Coop Supply Hosts Grain Marketing Meetings
YOU AND YOUR SPOUSE ARE INVITED To a Grain Marketing Meeting sponsored by Cooperative Supply Inc. & INTL FCStone
Location & Dates
Hilltop Lanes - Dodge & Howells - Mon. March 3rd - 6:00P.M. doors open 6:30P.M. Supper
Leigh - Tues. March 4th NOON at Park Place
Columbus - Tues. March 4th 6:00p.m. Doors Open
All meetings begin with meal followed by:
-China & South America Outlook
-use of risk mgt marketing tools
Please RSVP to any Coop Supply location by Feb. 26th.
NE, OH Senators Join Call For Japan To Eliminate Tariffs
Portman, R-Ohio, Fischer, R-Neb., Signed Letter To USTR On TPP
Senate lawmakers are calling on Japan to eliminate tariff and non-tariff trade barriers for U.S. agricultural products as part of the ongoing Trans-Pacific Partnership (TPP) trade talks.
The TPP is a regional negotiation that includes the United States, Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam, which account for nearly 40 percent of global GDP. Lead negotiators are met this week in Singapore – ahead of the TPP ministers meetings Feb. 22-25 – to discuss outstanding issues, including Japan’s recalcitrance on market access.
In a letter sent Friday to U.S. Trade Representative Michael Froman, 18 senators, led by Michael Bennett, D-Colo., and Charles Grassley, R-Iowa, asked for assurances that the TPP negotiations will not be concluded until Japan agrees to eliminate tariff and non-tariff trade barriers for agricultural products. In addition to Bennett and Grassley, signing the letter were Sens. Roy Blunt, R-Mo., Richard Burr, R-N.C., John Cornyn, R-Texas, Joe Donnelly, D-Ind., Deb Fischer, R-Neb., Kay Hagan, D-N.C., Jim Inhofe, R-Okla., Mike Johanns, R-Neb., Mark Kirk, R-Ill., Jerry Moran, R-Kan., Rob Portman, R-Ohio, Mark Pryor, D-Ark., Pat Roberts, R-Kan., John Thune, R-S.D., and Mark Udall, D-Colo.
Japan is demanding special treatment for its agricultural sector, including exclusion from the agreement of certain “sensitive” products. The United States never has agreed to allow a trading partner to exempt as many tariff lines as Japan is requesting. It wants exemptions for 586 tariff lines, or 11 percent of its tariff schedule. (In the 17 free trade agreements the United States has concluded this century, a total of 233 tariff lines have been exempted from having their tariffs go to zero.) A recent analysis of Japan’s market access offer can be viewed here.
The Asian nation is an important market for U.S. agriculture – the fourth largest – which shipped $12.1 billion of food and agricultural products to the island nation in 2013.
The senators pointed out in their letter that, if Japan is allowed to claim exceptions for sensitive products, other TPP countries inevitably will demand the right to do the same. That, they said, would cost U.S. jobs and billions of dollars in future U.S. agricultural exports and would undermine the TPP and future trade talks, including the ongoing Trans-Atlantic Trade and Investment Partnership (TTIP) negotiations between the United States and the European Union.
A number of U.S. agricultural organizations resounded the points in the Senate letter.
“What is achieved in TPP with Japan will set the standard for future TPP partners such as China and the Philippines and for TTIP negotiations,” said NPPC President Randy Spronk, a hog farmer from Edgerton, Minn., who pointed out that the EU already has indicated it will seek to protect pork and other agricultural products. “Japan’s market access offer, if accepted, would be a radical departure from past U.S. trade policy, exempting nearly three times more tariff lines than were exempted in all 17 previous U.S. free trade agreements combined. All U.S. sectors are at risk if the precedent of allowing widespread product tariff exemptions is established.”
Those sentiments were echoed by Bob McCan, president of the National Cattlemen’s Beef Association and a cow-calf producer from Victoria, Texas. “It is fundamentally important that all TPP members, including Japan, abide by the same terms of TPP as the other members. Excluding products for purely political reasons sets a dangerous precedent that will result in other TPP countries seeking similar treatment. This will undermine all efforts to make TPP a true 21st century agreement based on market principles and sound science,” said McCan.
“It is vital that TPP be done in a comprehensive manner so that all of America’s farmers and ranchers can realize the benefits of a more open regional marketplace,” said American Farm Bureau Federation President Bob Stallman. “The Trans-Pacific region is an economically dynamic slice of the world, and to be meaningful, these talks need to enhance opportunities for all sectors, rather than picking winners and losers based on one nation’s perceptions.”
Added James H. Hodges, president and CEO of the American Meat Institute, “The TPP is a 21st century trade agreement that must be ambitious and comprehensive. To live up to the high standards of the TPP partners, Japan must be willing to negotiate all products.”
“As a major wheat importer, it is in Japan’s interest to free its grain trade and ensure the future competitiveness of its large milling and wheat foods industries under TPP,” said U.S. Wheat Associates Chairman Dan Hughes.
“We are open to a reasonable but limited amount of time for Japan to transition to a zero tariff for wheat,” said National Association of Wheat Growers President Bing Von Bergen, “but we must see that outcome if Japan is to earn our support for its TPP membership.”
Valmont Announces Fourth Quarter and Fiscal Year 2013 Results
Valmont Industries, Inc., a leading global provider of engineered products and services for infrastructure and mechanized irrigation equipment for agriculture, reported fourth quarter sales of $827.9 million compared with $815.0 million for the same period of 2012. Fourth quarter 2013 operating income was $100.7 million versus $111.7 million in 2012 and included $12.2 million of a non-cash fixed asset impairment charge at Delta EMD. Fourth quarter diluted earnings per share were $2.04 compared with $2.43 in 2012. Included in fourth quarter earnings per share is an additional non-cash after-tax loss in the amount of $12.0 million or $0.45 cents per share resulting from the deconsolidation of Delta EMD and Valmont's proportionate share of the after-tax Delta EMD fixed asset impairment in the amount of $4.6 million, or $0.17 per diluted share.
For fiscal 2013, sales were $3.3 billion versus $3.0 billion in 2012. Operating income for fiscal 2013 was $473.1 million versus $382.3 million in 2012. Valmont's fiscal year net earnings were $278.5 million, or $10.35 per diluted share ($10.97 before consideration of the Delta EMD impairment and deconsolidation), compared with 2012 fiscal year earnings of $234.1 million, or $8.75 per diluted share.
"Led by an 8% revenue increase in the Engineered Infrastructure Products Segment, sales set another fourth quarter record. Fourth quarter revenue records were also achieved in the Utility Support Structures and Coatings Segments," said Mogens C. Bay, Valmont's chairman and CEO. "As expected, Irrigation Segment sales were lower. Operating income as a percent of sales was similar to last year's levels before the fixed asset impairment at Delta EMD."
Sales of $264.7 million were 5% higher than 2012. North American sales increased and international sales declined.
The need to improve reliability by adding physical capacity and increase the interconnectivity of regional transmission grids in North America continues to drive significant utility investments in transmission infrastructure. Further demand comes from renewable energy sources requiring connectivity to the grid. During 2013, the Company added manufacturing capacity to support market growth and satisfy customer requirements for shorter lead times. These newly commissioned facilities can make traditional monopole utility structures and a new Valmont designed 'jumbo' sized pole to address the market's growing demand for even higher voltage transmission lines up to 745 kilovolts.
Operating income declined 5% to $45 million, which represents 17.0% of segment sales. Operating income improved in North America on improved sales pricing, mix and leverage of fixed costs, but this was more than offset by volume deleverage in international markets and an inventory write-down associated with the loss of a project in North Africa. Customers are placing orders with shorter lead-times as additional industry capacity brought supply and demand more into balance. This has resulted in a decline of approximately $100 million in our year-end backlog.
Sales of $192.2 million declined 6% from last year's drought-driven record fourth quarter. In North America, the fourth quarter selling season reflected a more typical harvest season than last year. Last year's harvest was early, on account of dry conditions, which resulted in a more prolonged than usual fall selling season. The shorter selling season plus lower crop commodity prices contributed to the lower orders and sales, as evidenced by a decline in year-end backlogs. Growth continued in international markets.
While short-term swings in the farm economy can influence annual demand, long-term demand will be driven by the growing food needs of a rising global population and improving diets. To meet these needs, agriculture must increase its productivity. Competing demands on limited fresh water resources will drive agriculture to conserve water. Valmont's efficient irrigation products provide a lasting solution to these pressing problems, which we believe supports a favorable long-term outlook for this business.
Operating income was 22% lower than last year at $31.6 million or 16.5% of segment sales. The decline in operating income was a consequence of deleverage on lower volumes and planned business development efforts that increased SG&A expenses.
Engineered Infrastructure Products Segment (32% of 4th Quarter Sales) Lighting, traffic and highway safety products, wireless communication structures and components, and industrial gratings and access systems worldwide.
Fourth quarter sales were $267.2 million, an 8% increase over 2012. The increase was due to the contribution of Locker, an Australian engineered access systems company acquired in February of 2013, and higher sales of lighting and traffic products in North America.
Sales of lighting and traffic structures in Europe were slightly lower reflecting continued economic weakness and fiscal austerity measures throughout the region.
The additional sales from Locker more than offset the impact of a weaker Australian currency and economy on engineered access system sales.
Sales of wireless communication products were flat in North American markets and slightly lower in China.
Operating income doubled to $26.6 million, or 10.0% of segment sales. The improvement was the result of increased volumes in North America, the contribution of Locker, the benefit of cost reductions implemented in Europe and improved productivity in North America, Asia and Europe.
Sales of $85.6 million were 3% higher than last year. The revenue contribution of Pure Metal, a Canadian galvanizing acquisition completed in late 2012, more than offset the impact of Australia's weaker currency and economy on sales.
The performance of the Pure Metal acquisition has met our expectations. We have benefited from the increased geographic diversification and exposure to the strong Canadian economy.
Operating income rose 6% to $18.1 million or 21.2% of segment sales primarily due to the contribution from the Pure Metal acquisition.
"Record sales in all reportable segments drove significantly improved financial performance in 2013," said Bay. "Looking at results by segment, the Utility Support Structures Segment benefited from significant utility investments in the North American transmission grid. In the Irrigation Segment, historically high farm incomes drove annual sales gains in 2013. In the Engineered Infrastructure Products Segment, the first quarter acquisition of Locker in Australia plus improved sales in North America drove segment sales above $1 billion for the first time. Coatings Segment sales increased primarily due to a Canadian acquisition in late 2012.
"For the year, operating income as a percent of sales improved from 12.6% to 14.3%. The positive impact of acquisitions combined with operational leverage in all segments led to the increased operating income."
"We are facing a challenging first quarter comparison in light of last year's 47% first quarter earnings improvement," Mr. Bay said. "Last year we had exceptional irrigation results mainly driven by drought. This year's first quarter irrigation results will decline in comparison. In the utility business, we anticipate flat first quarter revenue due to less project activity in international markets. Operationally, severe weather has disrupted production and shipping in some of our facilities. This, plus some pricing pressure, will likely result in reduced first quarter utility profitability.
"Our present outlook is that first quarter 2014 earnings for the Company could be down around 25%. At this early stage in the year, we expect full year earnings to be slightly below 2013's $10.97 adjusted diluted earnings per share."
Final Day was Saturday at NE Cattlemens Classic
The 23rd Annual Nebraska Cattlemen’s Classic final day of shows was on Saturday, February 22nd . The Fancy Heifers and the Prospect Steer Sales wrapped up Saturday’s sales including a large crowd in attendance for the Sullivan’s Fitting Clinic sponsored by Purina/Sullivan’s and the Showmanship Blow-n-Go competition at the Classic.
Supreme Row judging finalized the evening celebration with an overflow audience.
Taking Junior Champion Showmanship honors was Ansley Maronde, York, NE; and Junior Reserve Showmanship went to Fletcher Larsen, Valentine, NE.
Intermediate Champion Showmanship honors went to Tejlor Strope, O’Neill, NE; and Intermediate Reserve Showmanship went to Kali Stratman, West Point, NE.
Senior champion showmanship honors went to Jefferson Keller, St. Paul, NE, and Res. Champion Senior Showmanship went to Savannah Schafer, Nehawka, NE.
The three official judges for Supreme Row were John McCurry, from Burrton, KS; Shawn Varner from Council Bluffs, IA; Spencer Schraeder, Wells, KS. These three gentlemen evaluated all 12 breed champion bulls and heifers to select the 2014 Supreme Champions. The Supreme Champion Heifer honors went to Blind Badger Ranch of Fort Morgan, CO, with the Champion Maine Anjou Heifer. This heifer sold to Timothy and Jake Zahm of Osceola, NE. The Supreme Champion Bull honors went to Dethlefs Angus Ranch of North Platte, NE, with the Champion Angus Bull. The bull sold to Larry Rice of Scottsbluff, NE.
FANCY HEIFER SALE
The 2014 Nebraska Cattlemen’s Classic Fancy Heifer Show and Sale was a favorite on Saturday afternoon, February 22nd in Kearney, NE. Nine lots of fancy open heifers on display attracted a large crowd to the show ring prior to the sale. Judge was Hyatt Frobose, Manhattan, KS, and the auctioneer was Tracy Harl of Kearney, NE.
Grand Champion Fancy Heifer and High-Selling Fancy Heifer was Lot 15, consigned by Bremer Show Steers of Fullerton, NE, and was sold to Derek Hubbard, Elm Creek, NE for $5,500.
Reserve Grand Champion Fancy Heifer was Lot 1, consigned by Gateway Genetics of Albion, NE. This fancy heifer was purchased by Mark Muller, Allen, NE, for $4,750.
The 2014 sale featured 9 lots that grossed $32,450 and averaged $3,606.
PROSPECT STEER SALE
The 2014 Nebraska Cattlemen’s Classic 2nd Annual Prospect Steer Display and Sale was a popular event held Saturday afternoon, February 22nd in Kearney, NE. 18 lots of powerful steer prospects displayed and circled in front of a large crowd. Auctioneer was Tracy Harl of Kearney, NE.
High-Selling Prospect Steer was Lot 7, consigned by Prinz Cattle, of Clarkson, NE, and was sold to Scott Blair, Drake, SK, Canada, for $5,100.
2nd High-Selling Prospect Steer was Lot 10, consigned by Gilbertson Cattle, of Kearney, NE, and was sold to Raelin Ripp, Kearney, NE, for $4,250.
The 2014 sale featured 18 lots that grossed $49,500 and averaged $2,750.
Why 2014 Just Got Better for Pork Producers
There are some good reasons why 2014 looks like the best year in the pork industry since 1990, says a leading economist.
“Our cost models are showing $27 to $28 profits per head this year, so it looks like the best year in a long time,” said Steve Meyer, president of Paragon Economics, a consultant who works with the Pork Checkoff.
That’s not just wishful thinking, he added. “Producers can take advantage of corn, soybean meal and hog prices right now to lock in those kinds of profits.”
Corn is significantly lower priced today than it has been in recent history. If there’s a good crop this year, corn prices could drop even more, Meyer said.
On the soybean side, worldwide demand remains strong, driven by China. It will take a lot more soybean acres in 2014 to bring soybean meal costs down substantially. Still, when you look at the big picture, feed costs are much lower than they were a year ago, Meyer says.
“Today, it costs about $30 a head less to raise a pig. With the kinds of market prices we’re looking at on the hog side, that’s really positive."
What about PEDV?
There are some questions about how much Porcine Epidemic Diarrhea Virus (PEDV) will impact pork supplies in 2014. It hasn’t had a major impact yet, because the first of the big PEDV losses happened last summer, and those pigs wouldn’t have come to market until December.
“I think the impact will get pretty large, however, as we go through the year and get to the summer, given the number of sow farms that were involved in PEDV breaks in October and November,” Meyer said.
The futures market is incorporating these factors. “We’ve already seen contract live highs on summer contracts, and it probably won’t be the last,” Meyer said.
While no producer wants to lose pigs, the financial impact of PEDV may be mitigated, Meyer added. “As the disease spreads, the financial impact on any one person gets smaller.”
Demand remains strong
Beyond PEDV, demand for pork at home and abroad remains a bright spot. Meyer’s calculations show that real per-capita expenditures increased virtually every month of 2013, up more than 5 percent for the year.
Pork remains in a good position relative to beef, which recently set records on its cutout values, Meyer noted. “The Pork Checkoff’s renaming of pork cuts with new nomenclature in 2013, the ‘Grill it like a Steak’ message and promotion of the U.S. Department of Agriculture’s 145-degree cooking temperature range with a three-minute rest all play into great positioning for pork against high-priced beef cuts as we go through 2014.”
Good things continue to happen for U.S. pork in the export market, as well. Japan and Mexico remain major markets, and demand from China continues to trend upward.
“Also consider that there are other countries that are not our major markets, but you put them all together and they become a top-three destination for U.S. pork,” Meyer said. “That adds diversification to our export portfolio.”
Updated ISU Swine Personnel Booklet Available from IPIC
Finding the Iowa State University swine expert you need is easier with the online listing provided by Iowa Pork Industry Center. The 21-page booklet features names, photos and contact information for more than 80 faculty and staff members with swine- and/or pork-related work responsibilities.
The table of contents is organized by subject matter, and individuals are listed in alphabetical order under respective departments. It includes those based on campus as well as those with offices around the state.
This list is useful for anyone interested in swine production, and offers a quick way of becoming acquainted with the names and faces in the booklet. It’s updated at least annually and is available at no charge on the IPIC website at www.ipic.iastate.edu/publications/ISUSwineResearchers.pdf.
Iowa Nutrient Reduction Strategy momentum buoyed by Iowa Soybean Association
On-farm innovation developed and implemented by the Iowa Soybean Association (ISA) is helping farmers improve production and water quality.
The assessment, made by Iowa Secretary of Agriculture Bill Northey at ISA’s On-Farm Network® Conference in Ames last week, coincides with growing interest in the Iowa Nutrient Reduction Strategy funded last year by the Iowa Legislature. The state’s ag leader said farmers play a key role in the success of water quality improvement efforts underway.
“The strategy is built on farmers wanting to become better and to reduce their environmental impact, which is also a goal of the On-Farm Network,” said Northey, who farms near Spirit Lake. “We have many watershed projects and tools being implemented across the state allowing farmers to learn from each other, build on that knowledge and take their production and conservation efforts to the next level.”
The Iowa Nutrient Reduction Strategy, developed by the Iowa Department of Agriculture and Land Stewardship, Iowa Department of Natural Resources and Iowa State University, seeks to reduce nitrogen and phosphorous loads to Iowa’s waters and the Gulf of Mexico from point and non-point sources by at least 45 percent. It’s supported by the ISA and other farm and environmental stakeholders.
Momentum behind the strategy is growing, Northey said. Last fall, nearly $3 million in cost-share funds were snapped up by nearly 1,100 farmers and landowners to adopt water quality improvement practices --- cover crops, conservation tillage and nitrogen stabilization --- on nearly 120,000 acres.
More recently, $4.16 million was provided for projects in targeted priority watersheds throughout Iowa. Eight watersheds were selected from 17 applications and an additional $8 million-plus in partner and landowner matches were secured. A second request for applications is open through March 31.
“There’s a strong commitment among many partners, including the Iowa Soybean Association, to identify and deploy practices that can make a difference in these watersheds,” Northey said. “We have a limited amount of cost share dollars for what we’re trying to accomplish. So we want to get a saturation of activities in smaller watersheds so we can monitor results and determine if they can be applied on a broader scale.”
Sharing information about “farmer champions” who have embraced water quality improvement practices have increased awareness of the strategy, Northey said. So has the endorsement of Gov. Terry Branstad and the Iowa Legislature.
“Our governor is absolutely supportive of the strategy, as are both chambers,” Northey said. “They’re excited to see the work that’s being done and the progress that’s being made. No one is spending time blaming each other. It’s about all folks addressing water quality rather than using others as an excuse not to engage.”
Success won’t be achieved overnight, Northey said, but farmers and industry stakeholders are committed to continuous improvement and progress.
“There will always be those who think agriculture cannot be successful on this strategy,” Northey added. “Our job is to overwhelm that argument by showing and demonstrating what we’re doing and that we’re serious about results.”
For more information about ISA’s On-Farm Network, conference presentations, field trial results or learn how to participate in trials, go to isafarmnet.com.
FY 2014 Export Forecast Rises $5.6 Billion to Record-High $142.6 Billion
(from USDA ERS)
The fiscal 2014 forecast for agricultural exports is revised up from the December estimate by $5.6 billion to a record $142.6 billion. The forecast for grain and feed exports is boosted $3.2 billion from December to $31.3 billion on greater volumes of wheat, corn, and feeds and fodders. Corn jumps by $1.2 billion to $8.6 billion as strong import demand from Mexico, South Korea, and Europe more than offsets lower sales to China. Oilseed and product exports are forecast at $31.4 billion, up $2.6 billion, driven by record soybean and near-record soybean meal exports. The soybean export forecast is raised $1.8 billion to $21.7 billion as strong demand from China and limited competition to date from South America add to both volume and unit value. Higher unit values have increased the cotton export forecast by $100 million to $4.4 billion. The export forecast for livestock, poultry, and dairy is lowered by $200 million to $31.6 billion, with reductions to poultry, pork, and other livestock products outweighing gains to dairy and beef. The horticultural product exports remain unchanged from the record December forecast of $34.5 billion.
U.S. agricultural imports for fiscal year 2014 are forecast at $110 billion, which is up slightly from the December estimate. This forecast is 5.9 percent greater than the fiscal 2013 import total. The estimate is consistent with a moderate recovery of import demand. The forecast trade balance in fiscal 2014 is up $5.1 billion from December to $32.6 billion, but still trails the fiscal 2013 surplus of $37.1 billion.
The fiscal 2014 forecast for grain and feed exports is boosted $3.2 billion from December to $31.3 billion on greater volumes of wheat, corn, and feeds and fodders. In addition, nearly all other categories are raised from last quarter. Feeds and fodders and products are higher, principally because of greater volumes of distiller’s dried grains (DDGS) to China, but also supported by higher corn prices. Corn jumps by $1.2 billion to $8.6 billion as strong import demand from Mexico, South Korea, and Europe more than offsets lower sales to China. Combined with less competition from Argentina, U.S. corn exports are increased 5.0 million tons. Sorghum value is nearly unchanged; strong demand from China is supporting unit values but is offset by slower sales to Mexico as that country switches to more competitively priced corn.
Wheat exports are up $600 million to $7.8 billion on larger volume. Logistical issues in Canada and a restrictive export policy in Argentina are creating opportunities to expand U.S. exports.
Rice exports are up $100 million to $2.2 billion based on higher prices for medium and short grain rice on concerns over the California drought. Volume is up 100,000 tons to 3.7 million on strong shipments to the Middle East.
Fiscal 2014 oilseed and product exports are forecast at $31.4 billion, up $2.6 billion from the December estimate, driven by record soybean and near-record soybean meal exports. The soybean export forecast is raised $1.8 billion to $21.7 billion as strong demand from China is resulting in higher prices. Soybean meal exports are raised $850 million to $5.1 billion as strong foreign demand and lagging Argentine sales have afforded additional export opportunities at higher-than-expected prices. The soybean oil export forecast is up $90 million to $609 million as volume gains more than offset lower prices.
Fiscal 2014 cotton exports are forecast at $4.4 billion, up $100 million from the December estimate due to higher unit values. World market prices have exceeded expectations as short-term limitations on global free supplies have outweighed concerns about potential drawdown of China’s surplus stock. The export volume forecast is unchanged at 2.3 million tons.
The fiscal 2014 export forecast for livestock, poultry, and dairy is lowered $200 million to $31.6 billion, with reductions to poultry, pork, and other livestock products outweighing gains to dairy and beef. Beef exports are raised about $300 million to $5.3 billion on higher volumes, while unit values are unchanged. Despite tight supplies and elevated prices, continued expansion in Asia will bolster shipments. Dairy exports are up $400 million to $6.3 billion as strong global demand continues to support high prices. Poultry exports are down $100 million to $6.3 billion, primarily due to lower unit values for broilers. Pork exports are lowered $100 million to $5.4 billion as tight supplies and high prices reduce competitiveness.
The fiscal 2014 export forecast for horticultural products is a record $34.5 billion, unchanged from the December estimate though subcategories have been revised. The fresh fruit and vegetable forecast is lowered $200 million to $7.9 billion on slightly lower-than-anticipated volumes to Mexico and Europe. The processed fruit and vegetable forecast is reduced $300 million to $7.7 billion on lower volumes to Canada, Mexico, and Japan. The whole and processed tree nut forecast is revised up$600 million to $8.4 billion due to a combination of higher unit values and increased shipments to Europe and China. The sugar and tropical product category forecast is unchanged at $6.9 billion.
U.S. agricultural imports for fiscal 2014 are forecast to be $110 billion, which is $500 million more than the preceding forecast and 5.9 percent higher than that of 2013. This projected growth rate is brisker than the 0.5-percent rate in 2013 but slower than the 9.4-percent increase in 2012. Nevertheless, this expected pace is consistent with a moderate recovery of import demand, which reflects the anticipated 3-percent expansion of the domestic economy this year. Despite a lower unemployment rate, personal consumption spending has not exhibited a vigorous pace as personal disposable income grew by less than 1 percent from October to December 2013 (lower than 3 percent last summer and 4 percent last spring). For all of 2013, personal disposable income was flat (in chained 2009 dollars). Furthermore, the numerous snow storms and severe cold weather in many parts of the country during January and February 2014 are also contributing to weak consumer spending. Indeed, the U.S. import volume for food and farm products in the first quarter of this fiscal year declined by 0.8 percent from the same quarter in 2013.
A number of important commodities had lower import prices in 2013 than in 2012, including coffee beans, palm oil, natural rubber, and sugar. These price declines were largely responsible for the minuscule 0.5-percent growth in total import value in 2013, despite an 11-percent jump in import volume. However, higher prices for other key imports, including cocoa beans, chocolate, coconut oil, and olive oil, partly offset those price declines last year. More stable food commodity prices are expected in 2014 at levels largely comparable to prices in 2013. Thus, the projected 6-percent U.S. import growth for 2014 is mostly attributed to moderately larger shipment volumes.
The lower average prices of tropical commodities in 2013 reduced the forecast for imported sugar and tropical products to $24.5 billion (from the previous estimate of $25.3 billion) in 2014. This $800-million drop, however, is more than offset by the $500-million upward adjustment of imported oilseed products, including olive and tropical oils, and $600-million increase in horticulture imports. Higher prices for olive and coconut oils largely offset lower prices for palm oil. Among other tropical commodities, higher cocoa bean prices are expected to partly offset the lower sugar, coffee, and rubber prices’ effects on their import values.
With respect to horticultural products, higher import values are expected for beer and fresh fruits (based on bigger volume shipments to date for beer and higher unit values for fresh fruits). The smaller import projection for fruit juices is due to declines in both volume and unit value as domestic apple juice production is up this marketing year. For horticultural products as a group, import volume was up 3.7 percent and unit values were up 2.5 percent on average in the first quarter. Positive changes for these general indicators of consumer demand signal larger import values for horticultural products in 2014, which accounted for almost 43 percent of total import value in 2013.
The outlook for processed grain products is raised from $6.7 to $6.9 billion based on larger first-quarter volumes and unit values, including those for wheat and bakery products. This gain pushes up the projection for total grains and feeds from $9.3 to $9.5 billion despite smaller bulk grain and processed feed imports to date. Compared to 2013, however, total imported grains and feeds are forecast to be lowered by $1.8 billion due to lower volumes and unit values for bulk grains and feeds. Bulk corn imports are down sharply to date, while bulk wheat, rice, and oats are up. The projection for imported oilseeds and oilseed products is adjusted upward due to higher olive and coconut oil prices, as well as greater import volumes to date—particularly of soybeans and rapeseed.
The $15-billion projection for imported livestock products in 2014 is $400 million higher than the December forecast and $1.3 billion more than in 2013. This represents a 9-percent gain from 2013 for all animal products. Growth in cattle imports from Mexico and Canada will be limited by tight supplies expected. Beef imports in 2014 are raised to 757,000 tons despite continued strong demand in a number of foreign export markets, especially from Asia. The $4-billion projected import value for beef and veal represents an 8-percent gain from 2013 fueled by strong demand for processing meat and higher prices.
The long-term picture for U.S. agricultural imports is tied to population growth, income levels, price changes, and taste preferences. Population growth is now around 0.7 percent per year, half of the pace of two decades ago. This slowing factor may partially be offset by food taste preferences that favor foreign products. However, the purchasing power of consumers is influenced by price changes in foreign markets as well as by the exchange value of the U.S. dollar. Although the domestic supply of food products has an inverse effect on import demand, their prices have a direct effect. As the United States recovers faster than other economies, personal income and the dollar will likely appreciate relative to other countries and boost U.S. purchasing power. U.S. import volume is then expected to rise relative to import unit values (assuming no other market changes occur). In the long-term USDA projections to 2023, U.S. agricultural imports are forecast to grow at an average annual rate of 3.7 percent.
America's Love of Pork Continues to Burn Strong
Results of a new consumer tracking study released by the Pork Checkoff find that more American consumers are reporting an enduring love for pork. Key research findings show more U.S. consumers rate their enjoyment of pork higher than in previous studies. Additionally, consumer-buying habits measured by the U.S. Department of Agriculture also show more consumers are buying pork.
“People are becoming more passionate about their consumption of pork,” said David Newman, chair of the Pork Checkoff domestic marketing committee and a pig farmer from Fargo, ND. “These two studies confirm that consumers are eating more in recipes and as a menu item because of its value, flavor and versatility.”
Consumers taking part in the Pork Checkoff study were asked to rate pork cuts on a 10-point scale, resulting in a demonstrated increase in the volume of consumers who rank pork as an eight or higher.
This tracking study indicates the size of the Pork Checkoff’s consumer target has grown to 43 percent of U.S. households, up seven points from 36 percent in May 2013, the last time the survey was fielded. In 2010, the consumer target was just 27 percent of U.S. households. Growth in the target size is attributed to people both rating pork cuts higher and in their confidence in cooking meat.
“We look at how much people enjoy pork and, through that experience, label consumers who love pork as ‘pork champions,’” Newman said. “We have found a marked increase in the number of pork champions, with these consumers consistently rating pork higher.”
The study also found that a majority of all fresh pork eaten – 84 percent at-home and 80 percent away-from-home – is consumed by a Pork Checkoff target consumer. The total percent of pork eaten by this target consumer grew significantly since the Pork Be inspired® campaign was introduced in 2011.
“We are beginning to see the impact of our new marketing campaign, and we feel it is making a distinct difference in the marketplace and how American consumers view and buy pork,” Newman said. “Across the board, consumers are buying more pork from stores and foodservice outlets.”
The tracking study results are further reinforced by the Pork Checkoff’s key measure of domestic marketing: real per capita consumer pork expenditures. Using USDA data, consumer pork expenditures measure both the volume (in pounds) and value (in dollars) of pork sold in the United States. Data through December 2013 showed per capita pork expenditures grew by 5.6 percent from 2012 to 2013.
The consumer tracking study also asked pork eaters, “Other than price, what most influences your meat-purchasing decisions?” The top three drivers of meat purchases are quality (63 percent), followed by appearance (50 percent) and convenience (32 percent).
The nationally fielded tracking study is conducted by the Pork Checkoff twice each calendar year and most recently in November 2013. Respondents are representative of the U.S. population for gender, age, ethnicity and income.
Excessive Rain Hampers Mato Grosso Soybean Harvest
Heavy rain severely hampered soybean harvesting efforts in Mato Grosso, Brazil's No. 1 soy state, last week, according to AgRural, a local farm consultancy. As much as 9 inches of rain fell in the north and east of the state.
Across Brazil, it was still a busy week for farmers, with some 9% of the crop harvested, said AgRural. But the Mato Grosso issues mean fieldwork, at 30% complete, is no longer that far ahead of last year, when 27% had been collected at the same stage.
In an attempt to limit losses, farmers have been harvesting in wet conditions. In Nova Mutum, center-north of the state, there are reports of farmers delivering beans with 27% moisture, the consultancy said.
In Mato Grosso as a whole, harvesting efforts were 48% complete as of Friday, up from 47% at the same stage last year.
In neighboring Mato Grosso do Sul, the harvest was 55% complete as of Friday, some 12 percentage points ahead of last year. Rain is also impeding farmers but, on the positive side, it is aiding the second-crop corn that has been recently planted.
The situation is similar in parts of Goias, but overall harvesting is further ahead of last year at 54% complete compared with 33% last year.
In Parana, the No. 2 state in the south, fieldwork is now 31% complete, the same as last year. The harvest is near completion in the west of the state, at 90%. Early yields were good, but according to AgRural, later-planted beans suffered amid hot, dry weather in January.
Elanco Announces Agreement to Acquire Lohmann Animal Health
Elanco, the animal health division of Eli Lilly and Company (NYSE:LLY), today announced an agreement to acquire Lohmann SE (Lohmann Animal Health), a privately-held company headquartered in Cuxhaven, Germany. Lohmann Animal Health is a global leader in the supply of poultry vaccines, and also markets a range of feed additives. The acquisition will establish Elanco as a global poultry leader, solidify Elanco’s vaccine presence, broaden Elanco’s product offerings, and significantly augment Elanco’s vaccine manufacturing capabilities.
“Effectively competing in the animal vaccine segment is a cornerstone of Elanco’s long-term strategy and is one more way we will expand the value we create for customers,” said Jeff Simmons, senior vice president of Eli Lilly and Company and president of Elanco Animal Health. “The addition of Lohmann Animal Health provides a unique opportunity for Elanco to expand our presence in the global poultry market and to enter the global poultry vaccine market with a solid base, established products, and global commercial and manufacturing capabilities.”
This acquisition complements Elanco’s mission to help the global food chain deliver a safe, affordable, sufficient food supply. “We believe innovation in food production is one of the most important ingredients to feeding a growing global population,” Simmons said. “Elanco has continued to invest significantly in animal health in the past few years, growing businesses and expanding our pipeline. This acquisition will support further pipeline growth and build on Elanco’s proven track record for successfully delivering new innovation and integrating acquisitions. We will continue to seek opportunities that support those efforts.”
“As the middle class grows in size and affluence throughout the world, the demand for eggs and poultry is growing rapidly. However, egg layer productivity is now shrinking after decades of increases,” said William (Bill) Weldon, vice president of Elanco R&D. “Delivering innovation to this industry is critical. Without it, we’re on pace to double the number of hens needed, plus the massive resources to support them, in order to meet demand in 2050.”
Under the terms of the agreement, Lilly will acquire all assets of Lohmann SE and its subsidiary, Lohmann Animal Health. These assets include a range of vaccines and feed additives, commercial capabilities, and manufacturing sites in Cuxhaven, Germany and Winslow, Maine. No other terms of the transaction were disclosed.
The transaction is expected to close in the second quarter of 2014, contingent upon clearance from regulatory authorities and other customary closing conditions. As a result of business combination accounting adjustments and transaction costs associated with this acquisition, Lilly has lowered its full-year 2014 earnings per share guidance to be in the range of $2.72 to $2.80 on both a reported and non-GAAP basis. Updates, if any, to specific line item guidance will be provided on the company’s first-quarter 2014 earnings call on April 24, 2014.
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