In spite of yesterday’s great news regarding exports, some new “realities” will likely take some luster off of U.S. meat and poultry export figures in months to come. We hate to rain on the parade, but anecdotal evidence from industry participants leads us to believe that exports for May (and perhaps June) will not be nearly as strong as they were in April. The primary culprit is shipping patterns and the related issue of shipping containers. Again based on anecdotal evidence, shipping firms have apparently found more profitable routes and products for their services in recent months, especially with the low value of the U.S. dollar. Their response to these more lucrative hauls and lower imports have created a shortage of containers and that, in turn, is a driver of higher frozen meat and poultry inventories the past two months. U.S. export customers find themselves in the unenviable spot of owning frozen goods in U.S. warehouses and having no containers to put them in. The inability to convert inventories to cash is already having major impacts on export customers’ liquidity levels. These issues will be solved as U.S. shippers pay more for services – but it will take awhile for those increases to filter through the market.

How big has been the impact of this week’s grain markets on hog producers? The graph at left shows the costs of the corn and soybean meal needed to make a 16% crude protein pig diet. That diet would be a good approximation for the average pig diet since crude protein levels are supplemented by synthetic amino acids to make the higher protein diets need by today’s high-lean pigs. The roughly $40/ton increase of the past 10 days is the largest we can recall witnessing since we began using this index in the late 1990’s. That explosion in future feed prices has breakeven projections for market hogs next summer above $95/cwt carcass weight. We had to add $50 to the Y-axis of this chart just to get the most recent observations on it! Projected breakeven costs for next summer are now above $95/cwt carcass. Will weaned pigs and feeder pigs have any value at all?

Weighted average cash hog prices fell back below $70/cwt carcass weight today as a number of companies struggled with flood conditions in Iowa. Tyson Fresh Meats did not slaughter at its Louisa County, Iowa plant on Thursday and will not do so on Friday or Monday. Chain speeds have been reduced at Tyson’s Waterloo plant as well because of workers dealing with flooded or threatened homes or not being able to get to work. Tyson hopes to add hours on Saturday and next week at Waterloo to process the extra pigs. Excel will not slaughter at its Ottumwa, Iowa plant today. That plant sits very close to the Des Moines River but is protected by a levee that held fast in the 1993 flood. Excel will operate its Beardstown, Illinois plant on Saturday to handle extra hogs and fulfill customers’ needs. There has been some concern about city water wells that supply Swift’s Marshalltown, Iowa plant but there have been no officak announcements on its status. Farmland’s Denison, Iowa plant had some concerns about the capacity of the sewage treatment system but, again, no news is good news there. Rains ended in eastern Iowa last night and forecasts call for dry conditions for this week — a BADLY needed respite!