Meat - Hog, Cattle, Poultry etc.

[la papillion]

Thks guys, for highlighting this interesting article on the relationship between hog/cattles/corn.

I invested in china milk, but never knew that the feed is so important to their cost. Fortunately, china milk grew around 75% of their own feed, hence isn't subjected to buying corn to feed their 'corn products', haha

then, they are subject to some fertilizer costs.... there's so much self generated dunk...so, surely, they must buy some from somewhere...and as far as i know, that aint cheap...

Hi K, if I'm not wrong. They have enough to sell their dung as fertilisers. I'm not sure, been a while since I read up on china milk. Haha, they're really to integrate their process - feed the cows, milk the cow, milk the bulls, breed some more cattles, sell not so productive cows for meat, sell leather from not so productive cattle, use dung for growing feeds. Repeat as long as possible.

[helios]

yo la pap,

Cupid is e right person to ask on china milk; here's e internal link:
viewtopic.php?f=46&t=143&p=5356#p5356

a penny thought on their communications, it's well-managed by August consulting.

[la papillion]

Hi san,

Yea, I know Cupid. Told him i'll do an indepth analysis of china milk's competitors, up to now still haven't done it yet, haha

[winston]

How We'll Make a Fortune Exporting Pork to China
By Tom Dyson

"I eat sausage in the morning, a meat dish and a vegetable dish for lunch and the same for dinner. If there's no meat, I won't feel full."

That's from the mouth of 20-year-old college sophomore Guo Meng as she chows down at a local McDonald's.

"It was impossible for my parents' generation to have meat all the time," adds Xue Wei, a 42-year-old teacher. "Now we can eat meat every day."

Since 1980, per-capita meat consumption in China has nearly tripled. The price of pork has jumped more than 50% in one year, yet the butcher shops remain packed.

In fact, there's so much money to be made in the Chinese meat trade that 26-year-old Zhou Jian recently switched from selling car parts to pork – and is now making three times more money.

The Chinese eat more pork than the rest of the world combined. The country consumes seven times as much as the No. 2 consumer, the United States. And consumption is increasing. According to the USDA, Chinese pork consumption rose 22% between 2002 and 2006.

In 2007, a shortage of pork hit China. The earthquake, huge snowfalls, and an outbreak of swine disease have resulted in a 9% decline in Chinese pork production. Chinese pork prices rose 68% between April 2007 and April 2008.

The disease problem in China is going to get worse. Peasant farmers account for 70% of hog production in China. As peasant farmers move to the cities for manufacturing jobs, it's putting pressure on supplies. So the government is setting up factory farms like they use in the United States. But with China's polluted water and overcrowding in the hog sheds, disease will spread even more readily than it already does...

"I am very skeptical of these modern facilities that are being built today [in China]," says Nick Rosa, a Chinese hog-industry expert speaking at JPMorgan. "What typically happens in a hog farm, when they have a brand new facility, with the first cycle, the mortality rate is 5%. But then each progressive cycle as disease starts building up, it goes from 5%, 10%, 15%, 20%, and before you know it, you have a big problem, and that is what I am predicting is going to happen in China."

Meanwhile, there's a glut of pork in North America. The situation is so bad in Canada, the Canadian government is giving Canadian hog farmers money to kill their pigs.

The Canadian Pork Council is giving hog farmers C$225 for every breeding pig they "cull." The funds help farmers cover the costs of transport, euthanasia, and disposal. To qualify for the money, hog farmers must agree to "depopulate" an entire breeding barn and promise not to house more hogs in the same barn for three years.

As of two weeks ago, the Canadian Pork Council had received 500 applications.

In the U.S., hog prices are so low, farmers are killing their piglets and using them as compost.

I think there's a big opportunity for America and Canada to export pork to China. As one hog-industry observer put it, "The potential for further Chinese importation of pork is almost incomprehensible." Chinese pork imports are already up 311% from last year.

My favorite way of playing this is to buy American and Canadian meatpacking companies that do business with China... As China's shortage grows more severe and hog prices recover in the U.S., these firms will make fortunes.

[sidney]

My fav white meat. Born in factory, slain in factory. The KFC we eat may be less than 2 months old. Nonetheless, for the future chicken will remain popular due to ease of raising, quick period slaughting (inventory turnovers) and efficient use of land space, compared factories to land grazing for cattles.

Threats i can think of is bird flu and/or containmination of feeds due to high levels of elements harmful to health e.g. high concentration of sulphurs.

Even if chicken produce can meet demands of emerging countries and developed nations, cost of feeds remains a great concern as partial corns and other grains produce will be grown for biofuels thru heavy subsidries.

Incentives given to crop farmers, like the U.S wishes to wean off energy demands from middle east. Unless there is breakthru in harvesting biofuels or using other substiutions, the desire to uphold their energy securities is likely to persisit for the next 2,3 decades.

One fine dae, our chickens will get sick due to high carbon emissions.

[winston]

China’s overseas purchases and imports of pork and pork products in calendar year 2008 were unprecedented for any single country in history, according to U.S. Meat Export Federation (USMEF) calculations from just-released Chinese trade data.

Based on import totals from China and Hong Kong, the country imported 1.925 million metric tons (4.2 billion pounds) of pork and pork products last year, including 1.161 million tons (nearly 2.6 billion pounds) of pork variety meats and 764,000 tons (1.7 billion pounds) of pork cuts.

Available trade data suggests that China’s imports eclipsed the previous single-year record of 1.022 million tons (2.2 billion pounds) of pork imported by Japan in 2005.

“The volume demonstrates the huge influence China can have on global markets when supply and demand become imbalanced,” said Joel Haggard, senior vice president of USMEF’s Asia Pacific region. “The import volume, though huge, represents less than 5 percent of China’s consumption.”

Although final data for 2008 is not yet in, USMEF estimates that total U.S. pork and pork product exports to China and Hong Kong reached 386,000 tons (851 million pounds) valued at nearly $700 million in 2008. The EU and Brazil were the other major pork suppliers to the region.

Haggard believes it is unlikely that China’s pork imports this year will match last year’s record. Increased industry profitability last spring, coupled with a range of hog raising subsidies, has resulted in a substantial expansion of China’s herd, and lower hog and pork prices. As of yesterday, live market hog prices in China averaged RMB 12.75/kg., or $84/cwt., 25 percent below the record RMB 17.04/kg. price set in April last year.

According to the National Bureau of Statistics, by the end of the third quarter of 2008, China’s live hog inventory had increased 6.6 percent from the year-earlier figure, and the sow population increased 12.4 percent. Total marketed hogs increased 5.8 percent and meat production was up approximately 6 percent.

Although the post lunar new year early spring period usually marks the annual low point in demand, USMEF has heard reports of serious respiratory disease outbreaks that could be adding a bearish tone to the market. That said, USMEF expects imported variety meat demand to hold through 2009, although U.S. muscle cuts face stiffer competition from domestic supplies.

On Jan. 12, China’s National Development and Reform Commission (NDRC), the state’s leading macroeconomic planning and policy agency under the State Council, in concert with key ministries including the Ministry of Commerce, the Ministry of Agriculture, AQSIQ and the Ministry of Finance, announced a new temporary pork price stabilization program ostensibly designed to smooth out the country’s volatile hog cycle.

Specifically, the program establishes an early warning system for low live hog and pork prices based upon the ratio of live hog to grain prices. As the live hog to corn price index drops, the program sets triggers for different policy actions by central and local authorities, ranging from mandating government purchases of pork for reserves to restricting imports and stimulating exports if prices drop into a “red” zone range.

China’s first new central policy document of the new lunar year of the ox pledged “tough” measures to support rural areas and agriculture this year. China noted that rural areas face the most difficult challenges during the global economic downturn. With 40 percent of rural income dependent on non-farm work, such as manufacturing jobs in coastal factories, the loss of overseas demand will translate directly into pain for the rural sector.

Results of a new Chinese survey announced yesterday estimate that 15 percent of migrant rural workers - approximately 20 million people - have lost their jobs due to the economic crisis. A number of subsidy increases have been announced for the rural sector in addition to those for the hog-raising sector, including farm machinery and appliance purchasing subsidies, and a 16 percent rise in the minimum purchase price for grain.

(From Cattle Network)

http://www.ehedger.com/2009/02/03/china ... y-in-2008/

[winston]

THE DOWNTREND IN BEEF by Brian Hunt, Daily Wealth

Our chart of the week is for the contrarians out there.

The contrarian investor's job is simple: find and buy assets that are "blown out," that have been dumped by the rest of the market. As you can see, the tasty asset that walks on four legs – cattle – is in the "dumped" category.

Cattle prices are like our friend Dr. Copper. They are highly sensitive to how "flush" the global consumer is feeling. And while we recently pointed out the consumer isn't dead yet, he is pulling in his horns a bit. The USDA predicts global meat demand will fall this year for the first time in a decade.

Our chart shows the past year's trading in the fund that allows investors to take a position in cattle. As we mentioned, it's in a terrible bear market... down 36% in the past year. Just what a contrarian looks for.

– Brian Hunt

[winston]

How to Play the Collapse in Meat Prices By Tom Dyson, Daily Wealth

I just got an e-mail from a friend of mine who's a pig farmer…

"The pork industry is just about ready to implode," he writes.

My friend runs a farm in one of the most important hog farming regions of the country: Sioux County, Iowa. He grows corn and soybeans on his farm. Then, he feeds the grain to several thousand head of hogs. He also raises cattle and runs a hog breeding operation.

My friend always keeps me updated on the hog industry. And right now, he says demand for pork has crashed. The meatpackers can't get rid of their pork inventory, so they've cut the number of pigs they slaughter by 50,000-60,000 thousand hogs per day.

Because the meatpackers aren't slaughtering as many pigs, there's a backup of live hogs on the farms. Lean hog prices have fallen about 50% from their 2008-highs.

"It has gotten so bad that I was recently offered 5,000 head of piglets for free, zero, nothing. Just come on down and pick them up," says my friend. "Today's futures prices are so low, I would still lose $10 per head feeding free pigs."

Beef prices are falling, too... although not as severely. Demand for steak has collapsed in the recession and there's so much oversupply, meatpackers are being forced to turn their high-end steaks into hamburgers in order to sell them. Live cattle prices have fallen 18% from 2008 highs.

The IPath UBS Livestock ETN (COW) tracks livestock prices. It's made up of 69% cattle futures and 31% lean hog futures. It's down 47% since October 2007.

Here's the thing, while livestock prices collapse, the stock prices of the giant meat companies, Tyson and Hormel, have soared in the stock market bounce. Tyson is the world's largest processor of beef, pork, and chicken. Its stock is up 150% since last November. Hormel is another processed meat giant, specializing in pork. Its stock is up 55% since December.

Shorting these businesses is one way to play the collapse in meat prices. The oversupply of meat combined with the collapse in demand is causing supermarkets to discount meat products, which pinches their profits.

Shorting corn is a second strategy. With livestock on the ropes, demand for feed corn should fall. But according to my Iowa contact, there's going to be a record breaking Midwest corn crop this year.

"Corn on the board could easy lose a dollar per bushel from this point," he says.

[b0rderc0llie]

I am exploring the idea of going long on hog and short on sugar.

Idea being hog is in bad shape and sugar being in good shape. Intending to hold the positions long term and see how it will turn out.

[b0rderc0llie]

Am long 1 contract of Lean Hog Dec 2009 (LHZ9). Become a farmer liao ...