The fact US pork exports and other protein sources are so strong is a reflection of huge global demand. Relative wealth increase in importing countries and lower supply in the importing countries are the main drivers.

In our opinion high feed prices and financial losses which have cut projected US per capita meat availability from 200 pounds per capita in 2008 to 180 pounds in 2012 is being reflected in what we believe have been meat production cuts in many other countries. The lack of supply in some countries is clearly reflected in their domestic hog prices with many currently double. US pork prices exports will stay strong for the foreseeable future as pork (and other meats) is pulled to these markets.

Other Observations

The US chicken hatchery supply stock on 1 November was 50.170 million hens, which is the smallest breeder flock since December 1996. Cutting the breeder flock is like cutting sows. The production base is down; months upon months of chicken industry financial losses have forced the chicken industry to truly cut supply capacity. Less chicken is always supportive to hog prices.

US farmland prices are posting record gains year over year, good farmland in Illinois has increased 23 per cent, Indiana 29 per cent, and Iowa 31 per cent. A huge equity gain for farmland owners and a reflection of the bullishness in present and future crop production. The bullishness for land is in our opinion opposite to producers of hogs. We sense little bullishness or optimism for the future of swine production. Too many years of no or small profit margins have dampened appetite for existing swine producers to invest in increased swine production.

Pioneer Hi – Bred is targeting a 40 per cent corn yield increase globally over the next 10 years, and Monsanto projects corn and soybean yields to double by 2030. We will need these gains to sustain our livestock production especially if the US government continues to force Corn Ethanol to be used in transportation. When you combine the projected yield increases, more land globally coming into production and improving farming practices we believe global grain production will expand tremendously. For example China’s corn yields are about 50 per cent of the US getting China corn production yields to US levels would be 180 million metric tonnes more than are being produced now.(seven billion bushels +).

We all farmed long enough to know farmers can’t stand a good thing; profits will always lead to over production. In the early 80s farm prices were high; the world was going to run out of food! By the mid 80s farm prices dropped in half. Lots of farmers lost their farms. We lived through it. The most dangerous words in business: ‘This time it will be different.’ Unfortunately history seems to always repeat itself.