Last week, we wrote that total meat availability in December is expected to drop 100 million pounds per week year over year. We were wrong. It has already happened. Once again, we are not bullish enough.

The drop in total meat production is 105 million pounds. That is one-third of a pound decrease US per capita. It's huge. It is also a 5% decline.

The devastating financial losses that all meat sectors have encountered are coming home to roost. American consumers are about to pay the price for the corn ethanol insanity. It is our opinion we are on the verge of a price increase for pork and other meats unprecedented in our history.

There is More

• Chicken egg sets and placements are running 7–11% less week after week. Current chicken slaughter levels have yet to reach this level. Less chicken is coming.
• Pilgrim Pride, the largest chicken integrator in the United States, is haemorrhaging millions of dollars per week. Their shares are trading at 38cents, up from the high 20s, with one analyst last week saying the shares have no value. Pilgrim's situation is a reflection of the chaos in the industry. There is no way this ongoing scenario will not lead to even fewer chickens. Sinking people want life preservers. They are not thinking of ramping up production.
• Cattle on feed are at 5% less than a year ago. Cattle slaughter weights are lower year over year. Cow slaughter has run year to date, 14% higher than a year ago. The cattle industry is downsizing. Cow/calf and feed lot losses have been in the billions. The USDA is projecting beef per capita supply in 2009 will be the lowest since 1959 – Fifty years!
• We all saw that the Sept–Oct total Canada – U.S.A. inventories showed at least 2% fewer pigs under 50 pounds. Those are the hogs beginning to go to market. There are less hogs. We can see it in the U.S. marketing down 2.7% last week compared to a year ago. There will be fewer hogs from now on, probably 5% less year over year in the first quarter.
• Less pork, less beef, and less chicken, the only way to ration supply is higher prices.

What About Exports?

A Smithfield Foods spokesperson publically said last week, pork exports had returned to levels prior to the global financial crisis, everywhere but Russia. We also believe exports will hold, going forward. Why? Korean farmers are getting US$1.50 live weight a pound, the European Union is 80-85 US cents liveweight per pound, Russia is US$1.50 liveweight, China is $1.00 liveweight per pound, and Mexico is 60 US cents liveweight per pound. See the trend? Higher prices everywhere, with higher cost of production. The devastation financially in our pork and meat sector due to historically high feed prices is a global phenomenon. Liquidation has been greater everywhere in all meat sectors. Total domestic and global meat production is having a decline of hundreds of millions of pounds.

Domestic Demand

We believe domestic demand will hold. We are a meat eating society. No matter what happens to our economy, the average consumer has significantly more disposable income than the people of Russia, Korea, China, European Union and Mexico. Look at the prices consumers in those countries are paying for pork. Double and triple of the US consumers. The prices in all those countries are a product of supply and demand. Maybe going forward, US consumers might not buy a new house, new car or a new television but we believe they will buy meat. Obviously, there is less, and there will be less meat. The price is the only way to ration supply. It is a fact, that in the last major recession of 1981-1982, with interest rates of almost 20%, hog producers had a very profitable time.

Corn Ethanol

The financial difficulties of corn ethanol producers will make it extremely difficult to attract new investors to build more plants. The domestic and global financial crisis is going to put environmental issues on the back burner and put another nail in the corn ethanol insanity. The final part will be when unprecedented high meat prices are rightfully blamed on the high feed prices that forced a liquidation of poultry and livestock production – nationally and globally. It's all over but the crying.

Pork Check Off

It was announced last week that the USDA is considering implementing a vote on whether the Pork Check Off should continue. This could get interesting.

Our observations

We support Check Off. We believe in marketing and promotion. Nothing gets sold by osmosis.

You might think it bizarre that we support Check Off. After all, Check Off has received over one billion dollars since its inception, and pork consumption has lost market share every year since 1988.

A billion dollars spent on Check Off with flat per capita consumption and loss of market share. The inability of our industry to hold or grow market share has cost our businesses collectively billions in lost revenue.

The last time we wrote of Check Off in our commentary we understood it caused much anguish at the National Pork Board. We heard the powers in charge were going to deal with us. We're not sure if this is true but the powers must have lost our phone number, because we never heard from them – shoot the messenger but forget to shoot!

This reaction is typical of a bloated bureaucracy which we have been led to believe has little respect for the producers who they are supposed to represent and champion. Producers like us, paying the Check Off are just the ninnies who send the money.

Check Off should stay. It just needs a new vehicle to implement policies, and spend our money. Maybe the Pork Board could be reformed, but when they spend our money telling us that The Other White Meat Program has worked dandy. They must think we are stupid! A billion dollars spent. Facts are, The Other White Meat Program has delivered lower per capita consumption and lost market share. It has failed to move on.

Fire the Advertising Agency! Do you think Coca Cola or McDonalds would stick to a program that is a failure?

Pork globally has 44% of all meat, and poultry consumption. The United States has 23.69%. Connect the dots. We have spent a billion dollars in Check Off in twenty years. We have invested our money. We need new blood to execute a plan to capture more market share. We are afraid a two decade old bureaucracy at the Pork Board is ill equipped to lead the charge with our money.

Throw out the bums. Not the concept. Change is needed.