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![]() Quarterly Pork ReportApril - June 2006Manitoba Regional OfficeIssue #30 June, 2006 ![]() World Market OverviewChina and South East AsiaIn China, domestic pork production remains stagnant as Hog inventories have dropped slightly. This has resulted in marginally positive price movements for live hog and piglet prices for the month of June. Central Vietnam's Quang Nam province is dealing with a foot-and- mouth disease epidemic, with 52 outbreak zones. Hong Kong plans to cease pig farming permanently under a 941.7 million HK dollar (121 million US) scheme so as to improve the sanitary situation. China is the current leading pork importer for the Hong Kong area. European UnionThe 2005 statistics for pork production and pig populations were released in June. New member States have generated a 3% growth in their pig populations while the EU 15 has seen a reduction in their pig populations during 2005. Lower labour costs have been attributed to the growth of the pig populations in the New Member States, especially in Poland and Hungary. Pig-meat prices in the EU 15 have reached the highest levels since 2003 during the month of June. United States and CanadaCommercial pork production in the United States is expected to increase 2.8% to 21.3 billion pounds for 2006. Despite reductions in pork exports to Japan in April, pork exports for 2006 are expected to be $1.026 billion or 16% above 2005 totals. A weaker US dollar continues to spur US pork exports. The Economic Research Service estimated returns for a farrow-to-finish operation in the North Central United States currently show break-even costs in the high $30 per cwt, suggesting that most US hog producers continue to operate with positive margins. On the processor side, the average 51-52 percent hog price continues to be positive and above a year ago, suggesting that packer\processors also have favourable margins. In Canada, May hog prices were down 10% versus last year. Hog supplies have recently dwindled as more market hogs have been going south. Disease may have also contributed to the reduced supply especially in Ontario. Canadian feeder and weanlings continue to be exported to the US in large numbers as the economics of finishing favour the US. Canadian pork exports are experiencing strong volumes however; competitive pricing has brought returns down. ChinaIn the near term, higher temperatures across China may slow the process of hog fattening and make piglets more susceptible to diseases. This, coupled with continued torrential rain in the south as well as wheat harvesting in the north, will affect farmers' interest in replenishing pig inventories. Despite some improvement in market sentiments, there is only marginal increase in piglet transactions as most farmers were still cash-strapped after earlier losses. Higher feed costs and profit concerns had also led some farmers to remain cautious. Better poultry prices had also prompted some farmers to give up on hog farming, opting to raise poultry instead. Table 1 Weekly Transacted Prices of Piglets in China ![]() Source: sFeedLink March 21st 2006 Currency Conversion: $1 CDN = 6.90931 RMB or 1 RMB = $0.14473 CDN With currently reduced live hog inventories in China this quarter, hog prices in southern regions have only made marginal gains. Live hog prices in southern China are expected to edge higher in the week ahead, while minor fluctuations are possible in northern regions. Table 2 Weekly Transacted Prices of Live Hogs in China ![]() Source: sFeedLink March 21st 2006 Currency Conversion: $1 CDN = 6.90931 RMB or 1 RMB = $0.14473 CDN European UnionPig-meat prices in the six largest EU15 producers have broken the 107p/kg barrier for the first time since 2001. Traders are quoting low stocks and high demand, boosted by sizzling temperatures and an influx of visitors to Germany for the World Cup as the main reasons for the strong market. German farmers are now receiving average prices of 115p/kg for heavy carcasses between 85 - 90kg deadweight. These prices are the highest in Europe with the exception of Italian Parma ham production. The latest GB Deadweight Adjusted Pig Price stands well behind comparable EU prices at 103.2p. Supply restrictions following foot-and-mouth outbreaks in Brazil have increased Russian demand for pig-meat. The latest statistics for European Pig Populations (see figure 1) indicate that the new member states enjoyed a 3% growth rate with Poland's population at over 18 million pigs. The total pig population for the new member states is estimated at just over 29 million compared to the EU15's 123 million pigs. Figure 1 European Pig Populations 2004 - 2005 ![]() DEFRA Statistics June 30th, 2006
United StatesCommercial pork production for the 2nd quarter is estimated at 5.1 billion pounds. Strong foreign demand and a weaker US dollar have resulted in increase US pork exports. Japan remains the single largest importer of US pork products followed by Mexico, South Korea, and Canada. US domestic demand is following historical norms as indicated by the Cold Storage numbers (see figure 5). Although prices for both retail pork and hogs are expected to be lower both this year and in 2007, the price spread between hog prices and retail pork prices will likely increase. This means the gross returns to packer\processors\wholesalers will probably be higher than 2005. Figure 1 ![]() *Estimated packer\processor margin = Weekly average base
lean hog carcass slaughter US Hog Inventories
Source: National Agricultural Statistics Service Figure 3 ![]() Source: National Agricultural Statistics Service Figure 4 ![]() Source: National Agricultural Statistics Service Figure 5 ![]() Source: National Agricultural Statistics Service
Source: USDA, Economic Research Service, Red Meat & Poultry Forecast CanadaCanadian feeder pig exports to the US are on track to set a record in 2006. As of June 24, 2006, US producers have imported an average of 111,529 Canadian feeder pigs per week into US facilities for growth to slaughter. At this rate, total US feeder imports for 2006 could end up being near 5.8 million head, well ahead of the 5.55 million head record imports in 2004. Additionally, there have been several reports in the Canadian press recently about Canadian producer desires to invest in wean-finish facilities in the upper mid-west. The strong Canadian dollar relative to the US dollar (>$1.60 CDN per USD in early 2002 vs $1.11 CDN per USD today) means these producers view ownership of pigs and facilities in the US as a hedge against the US-Canadian exchange rate. In addition, ownership of pigs and facilities in the upper mid-west gives them access to relatively cheap feed ingredients. Canadian Hog Inventories
Source: Statistics Canada, Agriculture Division Canadian Hog Slaughter
Source: Agriculture and Agri-Food Canada, Red Meat Section, Weekly Hog Statistics, May, 2006 There has been a drop in number of hogs slaughtered in Canada (3.7%). While there has been a 1.87% increase of slaughter weight hogs to the US (see table 8). This would indicate that it maybe more profitable to sell and finish hogs in the US. Provincial slaughter rates were mixed as packers were meeting local demands.
Source: Agriculture and Agri-Food Canada, Red Meat Section, Weekly Hog Statistics, May, 2006 Canadian Exports
Source: Statistics Canada CATS database
Source: Statistics Canada CATS Database
Source: George Morris Centre, Canadian Pork Market Review, June 22nd 2006 ManitobaOlyWest continues to move forward with its plans for a new processing plant in Winnipeg. After surviving a city of Winnipeg council vote on the location and funding of the project, OlyWest has moved on to hosting open house meetings for the public. OlyWest still needs to submit its plan for provincial environmental review before construction can begin in 2007. Manitoba producers are shipping nearly 13% more live hogs to the US this year than in the same period last year (see table 13). The data indicates that Manitoba producers are holding market weight hogs in anticipation of better prices, while focusing on shipping weanlings to the US. The total processed pork in Manitoba is down 23.6% while the total number of hogs slaughtered is also down 8% over the same period last year. The Canadian dollar and high processing costs have made pork exports less attractive. If hog prices improve and the value of the Canadian dollar declines in the next few months there should be an improvement in the processed pork numbers.
Source: Statistics Canada, Agriculture Division
Source: Statistics Canada CATS Database News HeadlinesHypor Signs Joint Venture AgreementTHE NETHERLANDS - International pig breeding company, Hypor, is pleased to announce the signing of Joint Venture Agreements with two of China's largest agribusiness companies. The agreements with Sichuan South Hope Company Ltd. (New Hope) and Shandong Liuhe Group Co. Ltd. (Liuhe) are for the production and distribution of breeding pigs in China. JBS United, a nutrition company based in Sheridan, Indianan, USA also has a minority share in the Liuhe joint venture. Ukraine's pig, poultry numbers up; cow, sheep numbers downUKRAINE - The number of pigs in Ukraine on June 1st totalled 7.63 million, 11.6 percent more than on the same date last year, according to the state statistics committee. In the last few years, despite bird flu, a number of serious investors entered the pork and poultry markets and considerable financial resources had been invested in upgrading the existing facilities and creating new ones. Some 200 new pig farms are being constructed in Ukraine, with the number of pigs expected to increase by 2 million in the course of the year. South Korea Pork Price touches record high in JuneKorea - The price of pork in South Korea touched a record high in the month of June, the National Agricultural Cooperative Federation said. Average price for a carcass weighing 100 kilograms reached 320,000 won or US$332.80 in June, higher than the previous record of 298,000 won recorded a year earlier. The prices were driven by strong seasonal demand and a supply shortage. Pork Commentary: World Pork Expo ReportDES MOINES IOWA -
Beef and Poultry Glut Appears to be EasingCANADA - An official with Ontario Pork says it appears a glut of beef and poultry in cold storage that's been pressuring meat prices has started to ease. Key factors expected to affect live hog prices in the coming months include demand for pork during barbecue season, US slaughter numbers, and the volume of meat in cold storage. Ontario Pork sales team manager Patrick O'Neil says there's been an increase in frozen stocks of both poultry and beef. "Definitely there's been an increase in frozen stocks of both poultry and beef supplies. Beef supplies are up 30 percent compared to a year ago based on the most recent data and chicken supplies are up 22 percent over a year ago. But the most recent data we have for chicken supplies shows that, at the beginning of April, chicken supplies were actually slightly less than the month before so that's an indication that, despite the fact that chicken supplies are abundant compared to their historical level, they are no longer growing and the same is true for beef. Beef supplies in cold storage are 30 percent more than the end of April last year but only one percent more than the end of March so we are seeing signs that these large storage levels are coming under control." O'Neil notes the volume of frozen meat in storage was a really hot topic at the beginning of April when the wholesale price of pork was about 15 to 20 dollars lower than the same time last year. However, he points out, in the last two months we've seen wholesale pork prices increase about 15 dollars per hundredweight US which means pork continues to move at good prices despite the increased competition from beef and poultry. Moose Jaw Pork Packers started killing hogs June 12thCANADA - The plan is to kill approximately 300 per day for the first few weeks. Producers are receiving 85% payment upon delivery. Initial reports indicated that the plant is selling only to the domestic market. Total work force is approximately 100 people. Prairie Orchard Farms (POF) has officially received label approval from the USDA to market their naturally Enriched Omega-3 Pork in the USCANADA - This means that the Winnipeg owned and operated meat producer is the first naturally enriched Omega-3 pork producer to receive USDA approval in North America. Prairie Orchard Farms, under its Verdancia Farms trademark will now provide Americans with fresh pork products produced by Sioux Preme Packers in Sioux City, Iowa. Its bacon and sausage will be produced by Webster City Meats in Webster City, Iowa. Prairie Orchard Farms has distribution in Manitoba, North West Ontario, Alberta and Quebec. OlyWest planned plant site will still be in St. Boniface Industrial ParkCANADA - A city of Winnipeg councillor has scrapped a motion to move the proposed plant site to an alternative site within the Tuxedo area. This proposal had been viewed by observers as a stunt by the councillor to raise awareness of a citizens group that objects having the plant in St. Boniface industrial park. The $200 million dollar facility is scheduled to go before the province's Clean Environment Commission. OlyWest spokesman Guy Baudry said the Quebec-based group hopes to be up and running in St. Boniface within a couple of years. Documents and EventsFor the latest market reports and listing of events, please refer to
AAFC's website at This site is updated monthly. Web SitesThere tends to be some confusion as to what Manitoba Agriculture Food and Rural Initiatives produces in terms of information and data and what Agriculture and Agri-Food Canada prepares. Manitoba Agriculture Food and Rural Initiatives has on its web site production economics (cost of production information), livestock sector profiles, trade information and the Weekly Market Report. Very useful information for both the generalist as well as the specialist! Manitoba Agriculture Food and Rural Initiatives www.gov.mb.ca/agriculture/index.shtml Agriculture Canada-Red Meat Section www.agr.ca/redmeat Other recommendedweb sites:The Canadian Swine Exporters Association at www.canadianswine.com Manitoba Pork at www.manitobapork.com Canada Pork International at www.canadapork.com Canada Pork Council at www.cpc-ccp.com The US National Pork Producers site is www.nppc.org Good general website to connect to all universities, governments and industry associations is at: www.umanitoba.ca/afs/animal_science/links.html For the latest on Foot and Mouth Disease, go to the Canadian Food Inspection Agency site at: http://www.cfia-acia.agr.ca/english/toce.shtml Export information can be found at the following sites: The staff of the Manitoba Regional office would like to thank Patti Negrave of the Red Meat Section of Agriculture and Agri-Food Canada for her comments and suggestions provided to the author prior to the document's final release. Should you know of a person, company or other organization who would like to subscribe to this report (no charge), please have them contact: Timothy Chapman
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