Feedstuffs is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Step-up trials minimize risk in pullet vaccine selection

Michigan Allied Poultry Industries MAPI Layer.2-005.jpg

Changing a pullet vaccination program raises concerns over whether the new vaccine can cause changes to the bird’s health and how it will affect the level of disease control. However, change can also lead to a lot of positive outcomes.

Elanco Animal Health Inc. has found that a step-up trial using a sound study design and detailed observation can help ease concerns about changing a vaccination program.

“One of the main concerns that arise when a new vaccine is being considered is whether or not it will cause significant changes to the bird’s health or the level of disease control that the poultry producer is accustomed to,” said Dr. Chase Miller, a consulting veterinarian with Elanco Animal Health. “This concern is common when a new salmonella vaccine program is under consideration, which makes a step-up trial a great way to test a new vaccine with minimal risk.”

A step-up vaccination trial is a methodical approach to testing a new vaccine by providing controlled monitoring of the vaccine reactivity in subsets of the bird population, Elanco explained.

One of the biggest benefits of a step-up vaccination trial is risk mitigation, the company said. The new bacterin is tested on missed-sex males first and then gradually tested across a company’s pullet flocks, thus instilling confidence in the new vaccination program. In addition, the step-up trial strategy provides a humane and effective approach to testing a new vaccination program in broiler breeders.

“A step-up trial also allows the poultry producer to be in the driver’s seat when it comes to deciding whether or not to adopt the new vaccination program,” Miller said. “If the trial results are not satisfactory, the company can maintain their current vaccination program or try another new one.”

Conducting a trial

When conducting a step-up trial, Miller said the first step is to set up a study comparing reactivity and mortality rates between the current vaccine and the new vaccine.

In this example, the broiler breeder team would test two salmonella bacterins on missed-sex males in one of the pullet houses.

At 18 weeks of age, the missed-sex males in the pullet house should be sorted into two groups, Miller said. One group will be vaccinated with the current salmonella bacterin, and the other group is given the new salmonella bacterin. Both vaccines would be administered in the inguinal fold of the leg, and the birds are painted two different colors for monitoring.

Fourteen days following vaccination, both groups of male birds should be euthanized humanely. The severity of the reaction in the inguinal fold should be analyzed using a standardized vaccine reaction scoring system, Miller noted. In addition to the scoring system, mortality records for both groups of male birds should be evaluated to see if any birds died before the end of the trial.

Both data sets can then be used to determine if additional trials with the new bacterin should be conducted. The next step in the trial is to vaccinate a subset of the pullet population, according to Miller.

One pullet flock should be vaccinated every week over a period of one month. Each flock should be monitored as it receives the new salmonella bacterin, and detailed records should be kept on mortality trends, feed consumption and the overall health of the flock. The monitoring should continue as the vaccinated pullets are moved into the hen house. If satisfactory results are seen, the new bacterin can be introduced or “stepped up” to the remaining flocks.

“Change can be daunting, and it can be uncomfortable,” Miller said. “The step-up trial process combines sound study design with detailed observation and helps poultry producers alleviate some of the anxiety and discomfort that comes with changing a pullet vaccination program.”

Farm Bureau report examines cattle market issues

traditional retail meat case

As the cattle industry continues to grapple with how the markets reacted after the coronavirus outbreak, a new report unveiled by the American Farm Bureau Federation provides an in-depth examination of the causes of and price implications resulting from extreme market volatility in the cattle industry. It also sets the stage to explore policy solutions.

The Cattle Market Working Group, comprised of the presidents of 10 state farm bureaus, spent more than two months investigating factors that led to market disruptions following a fire in August 2019 at the Tyson Foods beef packing plant in Holcomb, Kan., and the COVID-19 pandemic. They invited input and consultation from government and university experts, among others.

The report is designed to equip state and county Farm Bureau organizations with deep insight and policy considerations as Farm Bureau leaders debate policy recommendations for 2021.

“Our cattle producers suffered a one-two punch with the fallout from the Holcomb fire and the COVID-19 pandemic,” Farm Bureau president Zippy Duvall said. “The prices families were paying at the grocery store went up, but the prices paid to farmers dropped through the floor. That’s not fair to consumers or producers. We must work toward a more stable, resilient food supply chain that can better endure unforeseen challenges so we can keep America’s pantry stocked while ensuring farmers are paid a fair price for their products.”

The price movements and resulting margins after COVID-19 and the Holcomb plant fire led to consternation from many in the cattle industry over the potential for some in the packing industry to take advantage of the situation and participate in unfair or illegal behavior.

The Farm Bureau reports states that while the live-to-cutout spread typically provides a good measure of the overall health of packer margins, the uncertainty surrounding this situation makes that incredibly difficult to gauge. Also, processing plants’ new COVID-19 safety measures add a cost that is not included in the spread.

“There is no way to know the exact cost without getting a look at the processing companies’ internal information, but one can infer that the cost of protective gear, increased sick leave, increased bonuses and increased incentive pay are very high for these businesses. Additionally, while a plant may be profitable while operating at 90-100% capacity, that may not hold true at 50% capacity, even with record-breaking spreads,” the report notes.

The fixed costs associated with operating a plant come in many forms, including massive asset investment costs and large regulatory costs. The companies normally spread those costs over many animals when operating at or near full capacity, but when capacity is reduced significantly, the ability to operate profitably declines as they spread these fixed costs over fewer animals. “That being said, these levels reveal that processing margins were likely very healthy for many plants,” the report points out.

In its July report on the situation, the U.S. Department of Agriculture notes that at the core of many of these discussions is the desire for improved price discovery, reinvigorated competition and a more transparent relationship between the prices for cattle and their further-processed products.

Similar to findings presented by USDA, the Farm Bureau also explored some of the policy discussions on the table in an effort to develop its own policy moving forward. The National Cattlemen’s Beef Assn. additionally expects to have findings from its own working group completed by Oct. 1.

Mandatory minimum negotiated trade

The working group discussed “triggered” mandatory minimum pricing that is set on a region-by-region basis. Various and fluctuating levels would be determined regionally, including with input from state Farm Bureau members.

Negotiated trade is more common in certain states such as Nebraska, where the negotiated percentage has ranged from 30% to 60% in recent years. Other states typically have very little negotiated trade. In Texas and Oklahoma, for example, negotiated trade accounts for only 5-8% of cattle transactions. These discrepancies between regions contrast with the national picture, where negotiated trade hovers around 20-23%.

“A key point to remember when discussing the optimal level of negotiated transactions is that PRICE DISCOVERY is not the same as PRICE DETERMINATION,” the report notes. “While enhanced price discovery is a good thing, it does not necessarily mean it will result in higher prices (as many proponents of minimum thresholds contend).”

Any new policy should be mindful not to cause unintended negative consequences to cow/calf producers or to cause additional government interference in these markets, the Farm Bureau report notes.

Risk management and education

The working group suggested having the Farm Bureau work with the Chicago Mercantile Exchange (CME) to better address concerns from smaller producers. Existing risk management tools, such as Livestock Risk Protection insurance, could be adjusted to be more affordable for smaller producers.

“A resounding theme in almost every topic of the working group’s discussions was ‘risk management.’ Whether it be hedging cattle in the futures market or an insurance product, the lack of risk management tools used by smaller cattle and hog producers is concerning,” the report states.

Other areas of discussion surrounding risk management included, but were not limited to, using internet-based platforms for auctions to provide transparent market information, the boxed beef contract on the CME potentially providing additional risk management opportunities and making changes to risk management options both on CME and through other private providers to make them more accessible to smaller producers.

Small capacity meat packing

The working group discussed policy solutions that would allow smaller packing facilities to play a larger role in the food supply chain. Suggestions included creating incentives for smaller packing plants to become federally inspected.

The Farm Bureau said it supports several bills that encourage additional smaller capacity meat processing, such as the RAMP UP Act, the DIRECT Act and the Small Packer Overtime & Holiday Fee Relief for COVID-19 Act of 2020.

GIPSA

The Farm Bureau also said it supports strengthening the ability of the Grain Inspection, Packers & Stockyards Administration to enforce market rules. It believes in the need for robust enforcement through GIPSA and supports strengthening the agency’s ability to crack down on those who don’t play fairly in the market.

The report adds that the Farm Bureau “currently has strong GIPSA enforcement policy, as acknowledged by the working group. The working group recognizes the need to continue to advocate for these strong policy positions to make sure the markets are fair.”

Read the Cattle Market Working Group report.

Gene findings suggest Marek's disease treatment targets

The Roslin Institute. Roslin Mareks chicken23.jpg
The study provides a large number of potential targets for future therapies or techniques to manage Marek’s virus disease.

Researchers with The Roslin Institute in the U.K. have identified genes strongly associated with resistance to a virus that causes cancer in poultry and costs the global poultry industry more than $2 billion a year.

They conducted an analysis relating to the highly contagious Marek’s disease virus that provides a large number of potential targets for future therapies or techniques to manage the disease, the institute said in an announcement.

Findings from the analysis also reveal details about the biology behind susceptibility to the virus, which could lead to more precise selective breeding strategies.

Outcomes from the research are the first to provide such a large-scale, high-resolution analysis of genes underlying resistance to a virus in birds relevant to the poultry industry, Roslin said.

The researchers identified regions of chicken DNA that are seen as playing a role in disease resistance, the announcement said. The multifaceted approach included comparing the DNA of two groups of commercial egg-laying chickens that differed in their resistance to Marek’s disease virus.

They also analyzed genetic information from infected chicks and identified variations associated with resistance in the DNA of multiple commercial chicken lines.

Researchers investigated any genetic association with mortality in the infected offspring of egg-laying birds, Roslin noted.

Scientists found various DNA elements that had a strong genetic association with resistance to the virus.

"Marek’s disease is devastating to flocks worldwide as well as the economy, and current vaccination can only partially control it. Our study identifies regions of the genome associated with resistance, which could be used for mitigating the effects of the virus through selective breeding, improved vaccine design or future gene editing technologies," study lead Dr. Jaqueline Smith with The Roslin Institute said.

The tumors caused by Marek’s disease virus have similarities to human lymphoma, so the study may also increase the understanding of human cancers.

The study was published in the journal Genes and was carried out in collaboration with Hy-Line International and supported by the Biotechnology & Biological Sciences Research Council, part of UK Research & Innovation.

FEEDSTUFFS IN FOCUS: Amino acid imbalance aids in slowing of pig growth rate

The coronavirus pandemic resulted in delays and extended shutdowns at numerous packing plants, all the while straining the pork industry as market hogs had to be held in facilities longer than expected. To minimize sorting losses and keep as many pigs in market condition as possible, the feed industry stepped up to help hog producers adjust their rations. The goal was that of reduced growth rates and feed intakes.

In this episode of Feedstuffs in Focus, Feedstuffs editor Sarah Muirhead talks with Dr. Jim Smith, senior technical swine nutritionist at Kent Nutrition, to discuss how amino acid imbalances can aid in the slowing of pig growth. Specifically, they discuss the reduction of DL-methionine in rations of late finishing pigs.

This episode is sponsored by Hog Slat; from cleanup to startup, we're here to supply the products you need.  As close as your local Hog Slat store or order online at www.hogslat.com.  

For more information on this and other stories, visit Feedstuffs .com.
Follow Feedstuffs on Twitter @Feedstuffs, or join the conversation via Facebook.   

Apple Podcast Icon  Google Podcast icon

USDA asked to assist Iowa ag co-ops after derecho

Joseph L. Murphy/Iowa Soybean Assn. Derecho Storm Damage 2 jlm IowaSoybean.jpg
Damage from the Aug. 10 historic derecho wreaks havoc on a grain storage site near Luther, Iowa.

Sens. Chuck Grassley (R., Iowa) and Joni Ernst (R., Iowa) urged Agriculture Secretary Sonny Perdue to provide Iowa agricultural cooperatives with additional support and relief as they continue to rebuild from the derecho. This letter comes following a request the prior week that the Iowa Institute of Cooperatives made to the U.S. Department of Agriculture for assistance.

Following the derecho that swept through Iowa on Aug. 10, at least 71 grain elevators were either destroyed or heavily damaged at seven different cooperatives across the state, adding up to 57 million bu. of storage capacity that will not be available to farmers this fall.

“A key link in the agricultural supply chain is under serious financial pressure,” the letter said. The Iowa Institute of Cooperatives estimates that uninsurable costs, including lost production and reduced grain handling, will cost each location around $700,000.

Grassley and Ernst wrote, “This devastating storm came at a difficult time for the cooperatives and their members. The current economic impact of the coronavirus on the agriculture supply chain has lowered prices for Iowa's main commodities, corn and soybeans. Many Iowa farmers who make up the membership of Iowa cooperatives will be hurt by a combination of the coronavirus, drought and damage from the storm."

The senators added, “We ask that you consider the needs of Iowa agricultural cooperatives as they recover from the storm. Iowa farmers rely on agricultural cooperatives to deliver grain for storage and drying, market their commodities, order feed for livestock and buy their agricultural inputs. We look forward to hearing from you on how to best ensure cooperatives can bounce back to ensure the success of Iowa agriculture and Iowa’s agricultural cooperatives into the future.”

FEFAC publishes 'Feed Sustainability Charter 2030' at XXIX Congress

new-fefac-logo.jpg

FEFAC -- the European Compound Feed Manufacturers' Federation, which represents 23 national associations in 23 European Union member states, the U.K., as well as associations in Switzerland, Turkey, Serbia, Russia and Norway with observer/associate member status -- released its "Feed Sustainability Charter 2030" during its XXIX Congress.

Announced Sept. 25, the charter contains concrete feed sector actions at the EU and national levels featuring animal nutrition solutions that can help increase the sustainability of livestock farming operations. Highlighted are five key ambitions as to how the European feed industry can contribute to the development of more sustainable livestock and aquaculture value chains. FEFAC president Asbjørn Børsting and BFA managing director Katrien D'hooghe highlighted those actions and commitments, which include:

  1. Climate change -- Reduction of greenhouse gas (GHG) emissions by promoting the use of the PEFCR Feed and the GFLI Database;
  2. Circular economy -- Increased use of co-products and human-inedible feedstuffs;
  3. Biodiversity -- Upgrading the FEFAC Soy Sourcing Guidelines to facilitate the transition towards responsible and deforestation-free soy supply chains;
  4. Sustainable food systems -- Optimization of nutrient efficiency, and
  5. Antimicrobial resistance -- Animal nutrition solutions to support animal health and welfare.

"The feed sector holds an important 'pivotal' role in enhancing the sustainability of both animal and arable production, bringing solutions to issues related to reducing GHG emissions, nutrient leakage, antimicrobial resistance and deforestation. An essential contribution of compound feed manufacturing is the uptake of human inedible feed, including co-products from the food and biofuel industry," the groups said in announcing their plan forward.

For FEFAC and many of its members, the launch of the charter is considered a starting signal to set the path for continuous improvement and measure meaningful progress that will contribute to sustainable livestock production and aquaculture sectors. In the road toward 2030, FEFAC plans to publish annual progress reports for its "Feed Sustainability Charter" to follow up on how FEFAC and its members are advancing on the specific ambitions.

The digitally livestreamed FEFAC XXIX Congress featured a panel discussion between Michael Scannell of the European Commission, Pekka Pesonen of Copa-Cogeca, Philippe Weiler of Lidl Belgium, Preben Sunke of Danish Crown and Jean-François Timmers of World Wildlife Fund on the Green Deal and market expectations for the European livestock and feed industry. A key priority raised by all panelists was the need for the European feed industry and its chain partners to achieve deforestation-free soy supply chains. They also welcomed the ambitions set out in the FEFAC "Feed Sustainability Charter" and encouraged FEFAC and its members to take more targeted commitments.

“It's a proud today for the European feed industry to set its ambitions for more sustainable feed production for the 10 years to come. It was good to hear from important stakeholders what their concerns and priorities are and I can assure them that today is the beginning of a journey of measurable progress. We recognize that a deforestation-free soy supply chain is a key priority for our industry, and we're working hard on the upgrading of the 'Soy Sourcing Guidelines' to facilitate a mainstream market solution to achieve that goal,” Børsting said.

BFA president Dirk van Thielen said, “FEFAC and BFA are committed to step up the action on bringing down greenhouse gas emissions like methane, upscaling the use of co-products, tackling deforestation and reducing antimicrobial resistance.”

USDA: Good luck in reducing salmonellosis

chicken

The U.S. Department of Agriculture recently announced that its food safety agencies, the Food Safety & Inspection System (FSIS) and the Office of Food Safety (Dr. Mindy Brashears), has a plan to reduce salmonella, the cause of one of the top two bacterial foodborne illnesses.

What is not clear to me is whether the plan is to reduce salmonella contamination rates, particularly in poultry, or to reduce salmonellosis, the salmonella infection of humans.

To be clear, salmonellosis is not totally within USDA’s responsibility. An estimated 38% of salmonellosis is caused by consuming undercooked or mishandled meat and poultry products. The remaining 62% comes from elsewhere.

But chickens in particularly still take the brunt of consumer attitudes about what causes salmonellosis, so the USDA feels a need to help that industry compete with other proteins when it comes to food safety; and that is a good thing.

The bad thing is that efforts in the past have done very little to reduce salmonellosis rates in humans. The Centers for Disease Control & Prevention (CDC) estimated number of illnesses per year has hovered around 1.3 million for as long as I have been involved in food safety issues.

In July of 2005, on the second day on the job as the undersecretary for food safety at USDA, I was in the deputy secretary’s office meeting with him and Beth Johnson, the deputy chief of staff, who I would be reporting to for the next four years.

One of the five things they asked me to accomplish was to get the salmonella rate of contamination down on chicken carcasses. It was at 17% at the time and they considered that an embarrassment to USDA and its public health branch, FSIS.

We held meetings. We conferenced. And I learned a lot.

Among the good things we did was to establish a lower acceptable rate of contamination and categories for plants falling under FSIS inspection and testing for salmonella.

And we published the ratings, at least the Cat 3 ratings.

Cat 1 were plants coming in at less that 50% of the maximum allowable positive tests based on percent positive tests.

Cat 2 plants came in between 50% and the maximum contamination rates.

Cat 3 plants exceeded the maximum allowable number of positive tests.

It worked; we got the contamination rate down to about 6%.

But the subsequent CDC annual reports showed no change in human salmonellosis rates.

Part of that reason was because we measured intact carcasses. Who buys a whole chicken carcass anymore?

Al Almanza later measured chicken parts contamination rates and the numbers were staggering. Our efforts really had little effect on human health, they just raised the price of chicken meat.

I do not want to appear to be too negative, and I really respect Dr. Brashears and all that she has accomplished over the years in her career.

But, and it is a really big BUT, FSIS has no control over what comes into its plants. The bacteria are carried in by live animals, and ordinary slaughter and dressing procedures do not eliminate them.

Anything that can be done to reduce that pathogen load coming into the plants will make me a happier consumer.

All the science in the world cannot keep a chicken carcass from becoming contaminated when defeathering happens and carcasses and parts comingle.

The anti-salmonella effort really, truly, needs to move upstream; and USDA and FSIS have zero authority in the live animal arena.

The only authority that FSIS has is given to it by the Federal Meat Inspection Act, the Poultry Products Inspection Act and the Egg Products Inspection Act.  All it can do is perform inspection and condemn adulterated products.

Since salmonella is not considered an adulterant, hands are tied. The agency has no authority to regulate salmonella.

Efforts need to be increased in the breeders and in the hatcheries to reduce the salmonella load, and they need to be increased in the grow-out facilities to reduce the exposure.

These reductions can be accomplished via vaccinations for both breeder pullets and broilers, better hygiene and biosecurity in the barns and managing water systems.

In Europe, they have layered grow out barns, where broilers walk around on a wire mesh floor with fecal material falling thru and being removed by a revolving belt that is underneath.

In the U.S. we have chickens walking around on cement floors, picking up feces from their “roommates” that may or may not be contaminated with intestinal sourced salmonella.

In Europe they also vaccinate a lot more breeders and broilers than we do, and it is working for them.

There is no avoiding the issue that live production is where salmonella is most likely to make its existence known. Slaughter and further processing are simply our last chance to reduce the risk of human infection.

I think USDA and its two public health agencies may be jousting at windmills, just like I did 15 years ago.

 

 

Discrepancies cast doubt on ‘Hogs & Pigs’

DarcyMaulsby/iStock/Thinkstock hogs in finishing barn

The U.S. Department of Agriculture’s quarterly “Hogs & Pigs” report left many scratching their heads as slaughter levels have not been matching up to USDA’s inventory data.

U.S. inventory of all hogs and pigs Sept. 1, was 79.1 million head, a 1% increase from yearago but a 1% decrease from June 1. The average pre-report estimate was for a 0.2% decline.

Breeding inventory, at 6.33 million head, was 2% lower than last year but up slightly from the previous quarter. Analysts had expected the number to be 2.6% lower.

Market hog inventory, at 72.8 million head, was 1% higher than last year but 1% lower than last quarter. Analysts had estimated only a slight 0.1% increase.

However, the report's greatest deviations were found in the two largest weight categories, according to Steve Meyer, economist for Kerns & Associates/Partners for Production Agriculture. The 120-179 lb. weight category was up 6% year over year, but analysts had expected only a 1.5% increase. Hogs in the 180 lb. and over category were 9.8% higher year over year, while analysts had expected an only 2.6% increase.

“To make those numbers match up in a normal historical relationship, we’re going to have to have a 20% increase in hog slaughter over the next several weeks to be able to do the kind of math that we normally do,” Ron Plain, professor emeritus of the University of Missouri-Columbia, noted during a National Pork Board post-report webinar.

Normally, Plain explained, USDA will make revisions to previous reports to reconcile hog slaughter numbers with inventory numbers. However, he noted that very few revisions were made this time.

Further, Plain said slaughter has been far lower than implied by USDA’s June inventory reports.

Kevin Bost, president of Procurement Strategies Inc., said he’s having a hard time understanding how throughput could be slowed down as much as the report suggests.

“It looks pretty doubtful that the USDA numbers are really accurate. They might have overstated some, because you have to have a massive slowdown industry-wide -- all the major states -- in order to have slowed down that many hogs,” Bost said.

All four analysts on the call agreed that about 1.5 million fewer hogs have been slaughtered than the two previous “Hogs & Pigs” report numbers implied. In other words, the data suggest that there are that many hogs currently backlogged.

Len Steiner, president of Steiner Consulting Group, added, “We’re having a little trouble understanding how these roughly 1.5 million hogs keep getting moved forward.”

Based upon USDA not revising the spring pig crop or the market hog inventories, “there clearly should be a bigger hog supply than we have the kill capacity to handle,” Bost said.  

Breeding herd suggests exits

The decline in the breeding herd inventory suggests that some producers are leaving the industry due to the challenging year.

“The magnitude of the sows slaughtered over the last several months and the reduction in breeding herds indicates that there is some reduction in industry taking place at this time,” Steiner noted.

During the June through August period, sows farrowing totaled 3.18 million head, down 3% from 2019; the pig crop, at 35.1 million head, was down 3% from 2019, and the average number of pigs saved per litter was 11.04, compared to 11.11 last year.

Looking ahead, USDA data show that hog producers intend to have 3.12 million sows farrow during the September to November 2020 quarter, down 5% from the actual farrowings during the same period one year earlier and down 3% from the same period two years earlier. Intended farrowings for December 2020 through February 2021, at 3.11 million sows, are down 1% from the same period one year earlier but up slightly from the same period two years earlier. The total number of hogs under contract that are owned by operations with more than 5,000 head but raised by contractees accounted for 47% of the total U.S. hog inventory, down 1% from the previous year.

Higher prices ahead

Higher prices are expected in the fourth quarter, something that Steiner said is counter-seasonal. Using the CME Lean Hog Index, he forecasted the fourth-quarter 2020 price at $66.67/cwt., leading to an average 2020 price of $59.04/cwt. For 2021, he is forecasting an average price of $69.83/cwt. His forecasts for the first and second quarters of 2021 are $68.67/cwt. and $75.67/cwt., respectively.

Bost, also using the CME Lean Hog Index, forecasted the 2020 fourth-quarter price at $68 and the first and second quarters of 2021 at $68.00 and $78.00/cwt., respectively.

Using Iowa/Minnesota negotiated hog prices, Plain forecasted a price of $56.00/cwt. for the 2020 fourth quarter. For next year, he forecasted the first quarter at $57, the second quarter at $62, the third quarter at $60 and the fourth quarter at $51.

Market recap

December live cattle futures started the week lower but posted gains as the week progressed. Contracts closed lower Tuesday at $110.175/cwt. after losses on Monday. Strong gains on Wednesday recouped some of the losses, and contracts closed higher Thursday at $112.275/cwt.

November feeder cattle futures were mostly higher. Contracts closed higher Monday at $142.725/cwt. and higher Thursday $142.35/cwt. after losses Wednesday.

The Choice and Select cutouts closed lower at $215.05/cwt. and $203.39/cwt., respectively.

December lean hog futures were mixed this week but still posted gains. Contracts closed lower Monday and Thursday at $61.55/cwt. and $63.275/cwt., respectively.

The pork cutout was higher this week. The wholesale pork cutout closed higher at $92.03/cwt. Loins and hams closed higher at $77.43/cwt. and $89.87/cwt., respectively. Bellies were $152.11/cwt., up from $141.29/cwt.

Hogs delivered to the western Corn Belt were higher on the week, closing at $62.97/cwt., up from $60.55/cwt. last week.

USDA reported the Eastern Region whole broiler/fryer weighted average price at 62.20 cents/lb. on Sept. 18.

According to USDA, egg prices were steady, with a firm undertone. Supplies were generally moderate, and offerings were light to moderate. Demand was moderate to good.

Large eggs delivered to the Northeast were unchanged at 86-90 cents/doz. Prices in the Southeast and Midwest were also unchanged at 90-93 cents/doz. and 78-81 cents/doz., respectively. Large eggs delivered to California were $1.41/doz.

For turkeys, USDA said the market was steady to firm, and demand was moderate to good. The price range was $1.11-1.17/lb. for both hens and toms.

Ag markets functioning as expected

CFTC future volatility.png

The Agricultural Advisory Committee of the Commodity Futures Trading Commission (CFTC) met Sept. 24 and offered insight into how the agricultural commodity markets have functioned in recent months, especially in the wake of the COVID-19 pandemic.

“The events of 2020 demonstrate just how important it is for all of us to work together as partners so that our ag markets continue to serve their role in price discovery and risk management,” CFTC chairman Heath Tabert said.

David Amato, supervisory market analyst in the division of market oversight, gave an update on behalf of the Livestock Task Force, which was created after the many issues that presented themselves in the livestock industry in March and April.

“As 2020 began, many of the agricultural markets were seeing relatively low prices affected by weather the previous year and trade conflicts. Starting in the first quarter, COVID-19 brought significant market impacts on both the supply and demand side,” Amato said.

“Overall, markets are working as we expect,” Amato said, noting that, despite concerns about convergence in the April cash and futures market, the market showed good liquidity and good convergence at the end of the contract, given a somewhat nonexistent cash market because feedyards were unable to deliver when packing plants closed.

From April 17 to May 8, boxed beef prices more than doubled their value, reaching a record $475/cwt. Since then, the Choice boxed beef cutout has fallen to $220/cwt. At the same time, livestock cash and future prices fell sharply, leading to a large spread between the value of a processing facility’s input and outputs.

Boxed beef prices are now near historical averages, “but as we know, this could rapidly change, depending on [COVID-19] outbreaks at any of the packing plants,” Amato said.

During the height of the pandemic, Amato estimated that pork and beef processing capacity fell 35-40% due to plant closures and absenteeism. The latest numbers for cattle slaughter show that slaughter numbers are up significantly, almost 45%.

After the COVID-19 pandemic started, lean hog prices fell as much as 40%. Additionally, live cattle hit a 10-year low, down more than 35% at one point. Other agricultural producers were affected similarly, with individual commodities climbing between 10% and 40% in March. Today, most are approximately 10-20% lower than compared to the January numbers, with the exception of grains and oilseeds that were boosted recently by strong exports to China.

CFTC future volatility.png

“Livestock markets, though, are still dealing with animal backlogs and relatively weak demand,” Amato said. “Livestock prices in general remain relatively soft, and with restaurant and institutional demands continuing to be frail, this will be the case until the opening up of the full economy occurs.”

Nate Kauffman, vice president and Omaha, Neb., branch executive for the Federal Reserve Bank of Kansas City, noted that the agriculture sector started off 2020 in what he characterized as a “prolonged downturn, even before this year’s pandemic.” He added, “As the weeks and months unfolded with the pandemic, especially in April, conditions deteriorated quite rapidly.”

Kauffman said the economic conditions in agriculture have improved slightly, but that is due in significant part to government payments. “The environment surrounding agricultural credit conditions -- I would still describe those conditions as relatively weak,” he said, although farm real estate markets have provided some support in this area.

Coming into 2020, working capital was expected to decline about 15%, even before the onset of the pandemic, Kauffman noted.

“When the pandemic hit, especially in April and May, the combination of the temporary closures of meat packing plants, in addition to the shift in how consumers were buying food, led to some significant disruptions in the supply chain and ultimately lowered prices on the farm,” Kauffman stated. Dramatically lower energy use also greatly affected ethanol demand, which caused another major disruption for agricultural markets.

At the beginning of the year, profit margins had already been relatively low versus what had been the case from 2010 to 2013. By April, cattle prices, for example, had dropped 30% relatively to January, but other major commodities like hogs, ethanol, corn and dairy products had fallen even further. “Many of these prices rebounded somewhat since those lows in April, but most prices still remain lower than what they were at the beginning of the year, with the exemption, of course, of soybeans due to recent export strength,” he said.

Direct government payments will be on the order of about 40% this year, which is quite high in historical context and also doesn’t include the latest announcement of additional aid through the second installment of the Coronavirus Food Assistance Program of $14 billion.

Kauffman noted that the agricultural credit sector has seen delinquency rates on farm loans trend higher, but it is worth noting that the increases have been quite modest so far. Farmland as an asset accounts for more than 80% of the value of the farm sector's balance sheet. Despite some sharp declines in agricultural commodity prices and farm income, the industry has only seen modest declines in farm real estate values since the peak levels of 2013 and 2014.

“Agricultural lenders that have been recognizing additional stress in their portfolios and have been concerned about the level of liquidity or working capital among their farm borrowers [have] had opportunities in each of the past few years to restructure debt and take maybe additional accounts in the form of collateral as farm real estate to shore up some of that working capital,” Kauffman said, attributing it to limiting additional financial stress that might have been expected alongside some of the cash flow shortages.

Livestock & poultry cash market comparisons, 9/23/2020

Livestock and meat ($)

Sept. 23

Sept. 16

6 mos. ago

Year ago

Steers, Choice, 1,050-1,200 lb., cwt. southern Plains

105.00A

NA

116.00

NA

Feeder steers, 600-700 lb., cwt., Oklahoma City

145.00A

142.00A

127.625A

 150.50A

Lean hogs, carcass, Iowa-Minn. 167-187 lb.(1)

70.63

65.61

65.42

56.22

Feeder pigs, 40 lb. national direct delivered(2)

34.57

33.06

50.89

39.71

SEW pigs, 10 lb., national direct delivered (per head)

25.22

22.29

14.68

31.13

Choice beef, cutout, cwt.

215.87

215.38

253.57

213.51

Pork loin, 185 lb. 51-52% lean, cutout, cwt.(3)

77.43

74.04

103.44

66.10

Hog corn ratio

19.99

19.22

15.61

13.33

Steer corn ratio

32.70

32.70

31.70

26.79

Poultry and eggs (cents)

 

 

 

 

Chickens, Grade A, fresh lb. Chicago

61.03a

62.44a

87.17a

68.62a

Hen turkeys, Grade A, frozen, lb., Chicago

114.00Aa

113.00Aa

100.50Aa

94.00Aa

Young tom turkeys, Grade A. frozen lb. Chicago

113.50Aa

111.00Aa

100.50Aa

94.00Aa

Eggs, Grade A, large, doz., Chicago

80.50

80.50

224.50

58.50

NA: not available.          A: average.       a: offered         b: sales

(1) Replaces live hogs; live hogs are 0.755 of quote.
(2) Replaces Sioux Falls, 50-60 lb. (2/26/07)
(3) National FOB plant, replaces national daily carlot.
Livestock, meat, poultry and egg prices from USDA.