The 2010 Purchasing and Ingredient Suppliers Conference arranged by the American Feed Industry Association (AFIA) took place in San Antonio in March. The event incorporated sessions on animal agriculture with emphasis on the current and future state of the industries reviewed, a general session on grain and weather outlook and concurrent breakout sessions dealing with legislative and regulatory issues and flock and herd welfare.
AFIA speakers representing the various animal industry groups all emphasized the effect of the recession on consumption and hence feed production. A common theme was the inflationary effect of diverting 30% of the corn crop into ethanol. Other common issues of concern to all livestock producers included animal welfare legislation, stricter environmental restraints and food safety issues.
Pork production to drop 3%
Neil Dierks of the National Pork Producers Council stressed the losses estimated to have attained $6 billion to the hog industry from September 7 through December 9. It is estimated that the hog industry consumed 18 million tons of feed in 2009 to support current production.
In 2010 production is estimated at 111 million head, down by 3% from 2009, contributing to production of 22,520 million pounds of pork. It is estimated that the unjustifiable rejection of pork following emergence of H1N1 influenza inappropriately termed “swine flu” impacted the U.S. hog industry to the extent of $2 billion. Despite the statements issued by the USDA and the OIE, almost 30 countries banned U.S. pork imports and problems still exist with regard to China.
In response to concerns over health, food safety and the environment the National Pork Producers Council initiated the “We Care” program to counteract adverse publicity by opponents of intensive livestock production.
Domestic chicken consumption holds
George Watts of the National Chicken Council characterized the situation in the broiler industry as being “no shortage of challenges.” With a projected output of 35.9 billion pounds of processed broiler meat, the U.S. industry has paused in a long-term annual year-over-year expansion due in large measure to the world recessioon.
As with the hog industry which exports 15% of production, the U.S. broiler industry will ship 16% of total processed product produced in 2010, predominately in the form of leg quarters (dark meat). Russia and China collectively represent almost 50% of total exports. This numerical dependence on a few large client countries makes U.S. exporters vulnerable in the event of embargos as a result of trade issues or contrived sanitary concerns.
Domestic consumption has held up well through the recession although 2009 showed a 7% decline compared to 2008 but a 2% increase is anticipated by USDA in 2010 compared to the previous year. Fortunately the Quick Service Restaurants maintained or even increased off-take of broiler meat during the recession although casual dining declined alarmingly.
During a two-week period, it is estimated that average consumers in the U.S. consume chicken from a fast service outlet at least twice and consume chicken three times. According to NCC surveys, motivation to purchase chicken is based on convenience, cost and low fat content. The major constraints facing the broiler industry include food safety, flock health, animal rights activism and environmental pollution in common with other livestock production sectors. It is anticipated that the number of producing companies will decline with acquisitions and consolidations from a current 50 significant producers to approximately 40 by the year 2020.
It is expected that feed and social cost will increase and that profitability will depend on prudent restraint of expansion, effective management of resources, attaining optimal production parameters on farms and in plants and continuing to develop convenience products for consumers.
In the panel discussion George Watts commented on the need for traceability and the fact that a nationwide animal ID system will be required. A further problem relates to raising capital for investment in the U.S. broiler industry. Inherent advantage relating to cost of production which favor exports to Russia and China may be negated by trade barriers.
Speakers call for unified front
Forrest Roberts of the National Cattlemen’s Beef Association warned of the unintended consequences of legislation dealing with restricted use of antibiotics, emphasizing the critical need to have freedom to operate within existing federal guidelines.
Chris Galen of the National Milk Producers Federation stressed that the dairy industry is also opposed to restrictions on medication beyond Federal restraints now in operation. An FDA which responds to political considerations and rejects current decision making on the basis of science will be contrary to the interest of producers and consumers.
Emphasizing this opinion, Forrest Roberts opined that given the “current attitude in Washington there are only about nine months to get a rope around it.” It was generally accepted that to address the numerous issues facing livestock production, cooperation among farmers and integrators will be critical to present a united front against the forces that are opposed to intensive production.
Grain prices have peaked
In the general session on grain and sustainability, Richard Brock of Brock Associates stressed the current microeconomic trends which are influencing consumption and production. Having passed through a high-tech bubble in 2000, the housing bubble in 2005 and a commodity price bubble in 2008, investors are wary of committing capital to equities.
In some measure this may have resulted in the volatility in commodities which was stimulated by disproportionate investment of speculative capital by money managers. Brock estimates that in excess of an additional $200 billion was injected into traditional futures markets during the past year.
Grain prices appear to have peaked according to Brock although he was pessimistic concerning the speed at which the U.S. would emerge from the recession. He characterized Washington as being in disarray, beset with indecisiveness and he indicated that in retrospect “we might look back on the current administration and wish that we had never had it.”
Although the 2009 harvest was large in terms of total volume, corn quality is the worst in 30 years based on high moisture and mycotoxin content. Diversion of corn to ethanol will increase in accordance with the Renewable Fuels Mandate but the projections for cellulosic ethanol are in all probability highly optimistic and there will be no commercial application for at least five years despite the Federal projections of 16 billion gallons by 2022 out of a total projected production of 36 billion gallons.
Higher yields, lower quality?
Jerry Weigel of BASF Plant Sciences reviewed future advances in seed genetics and impact on supply. It is anticipated that new cultivars of corn and soy will ultimately yield 300 bushels and 100 bushels per acre respectively.
The U.S. which has 20% of arable land and 6% of world population produces 40% of all corn. Technology including satellite-guided machinery and attaining germination rates of 30,000 plants per acre will contribute to improved production. Nutrient characteristics including enhanced oil stability, low phytate content, reconfiguration of amino acids and kernel composition are all achievable but will have limited application in comparison to agronomic traits including yield, herbicide and insect resistance.
Emphasis on yield may result in a disproportionate decline in nutritional quality which is of significance to livestock producers. This creates an opportunity for producers of enzymes supplements to restore feed conversion efficiency.
Predicting weather accurately
The ability to provide long-term weather forecasts was reviewed by Drew Lerner of World Weather Inc. Factors such as sunspot activity, the El Nino Southern Oscillation and 18 year long-term temperature cycles are now subjected to more sophisticated analyses to be able to develop models of climate activity.
Ethics contribute to success
Major agribusiness companies are actively pursuing sustainability as an important component of their public image and profitability. Kevin Igli of Tyson Foods reviewed his company’s approach including a core values statement which establishes standards and relates food safety, animal well-being, environmental concerns, corporate ethics and personnel.
Initiatives established by the company include conservation of water, production of biofuels, and promoting renewable products. Tyson believes that by proactively managing food prices and fighting hunger it can serve the interest of investors and consumers and satisfy regulatory agencies.