NGFA – PFI Feed and Pet

Food Joint Conference

A Pork Producers View of the

Industry

September 26, 2013

Howard Hill, DVM, PHD

President Elect – National Pork

Producers Council

• Macro-economic trends in the pork industry

• PED - where did it come from, impact on supply

• Feed safety – what do pork producers expect from their nutritional suppliers?

• Third party certification – are they needed, are they expected?

Economic factors affecting the Pork Industry

• Record commodity prices

– 2012 worse drought in 50 years

– Ethanol – 5b. bu., DDGS 30%

– May, June, July, August contracts expired above $100

• Record pork exports – 27%

• Shrinking sow herd

• PED

• Record U.S. corn crops 2013

• Shuanghui International acquisition of Smithfield

– $6.995B

• Berkshire Hathaway acquisition of H.J. Heinz

– $27.643B

+2983

4000

5000

6000

7000

8000

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10000

11000

12000

13000

14000

15000

84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

US Corn Production (million bushel)Source: USDA

Decent yields plus big

acres equals record

production

-135

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40

60

80

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120

140

160

180

84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

US Corn Imports (million bushel)Source: USDA

Corn imports not just a record last

year, but a huge record

However, a 10% ethanol blend in the future will not be tenable

+250

0

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2000

3000

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6000

84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

US Corn Use for Ethanol (million bushel)Source: USDA

Ethanol likely does not go away, but

its impact is muted

What if China

responds in corn or

pork as they did with

soybean imports in

the mid 90’s?

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

China Corn Imports-Exports (mmt)

Imports Exports

Source: USDA

Watch this one and compare it to the soy trend

+10

0

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45

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70

75

87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Chinese Soybean Imports (mmt)Source: USDA

Chinese soy imports are not mitigating

Yearly Per Capita Protein Consumption

0 50 100 150 200 250 300

United States

Hong Kong

Australia

Canada

Brazil

EU-15

Taiwan

Mexico

Romania

China

Korea

Russia

Japan

Bulgaria

Ukraine

Philippines

India

Beef

Pork

Poultry

China Pork Imports

• Food inflation major government concern

• Growing middle class, increase demand

for protein

• Cheaper to import pork than corn and

soy

• U.S. - lowest cost producers

• 1% of China’s pork supply is worth $1B

to U.S. pork industry

From information, knowledge

Paragon Economics, Inc.

Pork demand has been good so far in ‘13

Beef and chicken prices are helpful

Lower exports have increased domestic usage – but real price is +3.5%!

. . . July was +4.7% yr/yr, YTD RPCE is +2.8%

From information, knowledge

Paragon Economics, Inc.

Pork exports: THE 2013 issue but improving

. . . July: 1st positive (+2%) month since Oct

From information, knowledge

Paragon Economics, Inc.

July exports – growth in all but China, Korea . .

. . YTD: Canada +3%, Mexico +2%, Others +18%

0

150,000

300,000

450,000

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900,000

1,050,000

1,200,000

1,350,000

1,500,000

1,650,000

1,800,000

1,950,000

2,100,000

2,250,000

Met

ric

To

ns

Year

U.S. Pork ExportsCanada FTA

NAFTA

(Mexico)

WTO Uruguay Round

(Japan & South Korea)

U.S. -Taiwan

Pork Deal

China

WTO Accession

Russia Pork

TRQs

Australia

FTA

DR-CAFTA

U.S. - Korea

U.S.-Colombia

U.S.- Panama

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Met

ric

To

ns

Year

U.S. Pork Exports to NAFTA Countries

Canada Mexico

Mexico EIF

Jan 1994

U.S. Export Growth

Since EIF

Mexico: 530%

Canada: 3357%*

Canada EIF

Jan 1989

* USDA data only available to 1989

0

10,000

20,000

30,000

40,000

50,000

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70,000

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Met

ric

To

ns

Year

U.S. Pork Exports to Australia

U.S.-Australia FTA

Entry into Force

2005

U.S. Export

Growth

8 Years Before

Entry into Force:

3,323 Metric TonsU.S. Export Growth

8 Years After

Entry into Force:

64,346 Metric Tons

0

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4,000

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18,000

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ric

To

ns

Year

U.S. Pork Exports to Chile

U.S. Export

Growth

9 Years Before

Entry into Force:

-8 Metric Tons

U.S. Export Growth

9 Years After

Entry into Force:

16,824 Metric Tons

U.S.-Chile FTA

Entry into Force

2004

• Goal: Removal of all tariff and non-tariff barriers

• Major payout is resolving sanitary and phytosanitary (SPS) barriers

• Japan joining TPP is a game changer

• End game has started and the intention of the parties is to reach an agreement by fall 2013, but that will be difficult as many issues still remain outstanding

• 19th round of negotiations in Brunei - Aug 23-30 – TPP inter-sessional beginning on Sept. 18th in DC

Trans-Pacific Partnership (TPP)

Transatlantic Trade & Investment Partnership (TTIP)

TTIP

Removal of all EU barriers would be an increase of $2 billion dollars annually

• U.S. cabinet officials stated unequivocally that agriculture would be part of the negotiations

• Negotiations start week of July 8th in Washington, DC – 2nd round in October, 3rd round in December

• NPPC leading lobbying effort & SPS effort

– Business Coalition for Transatlantic Trade

– Five ag coalition letters

• Now focusing on the architecture of the TTIP – U.S. needs to create negotiating leverage with the EU in the same manner

it has done with Japan in TPP.

– U.S. should not be willing to close tariff negotiations until non-tariff measures (SPS) are resolved.

Feed Mill Quality Control

• Various levels of control

– FDA registered

– On farm/ smaller mills

• 400,000 tons a year

• Rely on ingredient suppliers

• Third party certification

– ISO, HACCP

– Pork producers are embracing third-

party audits/certifications

Food Safety • “Livestock / feed industry is built on trust, hand shake agreements”

(Tibbetts)

• Game Changers

– PBB contamination of cattle feed (1973)

– Melamine contamination of pet food (2007)

• Expectation

– Unadulterated

– Correct ration

– Right farm

– Right bin

– Biosecurity (biological, chemical)

• Threats

– Mistakes

– Bio-terrorism

– greed

– Faulty processes

Food Security Modernization Act

• January 4, 2011

• “Aim to ensure the U.S. food supply is safe

by shifting the focus from responding to

contamination to preventing it”

• Proposed Rule July 29, 2013

• 15% U.S. food imported

– 50% fresh fruit

– 20% fresh vegetables

• Focus on food, not feed or feed ingredients

Link-to-Bin is a tablet-based

delivery solution, developed to

help feed mills and animal

producers ensure that the

correct feed is delivered to the

right farm in the right bin;

providing traceability for every

step of the process.

AT THE OFFICE

Link-to-Bin manages many facets of the

feed delivery process and collects data

each step of the way.

DOT logs, delivery and idle times, delivery

routes, excess feed amounts, delivery site

problems, tractor/trailer checklists, and

more are all tracked and stored

electronically, allowing for numerous

reporting possibilities.

Additionally, LTB reduces paper, manual

data entry errors, and helps to manage

and enhance fleet efficiencies.

IN THE FIELD

By streamlining processes and enabling

real-time communication, Link-to-Bin

gives the customer the assurance that

they receive what they ordered, where

and when they want it.

With a tablet-based application and

proprietary hardware, Link-to-Bin collects

data each step of the way.

Linked to the Bin

GPS puck

Veterinary Diagnostic Laboratory Iowa State University

SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY

15 APRIL 16 17 18 19 20

21 22 23 24 25 26 27

28 29 IA (W. Central) – SOW

30 IA (NE) – SOW

1 MAY 2 3 4

5 6 IA (NW) – SOW

7 8 IN – SOW

9 10 EM + (Corona Virus)

11 CO (Eastern) –

SOW (UMN-VDL)

Veterinary Diagnostic Laboratory Iowa State University

SUNDAY MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY SATURDAY

15 APRIL 16 17 18 19 20

21 22 23 24 25 26 27

28 29 IA (W. Central) – SOW

30 IA (NE) – SOW

1 MAY 2 3 4

5 6 IA (NW) – SOW

7 8 IN – SOW

9 10 EM + (Corona Virus)

11 CO (Eastern) –

SOW (UMN-VDL)

12 Pan-Corona Virus + (PCR)

13 Samples to NVSL PCR Product to ISU Sequencing Facility

14 15 ISU Sequence = PEDv (China 2012)

16 NVSL Confirms PEDv (PCR & Sequence)

17 USDA Announces PEDv in US

18

Yoon, Hoang, Stevenson, Schwartz, et al NVSL - Ames

Veterinary Diagnostic Laboratory Iowa State University *for the weeks prior to 6-17-13, laboratories were able to provide diagnostic case submissions and number of premises testing positive for PEDv.

Starting 6-17-13, the data are limited to ONLY diagnostic case submission numbers (aka Swine Accessions)

PEDV Positive Cases Ascertained from Multiple VDLs

Week Received

@ VDL

Total Number of PEDv Positive

Diagnostic Case Submissions

(Premises) via PCR or IHC

Farm Type

CO IA IL IN KS MI MN MO NC NY OH OK PA SD TN TX WI ?

Sow Growing

Pig ?

4/15/2013 2 (1) 0 1 1

4/22/2013 1 (1) 0 1 1

4/29/2013 9 (6) 2 4 5 1

5/6/2013 17 (13) 4 7 3 1 8 3 1 1

5/13/2013 10 (9) 5 3 1 1 4 4

5/20/2013 44 (43) 7 33 3 5 25 2 7 1 2 1

5/27/2013 32 (29) 6 22 1 22 1 1 1 3 1

6/3/2013 54 (52) 13 34 5 21 2 3 2 2 17 2 3

6/10/2013 47 (42) 11 24 7 17 1 3 2 20 1 3

6/17/2013* 47 18 18 14 10 1 2 8 1 3 22

6/24/2013 37 8 20 9 1 15 1 4 2 14

7/1/2013 10 4 6 0 1 3 2 2 3

7/8/2013 34 12 20 3 1 6 1 2 4 2 3 2 11 2

7/15/2013 32 8 19 6 6 4 7 1 3 2 8

7/22/2013 24 6 10 9 1 6 1 3 7 4 1 1

7/29/2013 31 12 15 7 1 5 1 1 7 3 2 1 10 1

8/5/2013 27 18 10 1 1 9 1 1 6 1 2 5 1

8/12/13 36 26 11 1 6 4 13 5 7

8/19/13 30 14 14 2 1 6 1 5 1 2 14

8/26/13 26 15 8 3 2 1 3 2 4 1 10 3

Total 552 189 280 75 20 174 4 23 56 4 42 1 30 1 15 146 7 1 1 1 1 9

Veterinary Diagnostic Laboratory Iowa State University

0

10

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60

# P

EDv

Po

siti

ve C

ase

s

Date by Week

Positive PEDv Cases per Week by Farm Type

Sow Grow-Finish Unknown

Veterinary Diagnostic Laboratory Iowa State University

0

100

200

300

400

500

600

# P

EDv

Po

siti

ve C

ase

s

Date by Week

Cumulative Positive PEDv Cases by Farm Type

Sow Grow-Finish Unknown

Questions?

Howard Hill, DVM, PHD

President Elect – National Pork Producers Council

hhill@iowaselect.com