Capital Update – For the Week Ending April 26, 2024

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In this week’s NPPC Friday recap: NPPC says FTAs key to supply chain resilience; NPPC Pork Alliance meeting held in Des Moines; study highlights hog pricing trends, importance of USDA’s Livestock Mandatory Reporting; NPPC monitoring bird flu’s jump to dairy cows; and World Pork Expo set for June 5-6.

NPPC Says FTAs Key to Supply Chain Resilience

What happened: NPPC submitted comments to the Office of the U.S. Trade Representative (USTR) on “objectives and strategies that advance U.S. supply chain resilience in trade negotiations, enforcement, and other initiatives.”

As a preface to its request for comments, USTR claimed that past U.S. trade and investment policies have led to supply chain vulnerabilities and the “movement of global production to countries with weaker rules and standards related to labor, environment, transparency, and governance issues.” The Biden administration’s trade efforts have focused almost exclusively on those areas and very little on market access issues.

NPPC’s take: In its comments, NPPC said U.S. trade and investment policy over the last several decades has been beneficial for the U.S. pork industry, the U.S. agricultural sector, and the broader U.S. economy. Abandoning that policy “will cause long-term damage to economic prospects of U.S. agricultural producers.” NPPC urged USTR to rethink its approach, including eschewing free trade agreements (FTAs), which “are an indispensable tool to enhance U.S. agricultural competitiveness, as well as supply chain resiliency.”

Additionally, such agreements “foster collaboration and cooperation among participating countries, encouraging the sharing of best practices, information, and resources related to supply chain management. … The certainty of long-term market access afforded by preferential trade agreements ultimately provides the economic incentives needed to invest in resilient, diversified supply chains by the private sector.”

Why it matters: U.S. agricultural trade is vital to America’s farmers and the overall U.S. economy. Over the past four decades, agricultural exports have grown significantly, particularly to countries with which the United States has negotiated FTAs.

NPPC Pork Alliance Meeting Held in Des Moines

What happened: NPPC held its spring Pork Alliance meeting for allied industry companies this week in Des Moines, Iowa. Alliance partners and members heard updates from NPPC staff on important pork industry issues, including the latest developments on the next farm bill, efforts to address the agricultural sector’s labor shortage and the problems caused by California Proposition 12, and plans to pressure the Biden administration to pursue a more ambitious trade agenda.

Additionally, there were roundtable discussions on a range of topics, from industry sustainability efforts to expanding international market access.

NPPC President and Lori Stevermer addressed the meeting, as did Steve Malakowsky, director of swine lending for Compeer Financial, who serves on the NPPC board of directors as the allied industry representative.

Why it matters: Allied industries, such as animal health companies, financial firms, equipment manufacturers, and genetics companies, play a pivotal role — as suppliers and advocates — in the success of the U.S. pork industry.

Pork Alliance members at meeting in April 2024

Alliance attendees receive pork industry updates.

Study Highlights Hog Pricing Trends, Importance of Livestock Mandatory Reporting

What happened: In a policy brief published by Iowa State University Center for Agricultural and Rural Development, economists apply the U.S. Department of Agriculture’s (USDA) Livestock Mandatory Reporting (LMR) data to identify changes in how producers have priced hogs over time. Chief Livestock Economist Dr. Steve Meyer and Iowa State University associate professor and extension economist Dr. Lee Schulz examined various pricing mechanisms across three time periods and found that, in all but one instance, average negotiated prices have been lower than other categories. For all time periods studied, negotiated prices have been the most variable. Additionally, the average negotiated price has the largest coefficient of variation, indicating greater relative price risk than other pricing categories.

Since wholesale pork volumes and prices became mandatory under LMR in 2013, producers and packers have been increasingly using USDA’s calculated pork cutout value as a pricing mechanism for hogs. Drs. Meyer and Schulz found that, for all three time periods, the cutout value was less variable than average negotiated price, which may help explain the declining share of hogs priced through negotiated sales and increased use of the pork cutout for hog pricing formulas.

The report also analyzes seasonal trends in hog slaughter, packer gross margins, and the relationship between hog prices and cutout values, which may serve as important considerations for producers interested in cutout-based pricing.

NPPC’s take: NPPC supports the right of producers to enter into agreements of their choosing and advocates for transparent and reliable price reporting data that allows them to make informed decisions. NPPC works closely with its producer-led committees to identify and advocate for improvements to LMR and other information tools, such as USDA’s Swine Contract Library, to ensure that accurate and dependable market information remains available from USDA.

Why it matters: Methods for buying and selling livestock have evolved in recent decades. Since 2001, LMR reports have offered transparent information on price trends, as well as various purchase and sales methods. USDA publishes seven daily and two weekly reports for swine, as well as four daily and 12 weekly reports on wholesale pork, capturing approximately 96% of the hog and pork industry.

As pork industry participants continue adapting to changing market environments, it is critical that the values published in USDA reports and used for base price determination are accurate and representative of supply and demand conditions.

NPPC Monitoring Avian Influenza (H5N1) Jump to Dairy Cows

What happened: Although no infections have been detected in hogs, NPPC is actively monitoring the H5N1 virus situation that has spread from wildfowl to dairy cows. According to data from the USDA’s Animal and Plant Health Inspection Service (APHIS), H5N1 has been confirmed in 32 dairy herds in eight states.

Wednesday, APHIS issued a federal order requiring testing for H5N1 in dairy cattle before any interstate movement and mandatory reporting of positive test results. USDA and the U.S. Food and Drug Administration have deemed pasteurized dairy products safe.

Previous strains of the H5 virus infected poultry in 2014-2015, resulting in the loss of more than 50 million birds. Since early 2022, a second outbreak of H5N1 avian influenza has affected more than 90.8 million birds in the U.S.

NPPC’s take: NPPC encourages pork producers to evaluate their biosecurity practices including rodent/wildlife control, feed storage, and worker/visitor entry policies. NPPC will continue to monitor the situation and provide producers pertinent information and updates.

World Pork Expo Set for June 5-6

What is happening: NPPC’s annual World Pork Expo will take place June 5-6 at the Iowa State Fairgrounds in Des Moines. More than 20,000 visitors are expected to attend the event, which showcases innovations and new products and offers training and educational programs, as well as lots of pork.

Click here for more information, tickets, and media registration for the world’s largest pork industry trade show and exhibition.