Brumm Speaks Out

This past week I’ve had several conversations regarding summer pig performance. In every instance, the comment was made regarding faster gains this summer than typical.

This raises the question – is the increase in slaughter weights this summer due to increased daily gain and normal marketings, or are pigs backing up as producers keep waiting for the ‘summer bounce’ in prices?

Let’s look at weights. I have tracked weekly Iowa-Southern Minnesota barrow and gilt slaughter weights since 2004. The typical pattern is weights peak in late November and early January and then hold steady to slightly lower until late May or early June. At that point, they drop sharply (typically in the range of 8-10 pounds) through late August when they begin to dramatically rise.

This year, weights held steady (or even increased slightly) thru the week ending June 20 when the average weight was 268.7 lb versus 269.0 lb for the 4^th week of January. I compare weights to later in January as the first few weeks of the year tend to be skewed due to holding of year end sales for tax purposes and 2 consecutive weeks (Christmas and New Years) with holiday disruptions.

The 2 weeks following June 20 they dropped sharply, but for the weeks ending July 11 and 18, they have increased to 264.9 and then 266.2 lb. The previous heaviest weekly average weight for the 29^th week of the year was in 2007 when it averaged 263.0 lbs.

Early in 2006, Iowa and Southern Minnesota slaughter weights were the heaviest ever, averaging 271.1 for the 4^th week of January. By the 29^th week of the year, they had fallen to 261.0, an 11.1 pound decline in weight. The 5 year (2004-2008) decline in weight was 7.8 lb. In contrast, this year the decline between week 4 and week 29 was only 2.8 pounds.

In the Midwest, the week ending June 20 was the first week at almost all Midwest reporting points that temperatures were at or above seasonal temps since prior to June 1. Beginning July 1, temperatures across the Midwest once again retreated to below normal where they have remained until the past few days. Here in the Mankato area, we have had quite a few days when the overnight low was in the mid-50’s, with temperatures as low as the upper 30’s in northern Minnesota on one or 2 occasions.

I think the change in weight correlates very well with the weather patterns, suggesting that pigs have performed very well this summer since heat has not caused the typical reductions in feed intake that we’ve come to expect. In addition, I’ve not heard any stories of producers delaying sales in an attempt to add weight or to capture a better price if the market price should rise.

While there are empty barns showing up in the country, I’m not aware of producers renting extra barns to give pigs more space to grow. Space still has a cost and at the current levels of space allocation, the typical improvements in gain from additional space generally don’t return enough of an improvement in daily gain to justify the expense.

Let’s start this weeks discussion with soybean meal pricing. In Chicago, September bean meal topped out at $368 per ton on June 11. Yesterday (July 16), it closed at $287.50, an $80/ton price decline in one month. This large drop in price suggests traders in Chicago think world and US stocks of soybeans and the resulting bean meal will be adequate prior to delivery of new crop beans.

On the other hand, the soybean trade apparently doesn’t think so, at least in the upper Midwest. I have tracked soybean meal bids from the Cargill plant at Sioux City for years. The historic bean meal basis is in the range of $-5 to $-10 versus Chicago, with some seasonality in that basis, as might be expected. Currently, the basis for August meal is $+30 and it is $+75 for September before dropping to $-5 for October. This September to October swing is a change of $80/t. I’ve heard of similar basis patterns at other processors in the upper Midwest. This suggests these plants are having a hard time sourcing soybeans for processing and expect this problem to continue until harvest begins. Current bids for soybeans at the Cargill plant at Sioux City are $+0.80/bu for July, $+0.65/bu for August and $-0.60 for the last half of September.

Synthetic amino acid prices haven’t risen to the same relative levels. In my discussions with a number of swine nutritionists, all are in agreement that swine grow-finish diets should be formulated right now with a maximum inclusion of synthetic amino acids to limit the amount of soybean meal in the diet and keep diet costs down. An added benefit of higher inclusion rates of synthetic amino acids is the fact that feed intake shouldn’t drop as fast in summer heat since less heat is released in their digestion versus the heat generated in the digestion of soybean meal. Assuming it will warm up yet this summer (they are forecasting a high temperature in Mankato of 63 F today, a new record for the lowest high temperature on this date), this becomes an important tool in management of pigs for summer heat relief.

On another note, PigInternational (www.pig-international.com) released a table of breeding herd inventories for the 30 largest countries in the world in 2008. China is the giant of pork production, with 49.907 million animals in the swine breeding herd. The US is as distance second, with 6.081 million, followed by Russia (4.22 million), Vietnam (4.150 million), Brazil (3.04 million), Spain (2.542 million), Germany (2.296 million), Philippines (2.195 million), Canada (1.381 million) and Denmark (1.289 million). While several of these countries are reducing the size of their herds due to unfavorable economic conditions (US, Canada, Denmark, Spain), several are in major expansion modes (China, Russia, Vietnam).

The China expansion is notable since they are so large in terms of pork production. In 2007 and early 2008, the Chinese industry was devastated by a mystery disease that was never fully diagnosed, but thought to be PRRS. They have apparently stabilized their herd health and reports that I’ve read suggest a major effort by the government to move their industry from backyard sows to commercial production systems. Apparently they have been successful as they are reported to be producing sufficient pork to meet their internal needs (note that exports from the US to China are very much lower than last year, even when accounting for pork entering China via Hong Kong), with some reports suggesting a new government program to support producers as local prices have fallen below cost of production

Saturday afternoon and early evening, I volunteered to assist other Minnesota Pork Producers in handing out free pork loin samples. The National Pork Board’s We Care trailer and crew were parked in Kirby Puckett Plaza at the Metrodome in Minneapolis. We barbecued and handed out samples of over 300 pounds of loins donated by Hormel and Co.

I ended up with a knife in my hand slicing loins and didn’t get much of a chance to interact with the people arriving for the Minnesota Twins game. However, a willing crew of young volunteers were out in the crowd reminding everyone that today’s pork is not only tasty, delicious and good for you, but also a relative bargain in the meat case.

I don’t know how many people went home with the intention to buy pork, but I know the samples I tasted would have influenced my purchasing decision favorably.

This week marks the beginning of county fair season across the Midwest. Many pork producer groups will be setting up grills and serving chops, brats, ribs and other delicious pork products to their neighbors and friends.

These local efforts to promote pork won’t have a big impact on the amount of pork sold from retail meat cases. That’s the goal of the Pork Board efforts at such events as the Minnesota Twins pre-game where upwards of 20,000 people saw the promotion trailer, etc in a 2 hour time period.

These local efforts are important because for many residents of rural communities, the grills and local promotion efforts put a human face to the production facilities that many often see when driving down rural roads. While there continues to be controversy regarding the changing ownership structure of the pork production industry, the rearing of pigs requires people. The grills and other activities by producers in local communities are good reminders to community members of the impact of pork production activities on their communities economic and social well-being.

As we approach the July 4 weekend and holiday, many are glad to have a forecast of seasonably warm with limited moisture. For southern Minnesota, seasonably warm means temperatures in the low 80’s during the day and upper 60’s at night. In the Mankato area, we are still looking for moisture (unlike our producer friends in the eastern cornbelt) as we remain below average for precipitation since April 1.

With the return of cooler weather following last weeks hot and humid blast, pig performance has shot up once again. We sold several loads from a research site yesterday and the weights surprised us, just as many of you are being surprised this week by your weights.

For the week ending June 27, barrow and gilt weights in the Iowa and Southern Minnesota market reporting area averaged 265.1 pounds. This was a 3.6 pound drop from the previous week, the biggest decline in weights for a one week period since prior to 2004 when I began tracking this number. However, at 265 pounds, the sale weight is still the highest ever for the last full week of June.

I’m going to guess that weights will go up at least 2 pounds this week due to the return of more seasonable weather. For southern Minnesota, we had several days with high temperatures below 80 F, meaning growing conditions in our facilities was again close to ideal in terms of temperature.

When you add in the $0.30-$0.40/bu drop in corn price in reaction to the USDA crop report on Tuesday, I think producers will return to feeding pigs to heavy weights, even though they are often loosing $20-30 per pig at current market prices.

At many meetings, producers have talked about the need for the industry to sell at lighter weights in order to reduce the available pork supply. While this sounds like a good idea, keep in mind that many producers sell into a packer payment grid that severely discounts underweight pigs, and packers have been moving the desired weights up on their grids in the past few years as they try and get more pounds of product out the door from the same labor force.

Given that we deliver pigs to slaughter houses in trucks that hold 160-190 pigs (depending on the size of trailer, size of pigs, etc) and delivery costs for many equate to 2-5 pigs per load ($250-600 per load in transport charges), everyone strives for full loads of pigs. To avoid issues with discounts on light pigs (which may be more severe than discounts on heavy pigs), many producers feel they have few options to reduce the delivered weight of their pigs, even though losses continue for every pig delivered.