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Weekly Overview: US Pins its Pork Production Hopes on Exports

04 March 2013

ANALYSIS - As long as weather patterns are in the normal range, 2013 looks likely to be a much better year for US pig producers; feed costs should return to normality and the prospects for pork exports are positive, according to presentations at two conferences there in the last week or so. At a recent event in the UK, it was reported that the popularity of anaerobic digestion technology is finally starting to take off.

Despite the historic drought, USDA chief economist, Dr Joseph Glauber, said at the 2013 USDA Outlook Conference that US agricultural exports will have another record-breaking year and the financial outlook for the agricultural sector remains solid. However, he acknowledged there are differences between sectors.

Livestock, dairy and poultry producers faced high feed costs for most of 2012 and high prices are likely to persist through much of 2013 until new crops become available in the fall, Dr Glauber noted.

"Feed ratios, which have generally been tight since 2007, tightened further in 2012 as feed costs rose relative to meat and dairy prices," he said. "While productivity gains have offset some of the decline in feed ratios, margins have been tight throughout the second half of 2012 and into 2013."

Strong pork and broiler exports helped keep margins higher than they would have been otherwise, but high feed costs have limited hog, poultry and dairy expansion. Prices for livestock, dairy and poultry products are all forecast up in 2013 but they face continued tight margins in 2013, at least until new crop feed grains and soybeans reach the market in the late summer and fall. Another year of below trend yields and high prices would likely result in further liquidation, according to Dr Glauber.

Talking of pig meat trade, after Russia’s WTO accession in August 2012, tariffs fell in accordance with accession agreements although WTO tariff changes will not be fully implemented until 2014-2015. Accession, did however, stimulate motivate increased meat imports to Russia in the months following Russia's WTO entrance, according to Bord Bia.

The US hog market could be buoyed up by limited US beef and EU pork supply despite rising production costs and a challenging breeding season, according to Rich Nelson, Chief Strategist at Allendale Inc.

Pig producers made losses over the last two quarters of 2012 but analysts at Allendale Inc. are predicting level supplies to bring a break-even picture in the latter half of 2013.

Speaking at the Allendale Ag Leaders Conference, Mr Nelson discussed USDA hog industry figures. USDA reports were expected to show producer liquidation due to corn and soybean price pressure but numbers stood firm with some light expansion plans occurring.

He commented: "I would question the USDA on two counts; firstly, on the idea that producers expanded and secondly, on productivity. We might see a shortfall in market-ready hogs compared to what the USDA told us, through March and into May time."

The use of on-farm renewable energy and anaerobic digestion (AD) is commonplace in Continental Europe, particularly in countries such as Germany and Denmark, but some countries such as the UK are lagging behind, writes Chris Harris, reporting from the recent Energy Now Expo and conference.

Although there have been targets set to have 1,000 on-farm AD plants by 2020 in the UK at present there are just about 100 plants that are outside the water industry.

However, the growth in the popularity of the technology is starting to take off and the numbers of on-farm plants are growing, according to Charlotte Morton, the chief executive of the UK's Anaerobic Digestion and Biogas Association.

Jackie Linden

Jackie Linden

Top image via Shutterstock

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