green. “The RFS has had an adverse effect on the chain restaurant industry, which has witnessed marked increases in commodity prices and associated costs to the tune of billions of dollars a year.”
According to Green, The mandate artificially inflates the price of corn, which increases costs throughout the system, from cattlemen and poultry and pig  producers to dairy farmers and restaurant operators. “The RFS mandate forces small business owners, franchisees and their suppliers to spend higher and higher sums on commodities, which ultimately drives up prices on the end-user, the consumer.”
The study was conducted by PwC US, which reviewed public and private reports and combined these findings with chain restaurant survey data to calculate the overall cost of the renewable fuel standard mandate to chain restaurants. 

Brazil poultry output may fall for first time in 20 years

Brazil's poultry output may drop 4.1. percent by the end of 2012, to 12.3 million metric tons, from 12.9 million metric tons in 2011 due to rising feed costs, according to oilseed industry researcher Oil World. The decline will be the first in 20 years, and is coupled with a drop in exports, from 3.95 million metric tons to 3.91 million metric tons.
“Producers have cut back in response to high feed prices and unattractive margins,” said Oil World. “This is the first year-on-year reduction in 20 years. A slight reduction occurred in exports, but most of the decline is going to occur in the domestic market, reducing average consumption per person.” The country's consumption is expected to drop, as well, to 8.42 million metric tons from 8.92 million metric tons in 2011, with per-capita consumption dropping to 43.41 kilograms from 46.34 kilograms.
The majority of Brazil's poultry meat is produced in the southern part of the country, where the corn harvest at the beginning of the year was significantly reduced by drought, according to Oil World. “Domestic poultry prices increased and were up by about 25 percent from a year earlier in October and early November, but the increase in feed costs was considerably higher,” said Oil World.

Brazil pig producers expanding in 2013, facing high feed costs

While Brazil’s pig farmers are facing rising feed costs and other international financial challenges along with the rest of the globe, they are better placed to ride out the current international turmoil than producers in many other parts of the world — and they are already planning to expand their markets in 2013.
“We are fortunate in that our producers are close to some of the best grain-growing regions in the world and we have a large, stable domestic market for the pork we produce,” said Pedro de Camargo Neto, president of Brazil’s Association of Pork Exporters (ABIPECS).
Speaking exclusively to Pig International, de Camargo Neto said that while Brazil is the world’s fourth-largest producer of pork (around 3,300 million metric tons per year), it only exports 18 percent, as about 2,700 metric tons is consumed locally. “Of course, we are also suffering to some extent from the pressure of higher prices for soya, maize and other grains, because they are part of an international pricing system, but we are currently protected by this large, strong local market for our product," he said. "And we are having a difficult year this year, compared with previous years.
“However, we are expecting to grow in 2013 and hope to expand our export market, particularly to China, which is the ‘big prize’ for all pig-producing countries in the West. We are also expecting a continued strong domestic market, which has remained relatively stable for several years.”


A view from a typical Brazilian pig unit.

The country’s export trade is mainly directed towards Russia, the Ukraine and Hong Kong, where it saw an increase of 45.98 percent in volume and 38.47 percent in revenue in September, compared with the same period in 2011. "Now we have also won approval for the Chinese market, and although we are currently just exporting small quantities directly to the country, we hope that these quantities will increase significantly from next year onwards,” said de Camargo Neto.
New markets in Europe aren't expecting the same kind of growth. “We are still waiting for sanitary approval for Europe," said de Camargo Neto. "It seems to be taking a long time to get it. But even when we are approved, I imagine our exports there will be limited by quotas, so we do not expect huge growth in that region.”
Overall, de Camargo Neto said he is confident about the way the sector is developing in Brazil. Producers and breeding companies are “more or less up to date” as far as genetics are concerned, and are also quite advanced in the move towards modern, hi-tech equipment. “We have made a lot of progress in this area, but there is still room for the international companies to introduce the latest systems into the country to help producers to continue to improve production,” he said.

Chicken industry leaders discuss impact of feed prices, trade

Industry executives on the Industry Outlook Panel had no simple answers for the issues faced by the broiler industry.

It’s no secret that high feed prices have put tremendous strain on the U.S. broiler industry, and that challenge was a central topic addressed by the Industry Outlook Panel at the National Chicken Council’s 58th Annual Conference on October 11.
WATTPoultryUSA and WATTAgNet.com videotaped the presentation, which you can view by linking to the different sections below.
The session was moderated by Dr. Clayton Yeutter, former secretary of agriculture and current senior advisor, Hogan Lovells. Panelists included Paul Fox, CEO, O.K. Food; Michael Popowycz, vice chairman and chief financial officer, Case Foods; and Thomas M. Hensley, president, Fieldale Farms.
You will be required to register or sign in to WATTAgNet.com to view the videos. Registration is free and only takes a minute.
Part 1
What did the broiler industry learn from 2011?
An introduction of the Industry Outlook panel at the National Chicken Council annual conference and the first question: What did the broiler industry learn from 2011 and how will the industry apply those lessons in 2012 and 2013?
Part 2
Impact of feeds costs and ethanol policy on the broiler industry
A discussion on feed costs and ethanol policy at the National Chicken Council annual conference.
Part 3
Importance of international trade to the U.S. poultry industry
A discussion of international trade and its impact on the broiler industry, today and in the future.
Part 4
Clayton Yeutter on trade and the farm bill
Dr. Clayton Yeutter, moderator of the Industry Outlook Panel at the National Chicken Council annual conference, gives his view on international trade and the progress of the farm bill.
Part 5
What will the chicken export market look like in five years?
Answers to questions from the audience.
Part 6
What are the biggest challenges the chicken industry faces?
Answers to questions from the audience during the Industry Outlook Panel at the National Chicken Council annual conference. 

National Chicken Council calls for waiver of renewable fuel standard

The National Chicken Council has called for a full, one-year waiver of the 2013 Renewal Fuel Standard requirement, saying that a recent study has shown such a move could reduce corn prices by $2.00 per bushel.
The estimate comes from an August 2012 report prepared for the Farm Foundation by three Purdue University economists that evaluated how an Environmental Protection Agency waiver of the ethanol mandate would affect the corn and ethanol markets. The council also delivered almost 10,000 individual comments from those whose livelihoods depend on the chicken industry, almost three-quarters of which came from chicken farmers. “Our comments prove in detail that the RFS is causing severe economic harm to the U.S. economy, and the 2013 requirement must be waived in full,” said council President Mike Brown.
A decrease in the price of corn by $2.00 per bushel would alleviate pressures on both consumers at the grocery store and the food, livestock and feed industries, said the council in its statement to the Environmental Protection Agency. Given the important role of corn in U.S. food production, as the price of corn decreases, so do the prices of meat, poultry and dairy products, and the foods that contain corn-based sweeteners, starches, flours and oils, as well as substitute products such as wheat and soybeans and any foods made using them. A marginal decrease in corn price of 24 percent, based on a reduction in the price of corn by $2.00 per bushel, would result in a decrease of approximately 2.4 percent in retail food prices.
More significantly, said the council, a decrease of $2.00 in the price of corn per bushel is equivalent to a decrease of $71.43 per ton of corn, which results in feed costs that are $32.14 to 47.86 lower per ton. The broiler industry uses 1.25 billion bushels of corn each year. Savings of $2 per bushel of corn would amount to $2.5 billion in annual savings to the chicken industry. "Because of the importance of corn in so many aspects of food production, the entire food industry — and ultimately, the consumer — are suffering because of the RFS."

Feed prices continue to affect Brazilian poultry revenue

Brazilian chicken meat exports totaled 305,700 metric tons in September, 0.4 percent higher compared to the same period last year, according to the Brazilian Poultry Union, UBABEF. Revenue fell by 3.4 percent in the same period, with a total of US$632.7 million.
Year-to-date as of late September, exports grew by 0.9 percent in volume compared to the first nine months of the previous year, reaching 2.922 million metric tons. Revenue fell by 6.9 percent, totaling US$5.616 billion in the same period.
UBABEF President Francisco Turra said maintaining the pace of the volumes of chicken meat shipped across the country has been critical to the survival of the poultry industry while it faces high corn and soybean prices.
Turra said it is critical for the government keep its efforts and investments in agricultural defense structure for the country to hold fast to its leadership in international poultry exports.

Hog producer enters receivership due to high feed costs

Canadian hog producer Big Sky Farms has entered receivership due to high animal feed prices caused by the ongoing U.S. drought, according to reports. An outside party will control the company until it can restructure its debt or be sold; Big Sky Farms has said it has no plans to lay off staff or liquidate its pig inventory.
The company has been losing C$40 (US$41.01) to C$50 (US$51.27) on every hog it sends to market, said Chief Executive Casey Smit, leaving the company with few options. Big Sky Farms filed for bankruptcy protection in 2009 when feed costs increased to similar levels and restructured its business.

Animal feed prices, production costs highlighted at SPACE 2012

Animal feed prices and production costs were the key topics of conversation among visitors and exhibitors at SPACE 2012, which opened in Rennes, Brittany, France, on September 11, with discussion about the new EU animal welfare regulations also a hot-button topic.
And in spite of the current difficult financial climate for all livestock farmers, the show, which runs until September 14 and is celebrating its 25th anniversary, is bigger than ever before, although attendance remained stable at about 22,100 visitors on the first day compared with figures from 2011.

A leading visitor on opening day was new French President François Hollande. While there, the president urged pig producers and other sectors of the agricultural industry to “go out and conquer new markets by boosting new farms, protecting agricultural land and calming volatility.”
His words were welcomed by many at the show, including Michel Rieu of the French Institute for Pigs, who told Pig International he believes there is plenty of room for French pig producers to grow and consolidate production for the domestic market, as demand for pork grows in the future. He also said he believes the balance of supply and demand will soon lead to higher prices for pork and that the prices will remain high through 2013 and maybe even 2014.
Pig farming, said Rieu, is becoming popular again in France with the number of young French people who want to be pig farmers growing rapidly. “This is a good sign and reflects the excellent model of farming that the industry has here — small, family-style farms with between 300 and 400 pigs per farm,” he said.
Jean-Michel Serres, president of the National Pig Federation in France, told Pig International that “France is a good place for the future.” He said that producers need to consolidate production to secure the domestic market, and that French producers are used to high input costs and can remain competitive under the current wave of high international prices.

Arnaud Buchet, commercial export manager for French pig breeder Nucléus SAS, said the company has been selecting for feed conversion rate, rather than growth, to help French pig producers produce more with less feed for several years, so it is now ahead of the game as feed prices continues to soar on the international markets. As a result, according to Buchet, the company’s sire and female lines are now attracting many new customers in several new markets, including China, Korea and the U.S.

U.S. Chicken industry may face challenges in fourth quarter

*The U.S. chicken industry will face challenges in the fourth quarter of 2012 due to ever-increasing grain prices caused by the drought, according to Koch Foods Inc. CEO Joseph Grendys, and the company's contracts in for 2013 will reflect the possibilities as adjustable clauses are written in for grain price fluctuations.
The last time the company sought quarterly adjustments was in 2008, said Grendys. “Costs have gone up so much due to the drought that the industry will be forced to get price increases of 10 to 15 percent across all product lines” for 2013 over this year, he said. Production in the industry as a whole declined in the first half of 2012 and rising feed costs continue to shrink margins.

Grendys said that while demand for Koch’s chicken products is “extremely strong,” uncertainty caused by the drought is leading his company to analyze its sales against the cost of raising chickens. The industry has reduced production costs over the last decade and can’t count on lower input costs in the future. He said the industry needs to be smart and focus on pricing if it wants to be profitable in 2013.

Canada pork producers concerned over high feed prices

Canadian pork producers are raising concerns over increasing animal feed prices due to the continuing U.S. drought, saying that ethanol policies and low crop yields in the U.S. are causing grain prices to rise to the point where it may no longer be economical to have pigs.
“Grain is by far the largest cost component of raising pigs, and marketplace realities are such that pork producers cannot simply pass along added costs to buyers," said Canadian Pork Council Chair Jean Guy Vincent. "Margins become squeezed and producers need to either absorb heavy losses or, unfortunately, get out of business.” The council said global policies on ethanol mandates need to be re-evaluated if feed is to remain affordable in the current climate.
“The status quo is not sustainable for the hog industry," said Vincent. "Pork producers need to work with all members of the value chain to address short and long term issues. The recent market conditions and feed prices were unimaginable two months ago and producers should not have to decide between losing their farm or increasing their debt to pay for unsustainable feed costs."
A task group made up of producers and federal government officials has been established to review the situation and identify measures to assist the hog sector to manage through the latest challenge.

Brazil poultry production down on high grain prices

Brazil's poultry meat production dropped 10 percent below the industry's average monthly output of 1.1 million metric tons in July, due to an increase in the cost of grains which account for 60 percent of poultry producers' expenses, according to Brazilian poultry association Ubabef.
Twenty of the association's 80 members, who range from small producers to large international exporters, are in financial difficulties because of the cost of feed, said Francisco Turra, head of Ubabef. "It's a crisis of the most serious kind in a sector that already works to very tight margins," he said. Prices members are paying for soy have risen 80 percent in the last six months, and 40 percent for corn.

Brasil Foods, JBS and Marfrig have all said they will raise their prices due to the higher cost of inputs. Fitch Ratings downgraded its outlook on all three companies on Aug 17.

Asia feed grain importers seeing high prices, low stocks

Asia's feed grain importers are seeing increased prices and decreased stocks as the worst U.S. drought since 1956 pushes Chicago corn futures to over $8 per bushel and strains alternative supplies in places like Australia, according to reports.
A 25 percent jump in cash prices for Australia's feed wheat as a result of reduced stocks is hurting Asian feed makers, who get their supplies from Australia and replaced some 7–8 million metric tons of corn with feed wheat, worth about $2.0–$2.2 billion, in 2011. "It is a very tough situation for the feed industry and we feel prices will stay high for the entire season," said the head of grains trading at one of Malaysia's biggest feed mills. "Substitutes are not going to be cheap."
But weather has been a factor for Australia, as well. Australia's record 29.5-million-metric-ton 2011 harvest was hit by late rains, which damaged the quality to the point where one-third of the wheat was feed quality. This followed a similar downgrade in 2010. For 2012 Australia is likely to produce a smaller, high-quality crop, which means wheat stockpiles will remain depleted. The Black Sea region and South America have suffered from dry weather, while India is retaining its own stocks for domestic use because monsoon rains are running a fifth below normal.