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"The financial risks of not being
aligned in some way in the pork marketing chain are just too
extreme," said Chris Hurt. "While many families and hog corporations
will not get through this period of low prices, those who stick with
it, or counter-cyclical investors who buy at the bottom, can expect
handsome returns in late 2003 and 2004."
Hurt termed recent events in the hog
market a flashback.
"Say it isn’t so! How can 1998 be
happening again? Wasn’t it supposed to be a once-in-a-lifetime
event? How can hog producers get through this one? Is this the end
of the line for the independent hog producer?" Hurt asked in the
wake of a market collapse.
"Panic attack is the only way to
describe the past two weeks in the hog market. Those producers who
survived 1998 have been determined to not have it happen again.
Nearly everyone thought that the worst of the financial crunch would
not come until this fall, providing time to move animals to market
by late summer. However, a much more aggressive liquidation of sows,
advanced marketing of market hogs, and drought which sent feed
prices unacceptably higher have set the panic in motion."
Prices were low in early August and
conditions grew worse. Terminal hog prices started the month in the
mid-$20s and ended the month in the $15-to-$18 range per live
hundredweight. However, terminal prices are not currently reflecting
base values producers are receiving at packers.
"The national base price for 51-52
percent lean animals on a live-weight equivalent basis ended the
month at about $27," said Hurt. "The range of price quotes by market
and type of contractual arrangement has been extreme. On Aug. 28,
for example, Midwest hog purchase base prices were quoted from $24
to $37 per live hundredweight, with a weighted average of $28.
"The lowest prices were for hogs
without contracts, where the producer negotiates the price of each
load with the packer. The highest prices were for those in a
category known as ‘other purchase agreements,’ which is a
non-formula agreement. In general, values of formula hogs were in
the $27-to-$32 range on a live-weight equivalent."
Supplies of hogs surged in July and
August, increasing by about 7 percent over the same period last
year. USDA inventory estimates suggested about 2 percent more hogs
for this time period. So, how can the additional 5 percent greater
supplies be explained?
"First, sows began to flood the
market," said Hurt. "For the two months, sow slaughter was up about
20 percent over the slaughter during the same period last year.
Secondly, the increases in Canadian live hog imports accounted for
nearly 1 percent additional slaughter. These two factors combined
account for about 2 percent of the unexplained 5 percent greater
slaughter.
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"A third factor is advanced marketings
of market hogs. By the last half of August, producers pressed the
panic button and began selling market hogs at lighter weights. At
the start of August, weights were running nearly 1 percent higher
than weights during the same period last year, but by the last week
of August they were down fractionally. All these factors still do
not fully account for the large number of hogs. USDA may still have
underestimated hog numbers by about 2 percent in their June
inventory."
The demand problems for pork have been
negative as well, he added. The trade restrictions on broiler
exports to Russia, the slowly recovering U.S. economy, a 5 percent
decrease in pork exports with a 17 percent increase in imports for
this year, and large supplies of competitive meats have left cold
storage pork stocks currently up 40 percent.
"The best news for the industry is that
sows are being liquidated fairly rapidly," said Hurt. "Sows not bred
in August will not have pigs in December, and pigs will not reach
market in June of 2003.
"The bad news is that we are still nine
months away from seeing the impact of sow liquidation on smaller
pork supplies."
Heavy sow slaughter can be expected
through much of the fall. Producers will also continue to market
lighter-weight pigs. In the short run, these will keep pressure on
the already-depressed markets.
The USDA’s September Hogs and Pigs
report, to be released on Sept. 27, will likely show a breeding herd
not much changed from last year, with the market herd up about 3
percent.
"This will not be sufficient to turn
prices higher," said Hurt. "So it appears that fall prices are set
for a continuation of the current rugged period. It appears that 51
to 52 percent lean hog prices, on a live equivalent, will be in the
$26-to-$28 range. Prices may improve to $28 to $31 for the winter
and to near the mid-$30s for the spring. By summer, prices could be
back into the low $40s, with mid- to higher-$40s in the last summer
and into the fall of 2003."
Costs, he noted, will be near $40.
"This means that losses could average about $13 per live
hundredweight, or $34 per head, this fall," Hurt said. "Losses would
be somewhat less in the winter and only about $5 per hundredweight
in the spring.
"In
comparison, estimated losses during the fourth quarter of 1998 were
$45 per head."
[U
of I news release]
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Located on the bluffs of the
Mississippi, across the river from Tom Sawyer’s old stomping ground,
the Pike County, Ill., area once produced more apples than anywhere
else in the United States. Most of the orchards are gone now, but
nestled in those scenic hills is Apple Basket Farms, one of the
area’s last remaining commercial fruit orchards and an example of
agritourism in action.
In addition to growing apples, peaches
and pumpkins, owners Jack and Karen Cruttenden have transformed
their farm into a destination for tourists and school field trips. A
listing of the activities available for visitors to Apple Basket
reads more like a cross between a theme park and a petting zoo.
There’s everything from potbelly pigs to rheas, which are South
American ostriches; a cider-making operation; the "a-maize-ing maze"
carved out of a cornfield; a miniature village built especially for
bunnies; educational school tours; and a gift and food store — in
addition to over 80 acres of apples, peaches and pumpkins.
People interested in adding agritourism
components to their current farm operation will benefit from hearing
how the Cruttendens built their successful and popular farm
business.
"Agritourism enabled us to remain on
our farm and make a living," said Jack Cruttenden. "We also enjoy
sharing our farm with others. You must love people to do what we’re
doing."
"Agritourism provides an opportunity
for farm operations to engage in ag enterprises that enhance revenue
opportunities and overall farm income," said Deborah
Cavanaugh-Grant, research specialist at the University of Illinois
in the College of Agricultural, Consumer and Environmental Sciences.
"It also provides an opportunity for people who are looking for day
trips and weekend activities to visit unique and interesting
attractions and destinations." She said that combining agriculture
and tourism results in enhanced farm profitability (a major
component of sustainable agriculture) and a reconnection of the
public to agriculture.
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The field trip is free and registration
is not required. Apple Basket Farms is located just off Interstate
72 at the Barry exit. The farm is two blocks north of Wendy’s. For
more information, including a map of the area, visit
http://www.applebasketfarms.com.
The Apple Basket Farms field trip is
part of the 2002 Sustainable Agriculture Tours, sponsored by the
Agroecology/Sustainable Agriculture Program at the University of
Illinois, the North Central Region Sustainable Agriculture Research
and Education Professional Development Program, and the Illinois
Small Farm Task Force.
"The tours give people a chance to see
a variety of sustainable agriculture operations in action," said
Cavanaugh-Grant. "Then, in November, we’ll be offering two identical
workshops, on the 13th in Effingham and on the 14th in Peoria, that
will look at the big picture and try to assimilate the practices
presented on the summer tours."
Visit
http://www.aces.uiuc.edu/asap/ for more information or contact
Deborah Cavanaugh-Grant at (217) 968-5512 or
cvnghgrn@uiuc.edu.
[U of I press release]
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"The purpose of the conference is to
assemble social and physical scientists from around the world to
present the latest scientific research on the severity of the
problem of climate change and evidence linking it to human
agricultural activity, as well as on cost-effective strategies for
mitigating climate change," said Madhu Khanna, an associate
professor of environmental economics in the Department of
Agricultural and Consumer Economics.
"The implications of differences in
perspectives towards the Kyoto Protocol between the United States
and the European Union will be discussed."
Khanna also noted that research on the
design of environmental policy to create incentives for controlling
carbon emissions through sequestration in soils and biomass and use
of renewable fuels as an alternative to fossil fuels will be
presented and discussed.
"The goal is to advance understanding
of actions and policy frameworks that could contribute to long-term
solutions," she said.
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While there is no registration fee,
registration is required. To register or learn more about the
conference, go to
http://www.environ.uiuc.edu/pERE/conference/.
Information is also available from
Khanna at khanna1@uiuc.edu or
(217) 333-5176.
U of I
sponsors of the conference include the Department of Agricultural
and Consumer Economics; the program in Arms Control, Disarmament,
and International Security; the Department of Atmospheric Sciences;
the College of Agricultural, Consumer and Environmental Sciences;
the Environmental Council; the European Union Center; William and
Flora Hewlett Foundation International Conference Grants
administered by the International Council; the Institute of
Government and Public Affairs; and the program in Environmental and
Resource Economics.
[U
of I news release]
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