Farming. Saturday. February 7, 1998
VERNON ACHENBACH JR.
Lancaster Fanning Staff
NORTH CORNWALL (Leba
non Co.) The economic fore
cast for the livestock industry is
tight margins, but some growth,
according toH. Louis Moore, Penn
State University professor emeri
tus of agricultural economy.
Moore has been a perennial pro
vider of an economic forecast for
livestock producers at various
agricultural .seminars in the state.
In his presentation, Moore dis
cussed the livestock and grain situ
ation, and ivhat possible and prob
able outcomes could result.
He said that with the national
economy doing well, no recession
in sight, inflation not a concern,
and continued growth likely, that
while strong profits are not pre
dicted, livestock producers may be
able to at least break even.
He also said that while grain
production is predicted to set
records, that grain use has con
tinued to grow, and prevented a
surplus.
In fact, he said carry-over sup
plies of grain stocks from one
harvest to another has become
marginalized, and grain prices
shouldn’t be expected to drop sig
nificantly even with a record crop.
He said that while grain produc
tion levels are an important factor
in making an analysis for generat
ing a forecast, the level alone can
not be used as an indicator of
future value.
Instead, the grain production
level must be compared to the level
of demand and uses for the grain,
in order to assess probably future
value.
Grain demand has been tracking
production, and livestock produc
tion has grown in response to grain
availability.
While Pacific Rim nations may
still represent a valuable market
for livestock and grain, dramatic
changes in economies there have
decreased the likelihood of those
countries buying great amounts in
the near future.
He said that exports, while “a
more fickle’' market of meat, will
continue to be important
He said demand for United
States meat can be expected to
continue in Europe and Russia. He
said meat production there has yet
to become reliably productive or
efficient, especially in the nations
formerly in the Soviet Union.
Moore said that what meat they
cat, though perhaps expensive, can
be provided by the United States.
To illustrate further the need to
compare uses with grain produc
tion levels, he said that the 1997
soybean crop was the third largest
ever for the United States, with the
highest year being 1994, and the
second highest year being 1996.
At the same time, carry-over
grain that available for con
tinued sale until the next
harvest has not been that
strong.
For example, the peak for
United States grain carry-over was
1987, Moore said, when there were
almost 5 billion bushels of com
from the 1986 crop to be able to
market during 1987.
In 1997 the carryover from 1996
was 884 million bushels. The car
ryover from 1997 into 1998 is 900
millions bushels.
Should weather adversely affect He said the number of hogs on being in value that much
spring planting, summer growth or farms, as of Dec. 1, represented an more over some Pacific Rim cur
fall harvest, and result in a short increase of about 7 percent. The rencics. United States’ consumers
crop, carryover grain stocks could number of breeding hogs increased should be able to purchase more
be quickly absorbed to create high- 5 percent, while there was a 9 per- non-agricultural and some agricul
er prices. cent increase in farrowing hogs rural products less expensively.
*...>'<& saidjlhat jiust the in. tys presentation, Moore sug-
Moore Gives Predictions On Livestock Industry
reported intentions for hog and
poultry production for 1998 can
account in the demand of an addi
tional 2SO million bushels of com
from 1997.
He said that beef production is
increasing, even with a reduction
in the number of producers and
animals. He said the beef produc
tion per cow has “increased dra
matically” and the total production
is up.
He said a trend continues for
more and more production coming
from fewer and fewer operations.
He said that while 30 percent of the
beef produced nationally came
from operations with fewer than
149 animals, that 14 percent of the
national production came from
operations with more than 500
animals.
Those with more than 500 ani
mals represent 5 percent of the
industry. Therefore, 5 percent of
the producers are making 14 per
cent of the beef going to market.
The trend continues in all lives
tock production for fewer, but lar
ger operations, and the loss of
smaller operations.
He said that 11 percent of the
nation’s hog producing operations
left the business last year, but hog
production managed to still
increase.
In the hog industry, Moore said
that 1.9 percent of the
producers those with 5,000 or
more produced 33 percent of
the total last year.
Some non-livestock production
aspects can be expected to drive
some domestic production
decisions.
Exports have been very helpful
to all aspects of the livestock
industry, but especially for
poultry.
He said that last year we actually
imported more beef than we
exported, but it was in different
forms.
He explained that the beef
industry has become so consoli
dated that it has gotten to be diffi
cult to assess prices. He said three
slaughter companies do 80 percent
of the nation’s business and he said
it seems appropriate to question
the validity of prices reported.
The export of pork was 1.2 bil
lion pounds, but because of the
economies in the Pacific Rim, the
devaluation of their money makes
United States product more expen
sive, so gains in exports to there
should be slower.
(However, it was reported this
week in The Wall Street Journal
that some of those Pacific Rim
economies are making a strong
rebound.)
He said that poultry has shown
the most benefit from increased
global trade.
He said he expects 4.7 billion
pounds of poultry to be exported
this year, and 600 million pounds
of turkey. The United States
doesn’t import broilers or turkeys,
and poultry is consumed
worldwide.
Tracking exports for the three
main meats beef, pork and
poultry from 1991 through
1998, he showed that while beef
and pork experienced significant
gains, poultry grew quickly.
The forecast for pork production
is more growth. He said it should
go from 1997 levels of 17 billion
pounds to 18.5 billion pounds.
In Pennsylvania, Moore said
production should increase 14
percent
He said he does expect domestic
beef production to drop from last
year, more or less as a correction.
He said that the supply is
expected to drop after mid-year
and the price of beef ought to rise
into the 60-cent range. A level at
which it will “still be hard to make
a living,” he said.
He said that he expects farm
management to continue to
increase production, as the
increasingly fewer number of
“integrators” battle to establish
market share and presence.
For Pennsylvanians, last year's
drought had some devastating
effects forcing purchased feeds, or
closing operations. The drought
affected regional producers, but
not national production or price.
He said he expects more off
farm work to supplement income
for family farmers, or similar
medium to small farming
operations.
Some farmers are expressing a
desire to get government back into
the price control business, Moore
said, though what effect that would
have, given the political arena and
the longer-term policy direction, is
uncertain.
That United States livestock
production has been growing
strong (though under the control of
fewer and fewer concerns), is
evident
Overall United States red meat
production increased 20 billion
pounds during the past 10 years,
and broiler production almost
doubled from IS billion pounds to
29 billion pounds (projected for
1998), Moore said.
The per capita consumption
the amount of meat consumed, on
average, by a United States
consumer can be expected to
drop slightly for beef, from 66.9
pounds per person to 65.6 pounds,
Moore said.
For pork, per capita consump
tion should increase from 47.9
pounds to 51.6 pounds.
Per capita consumption of broil
ers is expected to increase from
72.7 pounds to 77.5 pounds, and
turkeys consumption is expected
to increase slightly, less than a
pound.
In total, per capita consumption
of meat averaged 208.3 pounds in
1997. It is expected to reach 215.9
pounds in 1998.
Producer pork prices should be
Bto 10 cents lower than a year ago,
but not as bad as during 1995,
which was disasterous with prices
in the 30s and 40s.
While overall exporting of
goods and services by the United
States has been growing for some
time, with agriculture an important
factor, the “fickleness” of the
market isn't limited to agricultural
products.
This week, also in a report in
The Wall Street Journal, it was
noted that United States January
exports represented an overall
stagnation for the first time in 24
months. In other words, the overall
exporting activity for the United
States did not grow.
However, that fits with the
changes and effects Moore noted
in the Pacific Rim nation
economics with the dollar
gested that United States consum
ers are in a strong position
inexpensive and abundant food,
competitive prices on durable
goods, and now the promise of
even lower cost imported goods
from Asia.
At the same time, however,
there have been a number of pub
lished reports about consumers
reaching credit limits, and signific
ant increases in personal
bankruptcies.
Some have expressed concerned
about how long the United States
economy can remain on such a
growth track with consumers
building such debt, and at the same
time have more and more people
exceeding their ability to pay debt
But, it should also be remem
bered that with the United States
Milk Handler Speaks
At Ag Seminar
EVERETT NEWSWANGER
Managing Editor
EPHRATA (Lancaster Co.)
The president of a milk handler
company told farmers at a com
mercial ag seminar Wednesday
that even though we have not had
government buying surplus milk
products for much of the ’9os, we
have had a reasonable milk supply
across the country.
Thomas Dictrick, president of
Dietrick’s Milk Products, Inc., said
that without this relief valve the
markets are more volatile. The
market is more dependent on supp
ly and demand at any given time.
He also said the consumers walk
away when the price is too high. In
addition, there is not as much mar
gin in the handling and manufac
turing of milk products as many
people think. He listed the lack of
accelerated depreciation and
investment credit as examples of
advantages handlers no longer
have. In addition, he said consum
ers walk away when the price gets
too high.
“We don’t have the market sta
bility we had,” Dietrick said. “As
long as we have milk trading above
support, we will sec volatility. Any
time you have excess milk that
must be traded below the nego
tiated price, the whole pricing sys
tem falls apart.
“Milk supply right now is stron
ger than I would have guessed. We
have had to work hard to keep
everything processed. I would
have expected the ice storms in the
north to curb supply. But it still
seems to be there. The good milk
prices may have some effect.
Whenever milk prices are up, it
always produces more milk.
Maryland Ag Breakfast
CHARLOTTE HALL, Md.
The Southern Maryland Agricul
tural Commission will hold its
ninth annual Southern Maryland
Agricultural Breakfast with stale
and local elected officials on
Monday, Feb. 9, from 8 a.m. to
10:30 a.m. at the Jaycee’s Com
munity Center on U.S. Route 301
in Waldorf, Md.
The breakfast provides a forum
for the agricultural community of
southern Maryland to meet and
discuss current issues with feder
al, state, and local elected officials
and policy-makers. This year, it
also provides an opportunity to re
port to the agricultural community
and southern Maryland’s elected
, J j. l JIJ JVV.-Vs.Vl
consumer purchasing inexpensive
goods from those Pacific Rim
nations, that the increased business
they receive should work to help
restore their economies and
strengthen their ability to purchase
more meats and other agricultural
products from the United States, as
well as higher-valued products.
In his summary, Moore said that
the strong United States economy
and continued strong consumer
ism are both good news for agri
culture; that grain production
should continue to rise with prices
staying stable; livestock produc
tion overall should rise and gener
ally prices fall; and export growth
should continue to help all sectors
in absorbing production and per
haps growth, but not as much as it
has during the past several years.
“Regardless of the discussion in
milk pricing under Federal Orders,
I believe wc will have milk prices
high enough to insure an adequate
milk supply. Federal Order reform
has been long overdue. Consolida
tion must be done. The U.S. secret
ary of agriculture has announced
suggested changes. They include a
move to pricing in four classes
instead of three. They arc Class 1,
fluid milk; Class 2, soft; Class 3,
hard cheeses; and Class 4, powders
and butter. The price is tied more to
the market value of components.
On a question born the flora'
about the new ARMPPA coopera
tive that has been holding meetings
across the nation to try to force
higher prices on the farm by gain
ing control of 20 percent of the
milk produced on the farm. Diet
rick said it sounds like something
that has been tried before.
“Farmers already control 20 per
cent of the milk, but they have not
been able to make much change,”
Dietrick said. “My feeling is that
there is not much we can do about
the price of milk.
“The consumers walk away
when the price is too high, and the
handlers don’t have some of the
advantages they had in the 'Bos,
such as accelerated depreciation
and investment credit. While
ARMPPA is an appealing proposi
tion, whenever there is too much
milk, any pricing system falls apart
whenever milk must be traded fra a
lower price than has been
negotiated.”
Dietrick said that if farmers have
the energy and time to get involved
in such a movement, it is fine, but
in the end, products can only be
sold at a price the consumer will
buy.
leaders on the efforts of the newly
appointed regional Agriculture
Task Force, which is developing
the agricultural segment of South
ern Maryland’s regional strategy.
An important component of the
regional strategy will be an action
plan and recommendations to fed
eral and state policy-makers for
sustaining agriculture as an im
portant part of the southern Mary
land economy.
The cost to attend the breakfast
is $7. For more information or to
make a reservation, contact Candy
Walter, agricultural specialist, at
(301) 884-2144 or 870-2520. The
deadline for reservations is Feb. 3.