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DAVID KRUSE

By Staff | Oct 9, 2009

There is a terrible game called chicken. I am not sure if anyone has really played it other than in the movies, but two cars facing each other speed head on down the road. When one swerves out of the way, they are the chicken and the car continuing on straight is the winner. When neither turns away, there are two losers.

Now, hog producers are waiting for other producers to liquidate or swerve out of business. The Hogs and Pigs Report published at the end of September showed that up to now there has been very little liquidation and the tiny bit of liquidation has been erased by heavier hogs and more pigs per litter.

Has it become a game of chicken where hog producers are hoping that other producers swerve or crash before they lose and go out of business? Maybe this is another similarity to the other white meat?

There are hog producers that have been hedging and/or contracting hogs and feed. Of course they aren’t making a killing and laughing all the way to the bank with huge profits. However, they are maintaining a profitable level and will continue to fill their buildings.

Recently, an official from a large pork association commented on the tire tariff placed on Chinese tires and the possible affect it could have on pork prices. Almost in the same breathe he blamed H1N1 as the major reason China is not importing pork and then what the tire tariff could do for any future pork exports to China.

Is there a reason the pork industry needs to continually pass the blame? It is better to dream big than not to dream at all, but there is the need to know a dream from reality. Is China using H1N1 to stop exports? Or is the U.S. pork industry not looking at the facts and wanting and talking about something they know are false hopes?

It is time to get off the H1N1 band wagon for pork producers, especially where China is concerned. Unless China has a major disease or had the Olympics picked China for 2016, which is almost next to impossible, pork exports of past years are nothing but pent up hopes and dreams.

On Sept. 18, the U.S. Department of Agriculture assistant to China forecast China’s pork production would rise in 2010 to more than 50 million metric tons. China will continue to increase their own pork production and lower internal prices will lower pork imports in 2009 by more than half and declines into 2010 will continue.

China imported over 38 million MT of soybeans in the 2009 crop year. For 2010, exports for beans will increase. Chinese beef production is expected to decrease in 2009 by 6 percent and cattle producers into 2010 are expected to liquidate because of low return.

Double-digit gains are expected in the breeding cow imports with forecasts for almost exponential gains in dairy milk products with the improving economy in China.

China doesn’t want U.S. pork because they have a glut. Extra pork is being subsidized.

U.S. pork producers need to use a sharp pencil and to know to the penny their costs of production. Pork producers need to use packer contracts, futures or options to stabilize their operations. If not, plan on playing chicken into 2010 to see who ends up alive at the end of the year raising the other white meat.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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