limaohio.com

Reduced exports, sequestration threaten spring pork price recovery

March 8, 2013

WEST LAFAYETTE, Ind. - U.S. live-hog and futures prices have fallen in recent weeks as gas prices have soared, budget sequestration has threatened to furlough federal meat inspectors and global markets have reduced exports, Purdue Extension agricultural economist Chris Hurt says.



 



Economists and producers had been hopeful that prices would return to at least break-even this spring. But a $9-per-hundredweight drop in live-hog prices and a $7.50-per-hundredweight drop in futures prices since the beginning of February has quelled some of the optimism.



 



"Price weakness is coming from demand concerns," Hurt said. "The first of those concerns is the weakened buying power of U.S. consumers. Unusually high gasoline prices for this time of year and increased payroll taxes since January 1 have reduced the buying power of consumers."



 



Second, Hurt said potential reduction in federal meat inspectors as a result of automatic spending cuts mandated by sequestration could mean animal-processing plants would operate fewer days of the year.



 



"If plants were to shut down some days, they wouldn't buy hogs for those days, thus weakening hog prices," he said.



 



The biggest problem has been with pork exports, which account for 23 percent of total U.S. pork production.



 



In February, Russia banned imports of U.S. pork because of concerns over the use of ractopamine, a feed additive that promotes lean muscle in animals raised for meat. Russia represented 1.2 percent of U.S. pork production in 2012.



 



"The loss of Russian business would not be felt as much by itself due to their small share, but later in February China also announced that they were going to more closely check imports of U.S. pork for ractopamine," Hurt said. "Last year, China's pork purchases from the U.S. represented 3.4 percent of total U.S. production volume."



 



In addition to loss of Russian and Chinese markets, the value of the Japanese yen has fallen by 12 percent so far this year and by 16 percent since October. The decline means U.S. pork prices are higher in Japan by similar percentages. Japan bought 6 percent of the U.S. pork production volume in 2012, making the country the largest U.S. pork buyer.



 



All of the market problems have combined to create an outlook that is less-than-welcome for hog producers struggling to cover high feed prices.



 



"The current outlook suggests the industry will have to wait until late summer for break-even conditions when feed prices can decline if more normal corn and soybean crops develop," Hurt said. "With the more cautious tone, hog prices are expected to only average about $66 in the second quarter, with costs of production near $70 per live hundredweight."



 



With lower corn and soybean meal prices, late-summer production costs could come down to the $66 mark.



 



Hurt's full comments and an accompanying podcast are available in the weekly outlook section of Farmdoc Daily at http://www.farmdoc.illinois.edu/marketing/weekly/html/030413.html.



 



Loaded with Grain and Ready to Train



By Gene McCluer, OSU Extension Educator



The OSU Ag Safety and Health Program and the Ohio Fire Academy have a history of agricultural rescue collaborations that began in the late 1980’s. Examples include the training modules for on-site use at the Fire Academy, agricultural rescue demonstrations at Farm Science Review, presentations at OSU Extension field day events, and Ohio Bureau of Workers’ Compensation Safety Congress. This past Saturday, (March 2, 2013) our latest project was put into motion and began serving its purpose.



The Grain C.A.R.T. – a Comprehensive Agricultural Rescue Trailer - is a portable grain rescue training simulator. Dr.Dee Jepsen, OSU ‘s Agricultural Safety & Health Leader says that the mobile unit creates various levels of rescue exercises that simulate real life rescue situations first responders may encounter in rural communities. The trailer was built to optimize rural rescue teams’ knowledge and skill when responding to farm emergencies. The first group of firemen and EMTs from the Ridgeville, Napoleon and Archbold fire departments participated in the inaugural grain bin rescue program offered with the Grain C.A.R.T.



The simulator was built as part of a student design project with five students in the Department of Food, Agricultural, and Biological Engineering at OSU. With the help of industry partners, their project took shape and is now in the communities where it will serve rural rescue teams and farm families with educational programs. The state of Ohio is truly privileged to have this type of training and awareness unit available. Agricultural communities will benefit from their contributions for many years.



To learn more about the Grain C.A.R.T., and to see pictures, check out the following website: http://agsafety.osu.edu/grain-cart . To schedule training for a local firefighters or department, please contact the Ohio Fire Academy at 888-726-7731. As the Ohio Fire Academy does a variety of training, please refer that your request is for the GRAIN C.A.R.T. when you call.