Chinese CAFO's...  

As despised and frankly unappealing as CAFO"s are, they still are the best current method to produce a lot of pork. In a country where it may be easier to slide around environmental restrictions, they would be a real protein efficiency boost.

And that's what China seems to be doing.

In the long run, China’s move from backyard pigpens to huge industrial farms like Jiahua Pig Breeding, which benefit from economies of scale and more stable production plans, could help calm volatile boom-bust pork cycles and bring inflation more under control.

“The faster the trend to scale up and the faster that backyard breeding is phased out, the more volatility will be dampened,” Hua Jianqing, Jiahua’s president and principle investor, said from his headquarters in rural Zhejiang, south of Shanghai.

“It won’t be a year or two,” he said. “My analysis is that it will take three to five years to reach the balancing point.”

Jiahua keeps 5,000 breeding sows at a time and raises 100,000 pigs a year.

Squirming and oinking, young sows are lined up daily for buyers peering through a glass window. Those that are picked can be shipped hundreds of kilometers to help seed yet another huge farm. Large-scale operations with about 3,000 pigs each now account for about 20 percent of China’s herd, but huge, American-style farms of Jiahua’s size account for only about 2 percent.

The record-high margins last summer created a classic boom in investment in pigs, but now a drought in the United States is pushing up the price of grain used for feed, prompting owners of small farms to slaughter their animals and setting the stage for a possible supply shortage in months to come.

Small farms still produce enough hogs — about one-third of the national herd — that their decisions to buy more piglets or sit out a season can have a big influence on prices.

“If fewer choose to raise, in the third quarter of 2013 we see a shortage of pork and a run-up in prices,” said Andy Rothman, China strategist for the brokerage firm CLSA in Shanghai. [More]

It also suggests their appetite for corn will be a little more resilient to high prices, just as our big operators have proven to be remarkably tough during this current runup in prices.

One more reason...  

Why I would have died a flaming death in corporate America: marketing campaigns. I try to imagine having a meeting with these people.

Below are some highlights. Warning: We are about to enter the strange arena of marketing, where fictional worlds are conjured up out of whole cloth for the sole purpose of moving goods.
From what I can tell, the intention expressed here is to brush up the image of Hillshire Farm and roll out two new premium brands: "Smith & Smith Fine Meats" and "Flat Iron Ranch." The campaign is "foundational," the one slide declares, "and demonstrates how the new, purposeful Sara Lee will manifest: Modern. Authentic. Simple."

Seriously, if you can't sense a wind change in the meat industry from this, what will it take? It looks to me you're going to have to be able to fake "sustainability" and "humane production" at the very least.

 

True mystery meat...  

I'm not a  big fan of the McRib.  It's too messy, especially for the road and the texture defies mouth analysis. But I'm far from being it's biggest critic.

Some point to the lengthy list of unappetizing ingredients. But hey - what prepared food or restaurant fare doesn't read like that?

The more unsettling accounts are how the umm, meat is processed.

Roger Mandigo is an emeritus University of Nebraska animal science professor credited with the technology that made the McRib possible. And here's its story, straight from the meat scientist's mouth.

Roger Mandigo earned induction into the Meat Industry Hall of Fame for his invention of "restructured meats."

Back in the 1970s, Mandigo tells The Salt, he was approached by the National Pork Producers Council (the folks who later brought you "the other white meat") to create a product with pork trimmings that could be sold to the fast food giant.
"The pork producers wanted to see more pork on the menu, and they were targeting McDonald's," Mandigo said.
Mandigo went to work in the lab and came up with a new take on an old-fashioned technology: sausage-making. Instead of just stuffing pork meat inside a casing, Mandigo used salt to extract proteins from the muscle. Those proteins become an emulsifier "to hold all the little pieces of meat together," he says.
"All we did was reuse the technology that had been around for hundreds of years and emphasize that we could shape products to shapes people wanted," he says.
And here is where our story takes an interesting twist: Seems the McRib was not born in the shape of its current pork patty. The original concoction Mandigo made was formed as a faux pork chop.
McChop? Maybe not.
"[McDonald's] chose the shape," Mandigo said. "They wanted it to look like the boneless part of a backrib."
That's why Mandigo is adamant that he was not the father of the McRib, despite getting the credit for it all these years. [More]

Still others use the McRib to bash modern hog production methods.

Bad news for fans of the infamous McRib: The Humane Society filed a legal complaint against Virginia-based Smithfield Foods, which supplies the pork for McDonald's sandwich. In an undercover operation from 2010, the animal rights group says it uncovered a number of disturbing farming practices, including the use of tightly confining gestation crates that cause sows to suffer "from open pressure sores and other ulcers and wounds," with nary a veterinarian in sight. Will these gross allegations sully the reputation of the barbecue-sauce-slathered sandwich?[More]

But the most curious element is the intermittent appearance of the McRib on the MacDonald's menu. There is even a theory for that.

Now, take a look at this sloppy chart I’ve taken the liberty of making. The blue line is the price of hogs in America over the last decade, and the black lines represent approximate times when McDonald’s has reintroduced the McRib, nationwide or taken it on an almost-nationwide “Farewell Tour” (McD’s has been promising to get rid of the product for years now).

Key: 1. November 2005 Farewell Tour; 2. November 2006 Farewell Tour II; 3. Late October 2007 Farewell Tour III; 4. October 2008 Reintroduction; 5. November 2010 Reintroduction.
The chart does not include pork prices leading into the current reintroduction of the McRib, but it does show it on a steep downward trend from August to September. Prices for October, 2011 hogs have not been posted yet, but I suspect they will go lower than September—pork prices tend to peak in August, and decline through November. McDonalds, at least in recent years, has only introduced the sandwich right during this fall price decline (indeed, there is even a phenomenon called the Pork Cycle, which economists have used to explain the regular dips in the price of livestock, especially pigs. In fact, in a 1991 paper on the topic by Jean-Paul Chavas and Matthew Holt, the economists fret that “if a predictable price cycle exists, then producers responding in a countercyclical fashion could earn larger than ‘normal’ profits over time... because predictable price movements would... influence production decisions.” At the same time, they note that this behavior would eventually stabilize the price, wiping out the pork cycle in the process).
Looking further back into pork price history, we can see some interesting trends that corroborate with some McRib history. When McDonald’s first introduced the product, they kept it nationwide until 1985, citing poor sales numbers as the reason for removing it from the menu. Between 1982 and 1985 pork prices were significantly lower than prices in 1981 and 1986, when pork would reach highs of $17 per pound; during the product’s first run, pork prices were fluctuating between roughly $9 and $13 per pound—until they spiked around when McDonald’s got rid of it. Take a look at 30 years of pork prices here and see for yourself. Also note that sharp dip in 1994—McDonald’s reintroduced the sandwich that year, too. Though notably, they didn’t do so in 1998.
(I’m sure all the sharp little David Humes among us are now chomping at the bit—and you’re right to do so! This proves nothing. It is just correlation—and the sandwich doesn’t always appear when pork prices are low. In fact, the recent data could prove that McDonald’s actually drives pork prices artificially high in the summers before introducing the sandwich—look at 2009’s flat summer prices. Could that be, in part, because there was no McRib? On the other hand, food prices were flat across the board in 2009 so probably not. So, no, this correlation proves nothing, but it is noteworthy.)
Because we don’t know the buying patterns—some sources say McDonald's likely locked in their pork purchases in advance, while others say that McRib announcements can move lean hog futures up in price, which would suggest that buying continues for some time—and we can’t seem to agree on what the McRib is made of—some sources say pork shoulder, others say a slurry of offal—it’s hard to really make any real conclusions here.
The one thing we can say, knowing what we know about the scale of the business, is that McDonald’s would be wise to only introduce the sandwich (MSRP: $2.99) when the pork climate is favorable. With McDonald’s buying millions of pounds of the stuff, a 20 cent dip in the per pound price could make all the difference in the world. McDonald’s has to keep the price of the McRib somewhat constant because it is a product, not a sandwich, and McDonald’s is a supply chain, not a chain of restaurants. Unlike a normal restaurant (or even a small chain), which has flexibility with pricing and can respond to upticks in the price of commodities by passing these costs down to the consumer, McDonald’s has to offer the same exact product for roughly the same price all over the nation: their products must be both standardized and cheap. [More]

This strange sandwich provokes strange reactions in consumers. But it's most lasting effect may be the piling on consequence of yets another restaurant/grocery offering that should not be examined in detail.

For my mind, this is simply an example of a culture that values quantity over nutrition in food. And one with an abnormally high sweetness demand. McRibs are probably little worse than other fast-food offerings, and as for eating offal, that too is simply a cultural and economic affectation. Protein is protein, and if you don't like the idea of "variety meats", the McRib is simply one way to avoid knowing you're eating them.

The wonder meat...

I like Chinese food, and for many of us, that meal is most often served at Panda Express. Sometimes called the next McDonald's, this fast-growing chain makes an interesting business case and success story, but buried in an article outlining the future of the business was this little gem:

To reach Cherng's goal of $2 million per store in annual revenue and $2 billion in total sales, the company is going to have to make some changes. Lunde, the highest-ranking Caucasian in a company dominated by Asians and Latinos, believes he can improve sales by tweaking the menu. Lunde is a creature of the fast-food industry. At Taco Bell, he came up with hit products such as the Chalupa and the Gordita. He joined Panda in 2005 and has since created two recent popular additions to the Panda menu, Kobari Beef and Honey Walnut Shrimp. Kobari Beef is based on a dish originally served at the Panda Inn, where it was known as Panda Beef. "We focus-grouped it and found that some people thought we were actually serving panda," says Lunde of the name change. Lunde is best known for his judicious use of one key ingredient: bacon. "I put bacon in everything," he explains. He worries that to expand the business, the chain might need to move into breakfast meals—not a natural area for an Asian-themed restaurant—and add even more bacon. So far, experiments with bacon-cheddar bao—steamed buns—have not met with much success. [More][My emphasis]

I wonder if, just as we have bred poultry with supersized breast proportions, we will (or perhaps are) breeding pigs primarily for bacon (bellies).  Apparently we have done so in the past.

Most people would rather spend their time eating crispy, smoky strips of bacon than studying the breed it came from, but when a pig has earned the nickname “the bacon pig,” it deserves a closer look.

Ohio Farm Bureau members Paul and Marilyn Morrison raise this special “bacon” breed called the Tamworth on their 350-acre Darke County farm as show pigs and breeding stock for pork producers throughout Ohio, New York and as far west as Missouri and Arkansas.

“I’ve raised just about every breed of meat pig over the past 20 years,” Morrison said. “What makes Tamworths special is that they grow slowly so they are leaner with just the right amount of belly fat.” That’s what you look for in good bacon: lean, finely grained meat balanced with ribbons of fat running throughout.

The Tamworth originated from central England and was imported to America in the early 1800s. Considered a heritage breed, it is the result of centuries of breeding to preserve unique and desirable genetic traits including ones that help it resist disease and tolerate local environmental conditions. [More]

I like the stuff, but it seems to be taking on a whole new role in modern menus.  Explosive demand like this always makes me nervous. This smells like a salty fad to me.

It defies comment...

The new German Pig Museum.

[More confusing photos]

Stuttgart-based architecture and design firm extrastern has completed the new schweine museum
in a former slaughterhouse in stuttgart, germany. with over 30, 000 artifacts revolving
around the theme of the pig, the schweine museum is the largest gallery dedicated to the
animal in the world.

the 600 m2 museum is divided into 25 rooms of different themes including a 'piggy bank' room,
stacked floor to ceiling with piggy banks, and a 'golden pig' room which features a large statue
of a 'german large white' pig on a rotating stage.

many of the rooms are geared toward children: the artifacts are hidden or viewable only
through tiny windows, some requiring the opening of hatch doors to see. [More]

But did they use the "oink"?

The first thing to go...

Is not the knees - contrary to popular opinion.  It's the sense of humor.

The National Pork Producers just could not find the funny in this spoof ad.

[More]

We'd like to publicly apologize to the NPB for the confusion over unicorn and pork--and for their awkward extended pause on the phone after we had explained our unicorn meat doesn't actually exist. From our press release [PDF]:

"It was never our intention to cause a national crisis and misguide American citizens regarding the differences between the pig and the unicorn," said Scott Kauffman, President and CEO of Geeknet. "In fact, ThinkGeek's canned unicorn meat is sparkly, a bit red, and not approved by any government entity."

We'd also like to extend a special discount to everyone we offended with our portrayal of Unicorn Meat as "the new white meat." For a limited time, take $10 off any order of $40 or more by using the code PORKBOARD at checkout, good until 6/30/2010 at 11:59PM ET.
Thanks, National Pork Board, for giving us yet another reason to keep the April Fool's Day tradition alive. We'll always wonder if our Canned Unicorn Meat played some small, magical part in your rethinking of your brand.

UPDATE 6/21 2:50p ET: Due to popular request, and after some interest on the intarwebz, you can now download our original press release [PDF]. It was unfortunately rejected by the newswires so you won't find it elsewhere--kinda like unicorn meat.

[More - check out the lawyer letter]

 Sometimes ag is its own worst enemy.

I guess I got off lucky.

Equal species time...

Steve has been wandering a bit much in the food aisle pondering the future of beef eating, and I have been happy to support and benefit from his musings.

But there are other protein sources, ya know.  Unfortunately, it seems the pork culinary tradition is a little less, umm...genteel.

Last night’s Cochon 555 event, an epic gustatory battle where five local chefs prepare eats from five different heritage pig breeds, boasted a little bit of everything, from pig-ear coleslaw and pig-heart ravioli to drunken head-butts, a chef being ejected from a local bar and a pair of food-industry pros being arrested by the cops after a brawl over local vs. out-of-state pigs. [More good food and pugilism readin']

I dunno, maybe these chef shows are crossing over into WWF territory.

It's unthinkable, I think...

We've all been tsk-tsking about those poor pork producers for what, several years now, it seems.  But what if they actually made tough decisions and are on the way to recovery?

Analysts on a post-report call sponsored by the Pork Board agreed Friday's number could skyrocket hog futures prices on Monday and will very likely end sow culling.

"I think culling is likely to come to an end," said Len Steiner, principal at Steiner Consulting Group. "This report will give them some reasons to hang around."

The report showed all hogs on March 1 down 3 percent from a year ago compared to analysts surveyed by Reuters expecting a 1 percent decline.

It put hogs kept for breeding down 4 percent compared to an expected 2.6 percent decline and hogs kept for marketing down 3 percent compared to an expected less than 1 percent decline.

Prices

Compared to what Meyer estimates as a break-even price of $65 per hundredweight on a carcass weight basis, Erica Rosa, an economist with the Livestock Marketing Information Center, predicted hog prices will average $68 to $70 this year, which would be a 20 percent to 22 percent price increase from last year. [ More, free registration required]

One consequence of some brightness on the horizon may be a little more confidence in the feed usage numbers. With hog numbers sort of stabilizing, corn demand from that important industry could be written in something other than pencil.

There is more than a little way to go to recovery for most producers, but any bump in prices might calm some nearly hysterical lenders into extending needed credit before it's too late.

The pork industry thrives...

Some good news about a pork company:

AgFeed Industries ( FEED - news - people ) issued guidance for 2010 and 2011 this morning. The company expects to market 2 million hogs in both years, with sales improving by $90 million year-over-year. Shares of AgFeed soared on the news, gaining 13.3% to $5.11. [More]

Of course, there is this to keep in mind.

Wrong victim line...

The following e-mail tripped my trigger.  (It was sent to AgDay, but I get copied.)

When you quit calling it Swine flu and start saying N1H1 [sic*] flu everytime you open your mouth,most of the farmers and ranchers might take you serious.

I have seen several other outraged comments from pork producers aimed at media types who dare to use the ubiquitous nomenclature of "swine flu".  Allow me to make a few clarifying points here.

First, while I do not profess to "feel your pain", I am aware that the pork industry in under incredible economic strain, and that even large operations will fail because of cost and demand issues. That this stress can bleed over to other issues is understandable.

Second, the post above illustrates the problem with the H1N1 term.  It is not easily remembered.

Third, the term "H1N1 virus" is six syllables and can be garbled several ways.  "Swine flu" is two syllables and rolls off the tongue.  This means nothing to hog farmers, but a great deal to those who speak the news. If you can't grasp our working problems, don't be surprised when we don't empathize with yours.

Fourth, as I just pointed out, "H1N1" is probably already dated.

Fifth, if the term "swine flu" is such an outrage to pork producers, why have they waited until the thunderstorm to fix the roof?  The label "swine flu" has been around for decades. 

On February 5, 1976, in the United States an army recruit at Fort Dix said he felt tired and weak. He died the next day and four of his fellow soldiers were later hospitalized. Two weeks after his death, health officials announced that the cause of death was a new strain of swine flu. The strain, a variant of H1N1, is known as A/New Jersey/1976 (H1N1). It was detected only from January 19 to February 9 and did not spread beyond Fort Dix.^[29]

This new strain appeared to be closely related to the strain involved in the 1918 flu pandemic. Moreover, the ensuing increased surveillance uncovered another strain in circulation in the U.S.: A/Victoria/75 (H3N2) spread simultaneously, also caused illness, and persisted until March.^[29]pandemic, and urged President Gerald Ford that every person in the U.S. be vaccinated for the disease.^[30] Alarmed public-health officials decided action must be taken to head off another major
The vaccination program was plagued by delays and public relations problems.^[31] On October 1, 1976, the immunization program began and by October 11, approximately 40 million people, or about 24% of the population, had received swine flu immunizations. That same day, three senior citizens died soon after receiving their swine flu shots and there was a media outcry linking the deaths to the immunizations, despite the lack of positive proof. According to science writer Patrick Di Justo, however, by the time the truth was known — that the deaths were not proven to be related to the vaccine — it was too late. "The government had long feared mass panic about swine flu — now they feared mass panic about the swine flu vaccinations." This became a strong setback to the program.^[32]

Has the NPPC been working with the scientific community before this present debacle to adopt a more accurate name?

Finally, while I have earned the criticism of ethanol fanatics for my contention we have literally legislated our best customers out of business, on this issue I cannot side with pork producers.  You are not victims here, you are short-sighted business managers.

It's too late - it's swine flu.

Deal with it.



*Not to be condescending, because I learned what it means only a few years ago: [sic] means as in the original

The  moving target...

It seems clear to me the battle by the pork industry to rename swine flu H1N1 was about five years too late, and has now been lost.  We're now on to another label, "A(H1N1)S-OIV" as the virus evolves.

While that’s all very exciting, the paper itself is an anxiety-triggering read. The new swine flu (which the authors now call S-IOV S-OIV) is only distantly related to other known swine flus, which means that there are a lot of flu viruses circulating around about which we know very little. And, as I mentioned in my article, it had already entered the human population several months before it came to light earlier this spring. Be sure to check out figure 1 (I’m inserting it below from the wiki–thanks, Creative Commons!), which shows how lots of bird, swine, and human season flu viruses mixed together to produce the new beast. The authors warn that the pattern of evolution they see is the sort of pattern the big flu pandemics followed when they emerged in the past.

[More] [Click to enlarge]

This organism is a true hybrid, and trying to follow the diagram should explain why it will be called swine flu here on out. The situation is serious enough people are talking, and people like memorable, short names for stuff they fear.

Also, in fairness, pigs are a big part of the story.

We show that it was derived from several viruses circulating in swine, and that the initial transmission to humans occurred several months before recognition of the outbreak. A phylogenetic estimate of the gaps in genetic surveillance indicates a long period of unsampled ancestry before the S-OIV outbreak, suggesting that the reassortment of swine lineages may have occurred years before human emergence, and that the multiple genetic ancestry of S-OIV is not indicative of an artificial origin. Furthermore, the unsampled history of the epidemic means that the nature and location of the genetically closest swine viruses reveal little about the immediate origin of the epidemic, despite the fact that we included a panel of closely related and previously unpublished swine influenza isolates. Our results highlight the need for systematic surveillance of influenza in swine, and provide evidence that the mixing of new genetic elements in swine can result in the emergence of viruses with pandemic potential in humans². [More]

As the declaration of a pandemic is now official, maybe fussing over the media name should take a back seat to educating about the connection being from origins, not contagion.

My guess is the travel/hospitality industry has now moved to the front-lines of the damage from this health threat.

The swine NA Mexican* flu inflection point...

There is an analogy to economic activity and swine flu contagion that could be useful as we try to imagine the course of this disease.

A similar prevalence pattern among humans is likely to be true for the swine flu.
The initial spread of the disease among humans occurred when precautions were low. Now that we know that the disease is spreading, private individuals and corporations around the world have already taken steps to protect themselves, and these steps will eventually help slow further spread of the disease.
Individuals and corporations try to protect themselves and their employees, but they do not have good incentives to protect others. For this reason, government assistance can be valuable, and help make the disease cycle occur with a lower and less costly peak than it would with private actions alone.
Nevertheless, government efforts have the effect of reducing private efforts. The private sector does less to prevent a disease’s spread when the disease is less prevalent, and government assistance can help reduce prevalence, so government assistance will likely cause the private sector to do less to prevent a disease’s spread. This is a special type of the “crowding out” that happens with many kinds of government spending.

The swine flu may soon present our government with some tough choices: how many tax dollars to spend and how much to interrupt civil liberties. The public and taxpayers will benefit if those choices are sensitive to the critical role played by the private sector. [More]

Has the swine flu reached the "threat" level sufficient to change your personal planning?  For example, our long-time friends in our dinner club (The Greater Chrisman Area Fine Food and Swill Club**) were planning a cruise to the western Caribbean this July.  The cruise line just announced it was stopping all visits to Mexico. (In our case, Cozumel)  

For that matter, have you altered your grain marketing plans?

At any rate, when more people begin to take protective measures on their own (watching CNN constantly does not count) I think we approach the inflection point that will mark the peak of the contagion. It could come sooner because of our vastly improved communications system.

On a related front, a long-time reader points out swine flu is really misnamed.  

I am writing to inform you about the current situation with A/H1N1 influenza-like human illness in Mexico and the USA . The OIE is of the view that as this virus has not, for the moment, been isolated in pigs or other animals, it is not appropriate to call it ‘swine influenza'. The OIE recommends that the virus be referred to as ‘North American influenza', in keeping with the naming of other outbreaks of influenza in the human population. Nonetheless, this emerging disease is genetically linked, amongst others, with H1N1 swine influenza and the OIE is calling for scientific research to be started with urgency to assist in clarifying the sources and the risks presented by this virus to veterinary public health and to the different animal species (pigs, poultry and horses). [More]

In fact, I heard the same argument made on the Today show this morning. I agree but my feeling is that battle was lost several years ago when the the H1N1 strain was first isolated.




This is pretty common with disease names.  Once a name is widely accepted it seldom can be rectified with serious lecturing or relentless public relations campaigns.

[*Update: more folks want to change the name]

Consider the tiresome (and inaccurate) campaign to call the estate tax the "death tax". It also didn't work for Prince, remember.


(**Yes, that is our actual "official" name.)

Happy talk...

It is hard not to notice a definite change in tone for some hog industry analysts. Consider one of the best, Chris Hurt at Purdue. This is last March:

Most pork producers who take the market risk are in the midst of another financial disaster. The North American industry remains on pace to suffer the most damaging financial year ever due to a period of twin horrors. They face a period of excessive pork production while also battling feed price escalation of historic proportions. There seemingly is no cure until the financial carnage is sufficient to decisively reduce the size of the breeding herd. [More]

Now contrast with this from Chris just last week:

Pork is cheap in the U.S., but it is “dirt cheap” for many of our foreign buyers since the strength of their currencies effectively lowers the price even more. Pork is at bargain basement prices when you realize that U.S. producers are producing and selling hogs at huge losses. In essence, U.S. producers are providing huge subsidies to U.S. and foreign consumers. Why wouldn’t the world’s pork buyers be banging at our door for these bargains? Why would foreign pork producers want to try to compete with U.S. producers? All this indicates that U.S. pork prices will explode to the upside like other commodities have done. The question is when?

...

So when does the boom in pork and hog prices come? Based on projections of U.S. slaughter supplies, prices will improve very late this fall and winter and go wildly higher by next spring and summer. When one adds the trade boom, this advances the price escalation. Trade data lags about two months so we are always slow to see those impacts. Trade will likely continue to accelerate and this will encourage even stronger prices than the supply reductions expected for late this year and 2009.

The movement upward has begun for cattle, where prices have been up nearly $10 per hundredweight in the last three weeks. Given the coming declines in pork supply and the more than vigorous export growth, hog prices should not be far behind. If U.S. consumers don’t want to buy up the last of the cheap pork, the world is anxious for the opportunity.

The issue for individual pork producers is whether they can hang on long enough for hog prices to catch up with costs. Expectations now are for live hog prices to trade in the lower-to-mid $50s for this summer and fall then move into the low $60s by winter and on to the higher $60 to mid $70 by next spring and summer. Given prices of corn and soybean meal on July 7, costs of production for farrow-to-finish producers is estimated to be in the low $60s.

The extraordinary losses of 2008 may be offset by extraordinary profits in the last-half of 2009 and 2010. This will especially be true if CRP land is released in 2009, if ethanol receives less support, if 2009 weather is favorable, and if crude oil prices don’t keep moving higher. There are still plenty of uncertainties and most won’t feel relieved about “better times” until they arrive. [More]

Nor is Chris alone in his surprisingly upbeat outlook for hog farmers currently bleeding red ink. These guys know what they are doing, so why they relatively sudden optimism? Especially when you consider the prices for corn/meal in March versus last week.

Some guesses on my part:

• Analysts truly see a recovery led by exports. Forecasts change, and expecting monthly outlooks to be written in stone is unreasonable. Still, hog producers are in the middle of the swamp - not finding firm ground. While forecasts of happy days may be right, and they are laden with caveats, the change in tone strikes me as notable, if nothing else.
• The dollar can't find a bottom, so exports could continue to expand and support prices. Just when we think we have a grip on the credit crisis, another bank/investment house/mortgage company raises its hand to share with the class. A sinking dollar is keeping US pork in the driver's seat for world pork prices.
  
• Other countries are doing the liquidation for us. On Friday in Denmark, a major pork production country, their "hogs and pigs" report showed a 14% drop year-to-year in hog numbers. It was a big surprise, but confirmed what feed compounders already feared: hog producers were folding up shop big time in DK.

It is also possible that commenters with the horsepower of Chris Hurt are more sensitive to tone and nuance in their communications than ever. Instead of speaking of "horrors" [March] he alludes to better times if you can hang on. A demoralized industry may need this type of encouragement.

But who really needs it are demoralized lenders. Ag lenders have been largely spared the carnage of the rest of their industry, and I bet more than a few boards want to keep it that way. Although institutions panic with a little more gravity than individuals, I suspect many are on the verge of pulling the plug not only on operations operating underwater, but those who still haven't burned through their equity. I don't doubt Chris's words were printed out and taken to loan offices around the country.

Just as grain analysts carefully reassured a hyperventilating grain market after the last crop report, it is not impossible that even the most impartial experts are sensing a need to calm everybody down, and avoid speculation on what an early frost would mean, for example.

This neither duplicitous nor irresponsible. However, it carries larger than normal risks for Chris and others in his profession. Hog producers who do choose to hold on are unloading equity with every truck to the market, and hanging on slows the necessary liquidation.

I don't know where the greater good is served, and I think analysts of note do need to think carefully before speaking or writing. But they are struggling as are we all with the limitations of our forecasting abilities. When you are in new market territory, with new rules and much larger numbers this adventure in agriculture is more likely to be accomplished by trial and error in the dark.

What I am not suggesting is "spin" by Chris and his colleagues. But just as Sec. Paulson and Chmn. Bernanke are trying to calm troubled waters with "jawboning" I see hints that concerned leaders in agriculture are hoping to do the same. I just don't think it will be very effective.

As a culture we are more cynical than ever, and alert to shifts in emphasis. I am an example of parsing reports word-by-word to uncover subtext. Helpful or not, it is a fact of modern communications. At the same time, information flows in cataracts around us, instead of proceeding by the "mouths of elders" (or Cabinet officers, for that matter).

The power of prediction to aid may be one casualty of modern communications.

Competition check...

Some of the sites I monitor have occasional references to international developments in agriculture. In the interest of understanding what may be going on with our counterparts around the world, I'm going to try to feature some stories that give you a taste of farming elsewhere without having to leave the house.

Zaraysk, Russia - Three hours outside Moscow, where snowy weeds bow to the bitter wind, salvation has come. It's not pretty; in fact, it really smells. But for the 27 people who work inside the steamy barns of this new pig farm, life just got a whole lot better. "We worked at a socialist farm before coming here. The labor conditions were zero and the salary was low," says Natalya Kuskova, a team leader who now gets five weeks of vacation to spend with her daughter. "Our farm is so wonderful; they pay for lunch … and the attitude toward us is very good; it inspires you to work." The operation, valued at $29 million, was funded by a Spanish outfit and is expected to pay off that investment in six to seven years. It is part of a boom in agriculture across Russia, where land is 20 times cheaper than in Europe, and a two-year-old government initiative offers virtually interest-free credit to investors. One of five "national projects" implemented under President Vladimir Putin, the agriculture push is aimed at increasing production and reviving the countryside. [More]

It is important not to make generalizations from singular stories like this, but by the time we get good data on trends in distant economies, we can have a full-blown market disrupter like Brazil and eveybody is asking "Where did they come from?"

The important fact for me in this article is the Spanish ownership/investment. It fits with what I have heard in Denmark as farmers there (especially young farmers) decamp to eastern Europe, etc. in search of a chance to own some land and farm. Kinda like the handful of Americans in Brazil.

For a profession that used to stay put, farmers seem remarkably mobile today.

The coming "tsunameat"...

I will be reading Steve Cornett even more closely now, since my brief discussions with livestock producers at various meetings. Steve captures well the larger picture for the livestock sector, and often shares some surprising insights that help crystallize vague intuitions of my own.

Consider his latest about agriculture and a small community:

None of them are farming, by the way. The fellow who owns that land moved in. So what those farm kids do now: real estate agent/builder; nursing home owner; old folks home administrator; city manager’s wife; retired army colonel; software designer in Dallas; veterinarian; retired ag teacher; minister.

That’s all I can think of right now, but the point is made. These folks are not, as my parent’s generation were, leaving because they were pushed by hard times. They left because A)We don’t need them farming because we got tractors bigger than our parent’s houses were; B) because they got good educations and don’t have to farm and; C) because in the modern world, daddy doesn’t have to send the smart kid to town and give the farm to the one that can’t make it outside. Now you send the runt to college to learn journalism and you keep the prudent one home to manage the family LLC. [More]

Industrial agriculture is shedding people because we don't need them, and no subsidy low-interest loan will overcome that fact. I will trying to outline what that could mean in an upcoming TP column.

But Steve goes on to address a growing concern I have for our livestock industry - an inability of consumers to do the math necessary to grasp how much meat we consume and how it is possible to produce it.

A few critics do, and while I am unsure of their power to effect consumption changes, I do think their voices will add to the problem about to explode in the form of meat prices.

A sea change in the consumption of a resource that Americans take for granted may be in store — something cheap, plentiful, widely enjoyed and a part of daily life. And it isn’t oil.

It’s meat.

The two commodities share a great deal: Like oil, meat is subsidized by the federal government. Like oil, meat is subject to accelerating demand as nations become wealthier, and this, in turn, sends prices higher. Finally — like oil — meat is something people are encouraged to consume less of, as the toll exacted by industrial production increases, and becomes increasingly visible. [More]

Briefly put, meat prices need to escalate drastically to overcome feed costs. To have this occur at the beginning of a downturn is ominous, but those who hang on may be able to gain some pricing power under the cover of rampant general inflation that strikes me as very likely. (Much more on this later this week).

Every outlook opinion for the hog industry I have seen lately read something like this: Alas, Babylon! And as the last of previously contracted cheaper corn and/or soymeal is consumed, the deeper into the red the meat industry slides.

Now throw in a looming regulatory problem to comply with pending food safety legislation. (More on this later as well). This looks like a perfect storm for meat producers and eaters.

And we will not emerge unchanged.

It's not just about us [corn farmers]...

While I don't want to stand among the increasing crown of doomsayers during the current market blowout, I am looking at this phenomenon from the perspective of a grain grower. For our best customers, the story is looking much grimmer. As we zoom past $5 corn, livestock feeders are feeling the cost pressure.

Consider this comment below which I thought deserved to be raised up to a full post:

"John please do a spot on alternative feeds for hogs. Thanks from an independent producer in a corn poor area running out of corn and cash."

We are way past my expertise here, Anon, so how about these words from Chris Hurt at Purdue:

All you have to say to a pork producer is "1998" and the most jovial fellow will turn red with rage, or drop his shoulders in a feeling of helplessness. Unfortunately, those emotions may be relived as 2008 may replace 1998 as the worst financial year for pork producers in modern history.

The number one culprit is high feed costs and the second is too many hogs. The current unrelenting climb of corn and soybean meal prices may drive 2008 costs to the highest annual level ever. In addition, there continues to be more slaughter hogs than accounted for in USDA inventory reports, with no signs of moderation. [More scary reading here]

Nor does Chris brighten up much as he examines the options:

Costs prospects for 2008 at $55.60 are extraordinary. Estimated costs average for the previous ten years was $40.64 per live hundredweight. The previous record annual estimated high costs were $48.93 in 1996. The largest losses are expected in the first quarter of the year, when they could reach $36 per head, and then be around $20 per head for the rest of the year.

How do producers get out of this one? Nothing is going to come easy. Producers may want to base their strategies on a "survival mode" for 2008. If they can get through 2008, hog prices will likely recover in the spring or summer of 2009.

As for alternative feeds, I have no idea. If any one can offer a suggestion, post a comment or e-mail me. But I think we're going to force a liquidation of hogs, cows, and chickens until retail prices for all take huge leaps upward (my uninformed guess is 25-40% higher) to pay for feed costs.

Note that eggs - a much faster turnaround commodity have already risen by 40%. This is the crude comparison for my price increase forecast. Maybe, in a way, corn growers are right in saying there is no food vs. fuel fight.

Clearly there is a savage feed vs. fuel fight, however.

[source via farmgate]

China hasn't caught on yet, but ...

On a global level the economic miracle that is modern China is far more involved than immediately apparent.
Like the NIMBY affluents they are, the developed world has been happy to let China become the nineteenth-century Pittsburgh of the world, hosting nasty, smelly polluting facilities and shipping the products out.

China has become so good at being the forge of the world, the rate of pollution is literally breath-taking.

But just as the speed and scale of China’s rise as an economic power have no clear parallel in history, so its pollution problem has shattered all precedents. Environmental degradation is now so severe, with such stark domestic and international repercussions, that pollution poses not only a major long-term burden on the Chinese public but also an acute political challenge to the ruling Communist Party. And it is not clear that China can rein in its own economic juggernaut.

Public health is reeling. Pollution has made cancer China’s leading cause of death, the Ministry of Health says. Ambient air pollution alone is blamed for hundreds of thousands of deaths each year. Nearly 500 million people lack access to safe drinking water.

Chinese cities often seem wrapped in a toxic gray shroud. Only 1 percent of the country’s 560 million city dwellers breathe air considered safe by the European Union. Beijing is frantically searching for a magic formula, a meteorological deus ex machina, to clear its skies for the 2008 Olympics. [More of a brilliant NYT article]

Free-trade foes should ponder how much we want those dirty jobs back. While employment for undereducated Americans was a godsend when our industrial age was dawning, pushing Americans to get more education and shift to non-manufacturing jobs isn't all bad either. Our economy demonstrates this positive aspect of globalization.

But factories and power plants have to be somewhere, and I think China is awakening to the fact that what we have really outsourced to them is our environmental problems.

It has implications for their ag sector as well.

Perhaps an even more acute challenge is water. China has only one-fifth as much water per capita as the United States. But while southern China is relatively wet, the north, home to about half of China’s population, is an immense, parched region that now threatens to become the world’s biggest desert.

Farmers in the north once used shovels to dig their wells. Now, many aquifers have been so depleted that some wells in Beijing and Hebei must extend more than half a mile before they reach fresh water. Industry and agriculture use nearly all of the flow of the Yellow River, before it reaches the Bohai Sea.

The surge in US pork exports to China that experts attribute to Chinese swine disease problems and Beijing Olympic stage-dressing could be just the first indicator of an important trend. We saw something like this as the Soviet ag sector crumbled, but this time the customer is loaded with cash.

This could be the biggest farm story today...

Hats off to the hog industry in North Carolina. Legislation there will phase-out open hog manure lagoons. While this will be expensive, by sitting down together, hog producers will be able to get up to 90% of the cost picked up by government, and one of the biggest impediments to maintaining our hog industry will be diminished.

In 2000, pork butchers Smithfield Foods Inc. and Premium Standard Farms Inc. agreed to pay $17.3 million for research on new ways to handle the waste. Last year, researchers at North Carolina State University offered five alternatives that did reduce ammonia and pathogen emissions but were up to five times more expensive than a lagoon system.

The new legislation creates a cost-sharing program for farms that agree to convert to the new technologies. For the next five years, the state will cover 90 percent of the cost, or up to $500,000 for each applicant. The state share drops to 80 percent in 2012 and to 75 percent in 2017.

The hope is that the cost will drop as the systems are improved and demand for them grows.

Justice said she has fielded numerous calls already from farmers interested in the program and companies that believe they can develop still more systems that will meet the new standards.

"The market is wide open," she said. "(Farmers) are ready to go." [More]

If other states don't use this as a template, I will be very surprised.

Well done, indeed. Our current methods of manure handling border on indefensible.

I think we can label this "bad press"...

A searing indictment of Smithfield Farms ran in the Rolling Stone magazine. Not pretty.

We climb to 2,000 feet and head toward the densest concentration of hogs in the world. The landscape at first is unsuspiciously pastoral -- fields planted in corn or soybeans or cotton, tree lines staking creeks, a few unincorporated villages of prefab houses. But then we arrive at the global locus of hog farming, and the countryside turns into an immense subdivision for pigs. Hog farms that contract with Smithfield differ slightly in dimension but otherwise look identical: parallel rows of six, eight or twelve one-story hog houses, some nearly the size of a football field, containing as many as 10,000 hogs, and backing onto a single large lagoon. From the air I see that the lagoons come in two shades of pink: dark or Pepto Bismol -- vile, freaky colors in the middle of green farmland.

From the plane, Smithfield's farms replicate one another as far as I can see in every direction. Visibility is about four miles. I count the lagoons. There are 103. That works out to at least 50,000 hogs per square mile. You could fly for an hour, Dove says, and all you would see is corporate hog operations, with little towns of modular homes and a few family farms pinioned amid them.

The viewpoint is far from even-handed, and the language is masterfully accusatory. However, discounting these fully still yields a pile of bad news and worse projections. Most troubling to me is the concluding paragraph about plans for Eastern Europe.

When Joseph Luter entered Poland, he announced that he planned to turn the country into the "Iowa of Europe." Iowa has always been America's biggest hog producer and remains the nation's chief icon of hog farming. Having subdued Poland, Luter announced this summer that all of Eastern Europe -- "particularly Romania" -- should become the "Iowa of Europe." Seventy-five percent of Romania's hogs currently come from household farms. Over the next five years, Smithfield plans to spend $800 million in Romania to change that.

Even though I consider myself an industrial farmer, I support strong efforts to control environmental externalities caused by CAFO's (or any agricultural activity). We can find other methods of husbandry and we can endure higher meat costs to fund them.

States like North Carolina have the right to manage such economic activity as they choose, but they may be surprised what the increasing population density on the East Coast can do even against powerful business interests.