Canadian breeding herd finds a new level

Transcription

1 ISSUE NO /05/11 1 PAGE:1 COPYRIGHT: NO ONWARD TRANSMISSION OR REPRODUCTION IS PERMITTED WITHOUT THE EXPRESS PERMISSION OF THE EDITOR Brief 13 PAGE ISSUE! KEY STATISTICS ON THE GLOBAL PIG INDUSTRY Canadian hogs - 1 Danish herd - 2 Global Price Cycle - 3 Smithfield Foods - 4 UK herd/ German abattoirs 6 Asian imports - 11 Price Monitor - 13 DATE: 09/05/11 ISSUE NUMBER: 196 Canadian breeding herd finds a new level The most recent census data from Statistics Canada seems to indicate that the worst may be over - but still leaves questions about the industry trend. The Canadian breeding herd (sows and gilts) has declined again and is reported to be 5% less than one year earlier i.e. 1.3 million head or virtually the same as last year and our chart illustrates this leveling off. As Stats Canada has pointed out before - this is the lowest level of breeding herd in Canada since Stats Canada also notes that, "Farmers anticipated no significant changes in the number of sows expected to farrow during the second and third quarters of 2011." It looks like the Canadian industry is now at a new equilibrium and the restructuring phase is over. The overall inventory of pigs provides one positive headline number - the census data recorded 11.8 million hogs on Canadian farms - up 1.4% on April 1 and this comes after an 6% increase compared with January 201 Other positive numbers are seen in the different weight categories of hogs. Overall, market hogs are up 2%: weaners are up 6% on a year ago and the heavier slaughter weight hogs category (+81 Kg) is up 1%. The kg category is up 3% but the Kg category is down 6%. Slaughter numbers in Q at 5.5 million head were down 2.8% compared with Q1 in 201 Live hog exports were recorded as 1.4 million head in Q and this is a 3.6% decline from Q1 - but an improvement on the average decline for of c. - 10%. Sow exports to the USA in Q1 are down significantly on the figure but sow slaughter in domestic plants in Q1 does not appear to have increased to compensate for this. Canadian hog prices have recovered but with feed, labour and energy prices looking expensive and the Canadian exchange rate looking uncompetitive farmers will need much more encouragement before barns are restocked or rebuilt. '000 head breeding herd 1,800 1,700 1,600 1,500 1,400 1,300 Source: Statistics Canada Canadian total pig number and breeding herd BH hog number Canadian breeding herd and inventory Q ' 000 head 2011 April January April '000 head total hogs 1,200 Q4/03 Q2/04 Q4/04 Q2/05 Q4/05 Q2/06 Q4/06 Q2/07 Q4/07 Q2/08 Q4/08 Q2/09 Q4/09 Q2/10 Q4/10 % changes 11/10 April 15,500 15,000 14,500 14,000 13,500 13,000 12,500 12,000 11,500 11,000 Pigs kept for breeding 1,308 1,313 1,314-5 Market pigs 10,502 10,582 10, under 23 kg 4,004 4,058 3, kg 2,500 2,519 2, kg 1,827 1,800 1, kg and over 2,171 2,206 2, pigs 11,810 11,895 11, TERMS: DUPLICATION OR ONWARD TRANSMISSION IS FORBIDDEN AND ACTION WILL BE TAKEN AGAINST ANYONE FOUND IN BREACH OF COPYRIGHT. IF YOU RECEIVE AN ILLEGALLY COPIED VERSION PLEASE INFORM US IMMEDIATELY. TEXT MAY BE REPRODUCED WITH PRIOR PERMISSION AND AN ACKNOWLEDGEMENT. INFORMATION IS INTENDED AS A GENERAL GUIDE AND ALTHOUGH EVERY EFFORT HAS BEEN MADE TO ENSURE ACCURACY, LIABILITY CANNOT BE ACCEPTED FOR ANY ERRORS OF FACT OR OPINION. READERS ARE ADVISED TO SEEK PROFESSIONAL ADVICE ON INVESTMENT MATTERS

2 WORLD NEWS ISSUE NO /05/11 PAGE: 2 Danish herd falls again whilst exports grow The Danes' April 2011 census data suggest that the average Danish pig producer is not too confident about the future - certainly not confident enough to think about expansion. Despite prices recovering strongly in 2011, the legacy of (and outlook for) high feed prices, an apparently unsympathetic government, and the investments required to comply with the EU's 2012 pig welfare rules seem to have undermined the normally confident Danish pig industry. The Danish Agriculture & Food Council (DAFC) website is currently running a new video for a campaign under the slogan, "The future isn't as dark as it has been" and it aims to explain "the new story" about the contribution that agriculture makes to Denmark's growth and prosperity. The choice of title for this major campaign is revealing. Clearly, Danish farmers feel a little unloved. As the charts and tables below illustrate the latest census data seem to indicate that the downward trend in breeding herd numbers and total pigs is continuing. A fall of around 4% for the breeding sow categories and a similar drop for gilts is serious. Although the trend in live pig exports has levelled out (more on this in the next issue) the data still show a decline of almost 5% in pigs at slaughter weight in Denmark. The export data recently released from the Danes and printed in the table alongside shows a more positive picture of the Danish industry. EU 27 exports are up 2.5% in with strong gains made in the largest market - Germany. The Polish market continues to grow and the UK - always a focus of Danish export efforts - has suffered a small drop but nothing to worry about. Further afield Danish exporters have achieved significant growth in Japan and Russia and China. These are three very different markets which test the pricing, quality offer and logistics of any export company. The growth in Danish pork, ham and offal exports in exceeded 10% for non-eu customers and the overall growth rate of Danish pigmeat exports was just over 5%. Danish Crown and Tican seem to be handling the challenges that the meat business throws up - although it looks like they may have to do more to improve the confidence of their farmer suppliers if pigs are to keep flowing through their abattoirs. '000 head Danish breeding herd Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Danish total pigs and breeding herd April 2011 ' 000 head 2011 April January April % changes 10/11 Piglets 2,462 2,411 2, Weaners 5,156 5,204 5, Slaughter pigs >50kg 3,053 3,374 3, Gilts Sows in pigs Sows with pigs Other sows 1,034 1,057 1, Boars for breeding pigs 11,932 12,293 12, Source: Statistics Denmark Source: Statistics Denmark Danish pigmeat exports 2009, ( metric tonnes) 2009 % change on 2009 Germany 369, , UK 283, ,756-9 Poland 164, , Italy 112, , Sweden 44,740 52, Netherlands 23,730 24, France 18,038 18, Czech Republic 5,053 4, Other EU-27 81,431 94, EU-27 1,103,297 1,076, Japan 139, , Russia 104,148 95, China 134, , Hong Kong 37,379 25, Australia 49,020 45, USA 36,983 35, South Korea 12,561 12, Other third countries third countries 62,798 46, , , ,679,803 1,598,

3 WORLD NEWS ISSUE NO /05/11 PAGE: 3 New peak value for pig prices - onward and upward The pig price boom shows no sign of weakening. We have been saying for months that the current upward phase of the pig price cycle showed no signs of levelling off or turning down. That is still the case. The global pig price index has crashed through the April 2005 peak value and is now within touching distance of the November 2001 peak. FYI the numbers are: April April Nov July For those who need a reminder the 1997 peak was driven by the coincidence of disease in Taiwan (FMD) and the Netherlands (SVD). If history were to repeat itself the obvious candidates in 2011 are South Korea (FMD) and Russian-sourced ASF in Europe. Let's hope the second part of that comparison doesn't occur. Another major disease outbreak in any of the major pig producing/ exporting countries would force another rethink in consumers' (and politicians') inflation expectations. But even without disease the supply-side of the global pig industry is held back by past debts, new environmental rules and high input costs. This all makes for a much slower response to high pig prices. The charts alongside illustrate the peak values of our global index of pig prices stretching back until 1997 and even our tired old eyes can see that the 2001 peak is about to be breached. The computers in the office are more precise and certainly more comprehensive in their analysis but they say the same thing will see a new 10 year peak value for global pig prices. As our chart shows, the week to week percentage changes in global pig prices are still positive and showing significant rates of change. This is not a market that is weakening. With the latest news from the various herd census data from around the world, with Asian demand as strong as ever, and the prices of other meat species on their own upward roll, there is reason to believe that pig prices will not attempt to break through the 1997 peak value barrier. That would be quite a talking point and our computers are working on that calculation and forecast as we go to press Index 100 = 1August 1999 % Global Pig Price Cycle March May 2011 US price Danish price Canadian price "World price" Mar-03 Sep-03 Mar-04 Sep-04 Mar-05 Sep-05 Mar-06 Sep-06 Mar-07 Sep-07 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Week to week % change in global pig price from 1 August /08/ /08/ /08/ /08/ /08/ /08/ /08/ /08/ /08/ /08/ /08/ /08/ Index 100 = 1 August US price Canadian price Danish price World price Global pig price cycle, /1/90 6/1/91 6/1/92 6/1/93 6/1/94 6/1/95 6/1/96 6/1/97 6/1/98 6/1/99 6/1/00 6/1/01 6/1/02 6/1/03 6/1/04 6/1/05 6/1/06 6/1/07 6/1/08 6/1/09 6/1/10 6/1/11

4 WORLD NEWS ISSUE NO /05/11 PAGE: 4 Smithfield's sustainability effort - Whole Hog interview Dennis Treacy is the Chief Sustainability officer for Smithfield Foods (reporting directly to CEO Larry Pope) and he recently gave Whole Hog's editor some of his time to talk about how Smithfield is meeting the challenges that "sustainable food production" is creating. Obviously, Smithfield is a major US company and Whole Hog was half- expecting a typical "US-knows-best approach" to questions. But Dennis knows his stuff and was open to debate. He is no stranger to environmental issues and he has been working in this area for over 30 years. Nevertheless, Smithfield, arguably, is a late entrant to the subject but it soon became apparent that Smithfield has learnt from any mistakes it has made in the past and, from the CEO's office down was intent on being a "trusted meat producer" and that this included all the key aspects of "sustainability". Smithfield, explained Dennis, was in the business of giving customers what they wanted and that means offering them a source of meat and meat products that met a number of targets. Namely, Smithfield Food's companies must; lead the industry in reducing environmental impacts of meat production; meet animal welfare criteria; produce safe, high quality food; be based on high workforce and employee standards; and offer community and social benefits. These made up the five pillars in Smithfield's CSR programme and clear targets had been set for each of these aspects of the business. For example, energy and water usage were being reduced, gestation stalls for sows were being phased out and "social audits" by Smithfield's customers were common. Methane capture systems were being introduced to many of Smithfield's hog farming units and, when these systems were fully tested and proven Smithfield expected that farm-produced methane systems would pay an important part in on-farm energy use. Smithfield is also a strong supporter of the National Pork Board's efforts to measure the carbon footprint of hog production. All of this, explained Dennis, wasn't just a good news story for customers - it was also saving money for the company. He estimated that the Environmental Excellence Awards Programme that was introduced to all of Smithfield's operations in 2000 had saved in excess of $100 million since then. Smithfield is doing its bit to engage in the national and international debate on sustainability and food security through its place on the sustainability round table in the USA and its contributions on what the "farm of the future" might look like. He linked this last issue to the concept of "sustainable intensification" which has recently appeared in the UK and European media. Dennis was in favour of identifying and removing any barriers that existed to the private sector's ability to promote food security and Smithfield had been asked to contribute ideas on this to a National Academy of Science food security workshop. The impression that Dennis Treacy has left with Whole Hog is that Smithfield Foods, whilst being the largest hog processor in the world, is recognising that big scale brings with it big responsibilities. Smithfield is keen to use its size to change things and will not let its scale of operations slow it down. Back in the 1990s Smithfield was a watchword for the "US corporate" style but now it seems to be running fast to secure an image more in keeping with its global activities and, crucially, to play its part in the big debate about sustainability in the meat supply chain.

5 WORLD NEWS ISSUE NO /05/11 PAGE: 5 Pig prices head towards the sky in Europe Last month's issue of Whole Hog observed that European pig prices went through the roof in March. Well, in April they have carried on moving up and are now in danger of interfering with airline traffic above various EU member states. We rarely see double digit annual price changes in European pig markets but this month's charts have examples of some countries that have seen double percentage price changes for three months in a row. If this goes on pig prices in Europe will be in the stratosphere - next step outer space! In the Euro-zone the average pig price of Euros /100 kg has increased by 16.2% in comparison with April last year. All the major producers' prices in the Euro- Zone increased in April on a yearly comparison basis. Danish prices were up 14.6%. French prices were up by c. 23%, Irish prices increased by 12.4% and Belgium prices were up by almost 16%. Dutch prices were up by 18.4% and German prices were up 16%. It's difficult to believe that such large hikes in prices can be replicated next month. Apart from the UK the non-euro-zone countries shared in this price bonanza. Poland, Hungary, the Czech Republic and Slovenia all showed annual percentage price increases in their national currencies in April Poland is up 22.3% compared with April Hungarian prices are up 15% and Slovenian prices are up 24%. Czech farmers saw a price increase of 9.1% and, at last, joined the party. There is even something positive to say about the UK market - prices declined by 2.2% but this was the lowest rate of decline we have seen in the last three months. Europe's early summer at Easter undoubtedly encouraged BBQ fever and part of the market's strength in April can be explained by this. But there must be more to the market's rise than unseasonal hot weather. Certainly, German and Polish consumers were less affected by the financial crisis/credit crunch after effects but the Spanish, Italian and French economies are hardly booming. In the UK pork is in demand but only as long as it stays in line with the prices of other meat options. Therein lies a clue - food prices are rising across the board and pork has not lost a lot of ground at retail. The explanation for firming prices must be on the supply side. Overseas export demand has been robust whilst the domestic supply base has contracted. Even though feed prices are high this imbalance is unlikely to continue % % I Annual % change in EU pig producer prices (in Euro) 11.8 February - February 2011 March - March 2011 April - April *EU Average is constructed from % change i Euro and national currancies Belgium Denmark Germany Spain France Ireland Netherlands Annual % change in EU pig producer prices (national currencies) Source: EUROSTAT February - February 2011 March - March 2011 April - April UK Poland Hungary Czech Rep Slovenia EU Average

6 EUROPEAN NEWS ISSUE NO /05/11 PAGE: 6 UK herd census has signs of an upturn The UK herd census (reported in March) and the recent Pigs Outlook paper are puzzling. Or, at least, the noises being made by the UK pig industry's representative body BPEX seem to be contradicted by the census data and the Outlook numbers - and that is the puzzle. The April 2011 Meat Outlook Conference in London had a session devoted to the pig sector and much angst was obvious about the losses being made per pig at current prices and costs. Fair enough. According to BPEX each pig producer was losing c. 26 per pig and these losses had been mounting for several months. Stewart Houston, the BPEX Chairman, was adamant that the industry was about to go over a precipice. However, the last census reported a marked jump in gilt numbers and the overall breeding pigs number increased by 2% though this could have been before the latest gloom had descended. Very high spot and forward feed prices have fed that gloom and the pig producers at Outlook all felt that increased sow slaughter and industry contraction was on the cards. Indeed sow slaughter numbers are up 15% in Q1. Confusion arises because the UK Pigs Outlook paper written by James Park (senior analyst at the AHDB) foresees increased pork production in 2012 despite a forecast of continuing falling margins/increased slaughter through assuming no respite from new harvest grain. At the Outlook presentation Whole Hog's query drew the admission that the 2012 estimate implied optimistic assumptions about UK prices and productivity. But it's puzzling why optimism is driving the Outlook forecast when UK retailers are being told the end is nigh. The next issue of Whole Hog Brief will be available on the 9th May ' 000 head Dec Dec 2009 Jun Top 10 German abattoirs Source: ISN German Top Ten slaughterhouses ( million head) 2009 % change on WHOLE HOG Market share 1 Toennies, Reda-Wiedenbruec k Vion (NFZ, Best (NL) Moksel&Suedfleisch), Dec 10/09 % change Sows in pig Gilts in pig Other sows Boars for service Other female pigs Breeding pigs Market pigs 3,878 3,926 3, TOTAL PIGS 4,385 4,423 4,460-9 Source: DEFRA p/k g, dw UK breeding herd, 2009 (December census) Trend Weekly price UK pig prices Jan Jul Jan Jul Jan Jul Jan Jul Jan Jul Jan Westfleisch (incl. Barfuss), Muenster D&S, Essen/Oldenbur g Vogler, Lueckau Boeseler Goldschmaus, Garrel BMR Schlachthof, Garrel Tummel, Schoeppingen Gausepohl, Dissen Mueller Gruppe, Birkenfeld Top Ten German

7 EUROPEAN NEWS ISSUE NO /05/11 PAGE: 7 North American herd finally hits bottom The USDA has published its April report for the combined breeding herds and market hogs categories for North America. These data suggest that the North American pig industry is reached the end of the adjustment phase which began in As Whole Hog has indicated before the market has been searching for a bottom - and it now looks like it has found it. The census publications all report a similar picture - no continuation of decline but no expansion either. The total North American breeding herd is reported to be 7.10 million head for March 2011 and this is an increase of 3% on and a decline of 3.8% on The total number of market hogs was 68.7 million head and this is an increase of 7% from March 201 Sows farrowed in Q were reported as 3.56 million head and this is 1% lower than in March and down 5% from The inventory of all hogs and pigs was recorded at 75.8 million head in March 2011 and this is an increase of 1% from March and a fall of 2% from March The pig crop was estimated to be 35.1 million head for the combined herd and this is 1% up on and 3% down on In all these key statistics there is a common theme - either slight upward movements or much reduced rates of decline. The rot has stopped across the board and it will be surprising if the larger units in the USA react to a buoyant export market and record hog prices by resisting a move into expansion mode. Once you hit bottom the only way is up. The historical context for recent strong US hog prices is illustrated in the chart alongside. Canadian prices, of course, are correlated with US prices. But the relationship is more complex now. The relative strength of the Canadian dollar has affected the Canadian industry's performance and outlook, as have the new found interest in exporting by US processors. That interest has been encouraged (driven) by a weak US dollar so macroeconomics has been important to both parts of the North American hog industry. Access to capital, cheap (or cheaper) grain, lower energy and labour costs, and relative levels of productivity will now determine which parts of the North American hog industry will get into expansion mode first North American breeding herd & hog inventory Breeding herd '000 pigs '000 Source: USDA Breeding herd pigs Q Q Q Q Q Q Q Q Q Q Q Q Q1 Q3 Q North American herd changes (April census) ' 000 head %change 2011/ Breeding herd 7,096 7,074 3 Market hogs 68,678 68,144 8 under 50 pounds 22,902 22, pounds 18,725 18, pounds 14,136 14, pounds and over 12,915 12,883 2 hogs and pigs 75,774 75,218 7 Index100= 6 Aug /8/99 6/8/00 US and Canadian prices Aug May 2011 US price 6/8/01 6/8/02 Canada price 6/8/03 6/8/04 6/8/05 6/8/06 6/8/07 6/8/08 6/8/09 6/8/10

8 THE AMERICAS ISSUE NO /05/11 PAGE: 8 Sluggish start for export sales for the Canucks The first months of 2011 have been less than spectacular for Canadian pork exporters. Sales are up just 1% i.e. no change. sales are 175,891 MT and this is almost identical with the sales for YTD February 201 Live hog exports are in negative territory when the weekly figures are compared with 201 The data are reported for the period through to 16 April and feeder pig exports are down 2% on the YTD comparison. However, when we look at the week-to-week changes it seems clear that the moving average trend line has levelled out and is showing signs of an upturn. Feeder pig exports are up 7.1% when we look at these week-to-week changes. Individual market performances illustrate the Canadian performance. The Japanese market was down 3.8% for YTD February 2011 with 37,999 MT sold in those months. The large US market was down 7% on the year with 47,721 MT sold there. Mexico was up, 5% to 9,102 MT; Mainland China was up nearly 700% to 12,069 MT but Hong Kong was down 77% with MT sold in that market; Russian buyers purchased 17,046 MT or 28% more than in the period; the Philippines received 6,987 MT and this is a decline of 27%. The Australian market dropped back by 23% to 5,640 MT whilst the FMD-influenced South Korean market was up 91% to 17,040 MT in the first few months of "Other" markets fell by 23% to 10,619 MT in the early months of The table alongside provides these data in detail. YTD feeder pig exports to 23 April 2011 were 1.45 million pigs (-2%) and YTD numbers for barrows/gilts and sows exports are 316,165 head (-7.9%). The Sow and boar slaughter number for the period until 30 April 2011 has jumped to 28,638 head and that is 11% higher than for the same period last year. Canadian slaughter figures are down 3.4% for the YTD week ending 30 April Pork production is down by the same percentage. Canadian pigmeat imports in the year to date ending 23 April were 48,833 MT in total and this is 6.9% up on the same period last year. Fresh and frozen pigmeat imports from the USA were 33,353 MT, and this is a 7.8% increase on a year to year comparison. Imports of processed pigmeat from the USA were also up by 4.8% in the YTD and were recorded at 15,255 MT. 300, , , , ,000 50,000 01/01/03 head Canadian pork exports, year to 28 February, 2011 ( metric tonnes) 2011 Source: Statistics Canada % change on USA 47,721 51, Japan 37,999 39, Australia 5,640 7, Russia 17,046 13, Mexico 9,102 8, S. Korea 17,040 8, China 12,069 1, Taiwan 5,988 5, Cuba New Zealand 1,612 1, Hong Kong 3,506 15, Philippines 6,987 9, Others 10,619 13, , , /07/03 01/01/04 Canadian weekly live hog exports to US, actual and moving average hog number 01/07/04 01/01/05 52 week moving average 01/07/05 01/01/06 01/07/06 01/01/07 01/07/07 01/01/08 01/07/08 01/01/09 01/07/09 01/01/10 01/07/10 01/01/11

9 THE AMERICAS ISSUE NO /05/11 PAGE 9 US exports fly off the shelves in early trade data The USA's pork exports have achieved double digit growth in the first two months of 2011 recording a remarkable 11.5% rate of sale compared with the same period last year. FMD and nuclear fears in Asia, the weak dollar - and a processing industry that has been able to react to these windfalls are the main reasons for this success. If world economic growth carries on recovering this export performance must influence supply-side decisions in the US hog industry before too long. The February 2011 export volume for pork cuts and variety meat (168,936 MT) show an 8.1% jump in sales over February 201 At 331,302 MT the YTD result is 11.5% higher than in 201 Fresh, chilled pork exports were relatively unchanged from February at 42,402 MT. Frozen pork exports were reported at 73,200 MT which is a hike of 13.9% over February last year. Likewise, exports of variety meats from the USA during February increased by 11.3% compared with the same month in and were 37,388 MT. The figures for USA's export performance across its various overseas markets are presented in the table alongside. The Mexican market received USA exports of 43,347 MT of pigmeat in February. Mexico's pigmeat imports from the USA in the Jan-February period fell by 4.3% in the two months and were 92,526 MT. Mexico was the #1 export market for US pigmeat with a 27.9% share of its total sales going to this destination. Japan, the USA's second largest market YTD but the largest market in February, received 37,999 MT of US pigmeat in February 201 In what must be a reaction to the Japanese earthquake/tsunami/nuclear accident this market is up 19% on the YTD figures. year to date 2011 exports to Japan were 74,486 MT. YTD US exports to Canada were effectively unchanged compared with the YTD data last year and amounted to 26,612 MT. The YTD totals and changes for other key (metric tonnes) Source: US FAS markets are; South Korea 32,700 MT (+143%), Russia 7,279 MT (+1408%). China and Hong Kong showed contrary movements; China now up to 36,186 MT and Hong Kong down by 60% to 17,574 MT. All other markets were down 17% and bought 38,145 MT of US pigmeat YTD. US imports of pigmeat up until February 2011 were recorded at 52,709 MT and that is down 4.9% on the same period last year. The February 2011 total was 25,683 MT and this is 7.9% less than February 201 Fresh and chilled pigmeat imports were Source: US FAS Pork cuts US pigmeat exports, February 2011 Variety meats YTD 2011 YTD 14,673 MT - that's an 11% decrease on February 201 Frozen pork imports were 6,287 MT which is down 13.7% on February 201 In February 2011 Canada exported 20,745 MT of pigmeat to the USA. Year to date Canadian-sourced imports were 43,015 MT - a 7.9% decrease on 201 Canada made up 82% of total US imports. Denmark exported 4,558 MT of pigmeat to the USA in the frost two months of 2011 which is an 8% decline compared with 201 During February 2011 Danish exports of pigmeat to the USA were 2,399 MT. US pigmeat imports, February 2011 % Change Japan 37, ,486 62, Mexico 29,338 14,009 92,526 96, Canada 12,209 1,403 26,612 26,698-3 South Korea 16,782 2,750 32,700 13, China 8,469 9,930 36, Taiwan 1,731 1,421 5,793 7, Russia 4, , Hong Kong 1,622 5,084 17,574 44, Others 19,319 1,774 38,145 45, ,547 37, , , ( metric tonnes) Pork YTD 2011 YTD % Change Canada 20,745 43,015 46, Denmark 2,399 4,558 4, Others 2,539 5,137 3, ,683 52,709 55,

10 AUSTRALASIA & EMERGING ECONOMIES ISSUE NO /05/11 PAGE: 10 OZ imports fall as domestic production and exports grow The Australian trade data for the first two months of 2011 are now available. The import trend line is showing very clear signs of entering a downward phase and the export trend line is showing an upturn. The February export sales data were up c. 1.7% by volume and imports were down c. 20%. Domestic slaughterings and production have also increased - up 3.1% and 2% respectively for the trend lines, and up 9% and 2% respectively for the month of February. MAT export volumes are up 4.6% and total import volumes are up 7% for the period ending February Export values are down 9%.and import values are down 4%. The chart alongside illustrates these changes with export and import volumes shown on the two vertical axes. In February Australia exported 2,750 tonnes (Shipped Weight) of pigmeat. In value terms this was worth A$7.3 million, or about 20% lower than in February The trend in total volume was 36,470 tonnes. The Moving Average for the value of these exports was recorded at A$113.2 million, which is a 8.8% decline in dollars received on 201 The average price in February was A$2.65/kg, a 21.1% decrease over the year. Export values to the Singapore market decreased by 38% in February and are c. 12.2% down on the MAT trend. The volume was 21.2% down on February 201 For other major markets there was a decrease in export volumes in February; New Zealand sales were down 35% and Hong Kong sales down 27%. Sales to Hong Kong show a trend decrease of c. 6% over the year, New Zealand sales were down c. 11% and sales to Singapore down c. 7% on the trend line. Singapore, New Zealand and Hong Kong are the major destinations for Australian pigmeat and made up 58.2% of the total exports for February February's pigmeat imports into Australia were 9,102 tonnes which is a 19.6% decrease on February 201 The trend in total import volumes increased by c. 1% in the 12 months since February and was reported at 137,427 tonnes. The MAT trend in value was A$467.2 million, a 4.1% decline year on year in dollar terms. Canada's exports fell in February with 2,215 tonnes of pigmeat sold to Australia in February This is c. 22% less than a year ago and the 12 month trend in import volumes from Canada is recorded at 39,807 tonnes, c. 15% less than in the 12 months since February 201 The trend in value was down c. 12% and totalled A$126.2 million. Denmark's exports also fell back in February. It exported 3,479 tonnes of pigmeat to Australia in that month. This is a decrease of 27% from February 201 But the trend in Source : ABS Source : ABS Australian pigmeat exports February 2011 Australian pigmeat imports February 2011 Danish import volumes is reported at 46,794 tonnes (up 2.7%) while the trend in total value fell 20% and equalled A$170 million. US pigmeat exports to Australia gained ground in February and were 3,333 tonnes, a c. 10% increase from February 201 The trend in total volume was 49,411 tonnes which is a c. 14% increase on February 201 The trend in total value was reported at A$158.7 million and is 27% higher than as measured in February 201 Singapore New Zealand Hong Kong MAT February , , , , MAT February , , , , % change February , February -10 2, , % change Australian pigmeat exports/imports MAT in volume Exports tonnes Imports tonnes 56, ,000 51,000 46,000 41,000 36,000 31,000 26,000 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Exports MAT Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Canada Imports MAT Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Denmark Dec-10 Feb , , , , ,000 90,000 80,000 70,000 USA MAT February , , , , MAT February , , , , % Change February , , , , February , , , , % Change

11 ASIA & EMERGING ECONOMIES ISSUE NO The Japanese trade data for the first month of 2011 are just one data point but the sales numbers in that month indicate that US exporters are off to a great start. The January 2011 import sales data show a 19% increase compared with for US-supplied pork. sales for all imports are up 2%. In contrast with the USA, Danish exports are down 23% and Canadian sourced supplies are down 12% compared with a year earlier. imports of pork in January 2011 were 57,683 MT and this is 2.1% higher than in January 201 During January Japan imported 17,986 MT of fresh and chilled pigmeat which is 8.5% more than in January 201 Imports of frozen pork were 39,913 MT, which is about the same as January 201 The USA's exports for January 2011 were 24,384 MT - and US sales are up 18.8% on a year to year comparison. Canada exported 12,087 MT of pigmeat to Japan during January That's a 12% drop year on year. Danish export sales were 9,266 MT and this is a 23.2% drop on last year. In January 2011 Japan's pork stocks were reported as 170,610 MT. This was about the same as a year ago. Imported pork stocks in January 2011 equaled 144,817 MT and this was 1.3% higher than last year. Domestic pork stocks were 25,793 MT, an 8.1% decline on last year. /05/11 PAGE: 11 Flying start for US exports to Japan in 2011 Japan's pigmeat imports, January 2011 ( metric tonnes) January 2011 YTD 2011 YTD Source: Japan's Agriculture & Livestock Industries Corporation YTD % change Fresh & chilled pigmeat 17,986 17,986 16, Frozen pigmeat 39,691 39,691 39,913-6 US 24,384 24,384 20, Denmark 9,266 9,266 12, Canada 12,087 12,087 13, Pigmeat 57,683 57,683 56, Pork sales in Japan increased held steady compared with the previous year and were 130,245 MT. The sales of imported pigmeat were 54,397 MT - up 6.8% on January 201 Domestic pigmeat sales were down year on year 4.3%, to 75,848 MT. FMD drives South Korean imports to new heights The South Korean market continues to be a bonanza for exporters. All except Chilean suppliers are sharing in this bonanza but with the lion's share going to US exporters. The Q data shows how much damage to domestic availability has been caused by the FMD outbreak in South Korea. YTD March 2011 pork imports were up 40% in this quarter. The total volume of pigmeat imports was 102,205 MT. USA imports held the # 1 import supplier spot by a long way and YTD purchases from the USA are up 82.3% to 35,804 MT - a third of the total. And this is before the new US-South Korean free trade agreement (FTA) is approved and implemented. The US-South Korea FTA will eliminate tariffs on 90% of US pork products by 1 January (South Korea and the European Union also recently signed an FTA, and Chile secured an FTA agreement in 2004 which has reduced tariffs on Chilean pork with a target date for abolition in 2014.) Canadian sales were up 27.4% to 18,645 MT YTD March The major European suppliers saw their sales increase by 30% on South Korea's pigmeat imports, March 2011 Source: Korea International Trade Association Mar 2011 YTD 2011 YTD %Change 11/10 United States 14,769 35,804 19, Canada 7,973 18,645 14, Chile 2,474 10,053 12, Spain 3,222 6,651 4, Belgium 1,323 3,859 3, France 1,188 3,767 3, , ,205 73, the YTD total. Chilean-sourced supplies fell by 19% in the quarter compared with Q1 201 When compared with March 1 Chilean sales were down 47%. 40,648 MT of pigmeat was imported in March and this is a new monthly record total - that's a 53% increase on March 201 US sales for the month were 14,769 MT which was another record and is 122% higher than March 201 Canada also set a record for monthly sales with 7,973 MT sold and a year on year increase of 57% on last year.

12 NEWS IN SHORT ISSUE NO /05/11 PAGE: 12 News in short...news in short...news US-South Korea The USMEF is launching an expanded and intensified campaign to promote US pork in South Korea - ahead of the expected approval of the draft US-South Korea Free Trade Agreement which will remove most tariffs on US pork by The new USMEF pork campaign will get a grant of almost $250,000 from the Pork Checkoff/ NPB and USMEF wants to supplement this with expanded funding through the USDA's Market Access Program (MAP). "South Korea is an extremely important market for U.S. pork producers," said Danita Rodibaugh, USMEF chair-elect and a pork producer from Rensselaer, Ind. "The United States currently supplies 27% of the imported pork going into Korea, but there is aggressive competition from Canada, Chile and other nations, and this campaign will help establish a more consistent identity for U.S. pork." Vietnam/Korea PIC has concluded an agreement with a local agribusiness, Greenfeed (GF), for the production and distribution of genetically advanced swine semen in Vietnam. The first 100 elite boars have been shipped from PIC's Apex genetic nucleus in USA and taken up residence in GF's 500-boar stud located in Dong Nai province in the south of the country. Four genotypes are featured in the product line-up, to provide options to match customers' preferences and the first semen doses were delivered to pig producers in February. In South Korea PIC has extended its agreement with franchise partner, PIC Korea, and is embarking on a programme of expansion to capture a leading share of the swine genetics market in the country. Two new gilt multiplication farms were commissioned in and capacity growth will be accelerated in 2011 with the addition of a further 3,700 GPs in 3 multiplication units. Expansion of the supply base is underpinned by a second nucleus facility that is now under construction and will be stocked by import of elite great-grandparents from PIC genetic nucleus herds in North America. Mexico The Agriculture Department in Mexico (SAGARPA) is claiming successful installation of 324 biogas digesters on hog farms, dairies and slaughterhouses in Mexico with associated savings in production and power generation equivalent to 69 giga watt hours per year. This is enough to power almost 30,000 homes in a year and a reduction of 1.4 million tonnes of carbon dioxide. Energy Secretary Jose Antonio Meade, said Mexico was committed to the use of alternative energies that promote the conservation of natural resources and reduce fossil fuel use. "Good environmental management will be the basis of productivity and competitiveness of the pig," he warned. The Federal Government supports producers with grants of nearly a third of the cost of equipment to through the Trust Fund for Shared Risk (FIRCO). FIRCO is promoting the use of renewable energy sources in the livestock production and processing sector UK The UK pig industry has launched its "Roadmap" document which sets out a plan to achieve reductions in its environmental impact. The Roadmap's 22 pages have been produced by BPEX and give targets for the reduction of key environmental burdens over the next 10 years. The four environmental impact categories being targeted are: - Climate change potential: is an increase in temperature caused by the emission of greenhouse gases into the atmosphere. The target is a 17% reduction - Eutrophication potential: is the amount of nutrients such as nitrate and phosphate from manure or slurry that ends up in the aquatic environment. The target reduction is 15% - Acidification potential: relates to the release of acidic gases such as ammonia, again from slurry or manure or sulphur dioxide from burning fossil fuels. These have the potential to form acid rain which, in turn, can damage ecosystems. The target is a 15% cut - Abiotic resource depletion potential: estimates the use of scarce natural resources including fossil fuels. The target here is a reduction of 16% achieved through even greater efficiencies. The author of the Roadmap report, BPEX Environment Programme Manager Nigel Penlington, said: "The aim is to reduce all of these by between 15% and 17%. Since 2001 we have already seen reductions of between 7% and 17% The roadmap not only outlines the targets for the industry but also takes a broad look at ways these targets can to be achieved. The fine detail will be posted on the BPEX website as it develops." EU Members of the European Parliament (MEPs) have decided that food labels should contain information on slaughter methods and country of provenance. MEPs also want an indication of the "date of first freezing" for frozen unprocessed meat, poultry and fish. The MEPs want labels to indicate where an animal was born, reared and slaughtered. Also, they want labels to show if meat is derived from a slaughter process without stunning (in accordance with certain religious traditions) and meat consisting of combined meat parts must be labelled "formed meat". The rapporteur of the Environment and Food Safety Committee will discuss these changes with the Council ahead of Parliament's plenary vote in July. Netherlands The Dutch bank Rabobank International has released a new presentation on the future of the global meat industry which argues that chicken consumption will outgrow pork consumption and be the main source of meat protein by 203 By then chicken consumption is forecast to be 39% of global meat consumption - compared with 37% for pork and 20% for beef. The compound annual growth rate of all meat consumption is forecast to be 1.9% per annum between and 2030 but poultry consumption will grow at a rate of 2.4% per annum compared with 1.8% for pork. Overall, Rabobank calculates that the extra demand for fuel, food and animal feed will require an additional 500 million metric tons of grains and oilseeds compared with levels. Mulder's presentation identifies 75% of the growth in global poultry demand as coming from emerging markets - mainly China, Brazil and India. Russia flows closely behind. He notes that the USA, Argentina and Brazil have the lowest costs of broiler production and that the global trade in poultry meat will rise by 12 billion metric tons and represent 17% of global production by 202 Forty% of production growth will come from the BRICs - Brazil, Russia, India and China leading the way. Mulder claims that chicken has a lot going for it when comparisons of cost of production and greenhouse gas (GHG) emissions are considered. It has a higher feed conversion rate than pork, shrimp, beef and salmon, and poultry comes out as one of the lowest producers of GHG emissions per metric ton -much lower than beef and significantly lower than pork.

13 PRICE MONITOR ISSUE NO /05/11 PAGE: 13 Company News VION has announced proposals to re-structure its sausage processing business in the UK and its sow slaughter and bacon production sites in the Netherlands. This will result in the closure of 3 sites - 1 in the UK and 2 Dutch factories. VION will transfer all operations currently undertaken at the Sheffield site in England to VION Hall's site in Broxburn, West Lothian, Scotland. 250 jobs are potentially affected. In the Netherlands about 170 permanent jobs and 200 casual jobs are affected by the plan. The company's statement claims that the restructuring is necessary for, "competitiveness in the highly competitive food market." The Dutch sites are; VION Groenlo which will specialize in the slaughter and processing of meat sows resulting in the closure of the Ballering Export facility. Bacon production will be concentrated in VION Scherpenzeel and this will mean that bacon production ends at VION Doetinchem. VION NV has about 27,000 employees and an annual turnover of around $14 billion. VION Netherlands has two business units, Fresh Meat and Convenience producing pork and beef products in 10 sites in the Netherlands. Maple Leaf Foods' oods' results for Q have been released. Highlights include; Adjusted Operating Earnings up 61% to $57 million, Net earnings in Q1 down 47% to $15 million, including $26.1 million in pretax restructuring costs. Sales for Q down 4% to $1,147.9 million compared to $1,191.5 million last year, primarily due to business divestitures. Excluding the effect of divestitures, and the impact of a stronger Canadian dollar, sales were up 4%. Adjusted Operating Earnings increased to $57 million compared to $31.5 million last year primarily due to improved performance in the Protein Group. Adjusted Earnings per Share increased to $18, including $2.4 million ($02 per share) related to tax benefits associated with a prior acquisition. Adjusted Earnings per Share for the prior period were $07. Net earnings fell to $15 million or $08 basic earnings per share in Q1 compared to net earnings of $19.9 million or $14 basic earnings per share last year. Net earnings in Q1 included $26.1 million of pre-tax costs related to restructuring activities (: $4.0 million). "Maple Leaf Foods delivered our eighth consecutive quarter of improved results, with a significant increase in profitability in our fresh and prepared meats businesses," said Michael H. McCain, President and CEO. "While the most significant challenge has been rising raw material costs, we are passing on price increases to protect our margins. Overall, this was another strong quarter of performance." Adjusted Operating Earnings in the Meat Products Group for Q1 increased 131% to $26.6 million compared to $11.6 million last year, driven by margin PRODUCER PRICES FOR PIGMEAT FROM AROUND THE WORLD WHOLE HOG Price Monitor Date: 9 May 2011 European Union National currency % Change previous week Source: Whole Hog ( Exchange Rates 09 May 2011 expansion in prepared meats and improved primary processing markets. Prepared meats margins strengthened as price increases were successfully implemented to manage the effect of rising input costs. Strong performance in primary pork processing operations was driven by improved market conditions in North America and operating efficiencies at the Brandon pork processing facility. Sales in the Agribusiness Group for Q1 increased 37% to $57.3 million from $41.8 million in UK (pence/ kg dw) US $ (cent/ kg dw) Euro (euro/- kg dw) Week ending Belgium Denmark France Germany Ireland Italy Netherlands Spain Hungary Poland Czech Republic United Kingdom The Americas USA Canada Mexico May-11 Brazil May-11 Australasia Australia Apr-11 p er US$ per UK per Euro Australian $ UK Canadian $ Japanese Yen US$ Euro Danish Kroner Q1 last year. Hog prices have increased 18% since last year and outpaced the Company's net cost of grain, contributing to higher earnings. The contribution from by-products recycling operations also increased due to higher biodiesel sales volumes, eco-energy credits that were not received in the first quarter of, and operational improvements. The benefit of higher market prices in the rendering business was mostly offset by higher raw material costs. Whole Hog Brief is published monthly. Editorial: orial: editor@porkinfo.com Subscriptions: tions:subsscriptions@porkinfo.com Phone: +44 (0) Fax: ax: +44 (0)