United States-Animal Rights target Spam.

Posted in: Economics by admin on January 1, 2009 | No Comments

An animal-rights group unsuccessfully tried Tuesday to get Hormel Foods Corp. to label all of its meat packages with information on the greenhouse-gas emissions “footprint” caused by making the products. People for the Ethical Treatment of Animals representative Stephanie Downs read a statement in support of PETA’s resolution during Hormel
Foods’ annual stockholders meeting Tuesday night at Austin High School. Downs urged shareholders to pass the labeling resolution to “bring transparency about Hormel’s environmental impact.” Hormel chief executive officer Jeffrey M. Ettinger said the company has stated publicly its goal to reduce greenhouse-gas emissions from the production and delivery of its products. “We are unable to provide accurate, reliable information on the impact of greenhouse gases per food product due to the lack of universally accepted standards,” Ettinger said. “If meat is on the menu, so is a hefty serving of greenhouse gases,” PETA senior vice president Tracy Reiman said in the release. “Consumers have a right to know how much Hormel’s conversion of animals into meat is contributing to climate change.”

The Voodoo Economics of the US National Pork Producers Council: A Commentary

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Canada recently introduced a program to assist its hog industry. Based on a recommendation
from the Canadian Pork Council, the program has two components that can provide direct
economic benefits to hog producers. One component will pay producers to exit the industry. The
second component provides partial loan guarantees under commercial terms to potentially viable
producers who elect to remain in production and restructure their operations.
The US National Pork Producers Council (NPPC) opposes the program and cites a study from
Iowa State University that estimates a 7.5% reduction in North American hog prices as a result
of the program.
The study is not publically available, so it is not possible to analyze it. However, the claim is
astounding. The aim of the first part of the Canadian program is to reduce the Canadian breeding
herd by 5%, which would eventually reduce the number of market hogs from Canada
accordingly. Assuming price flexibility for pork between -1.0 and -2.0, the loan guarantee
program would need to result in 6.75 million to 13.5 million more hogs from Canada than would
have been the case. This is based on 2008 production levels. If the first component results in a
5% reduction, the loan component would need to result in a 27.5 – 52% increase in Canadian
production in order to suppress prices by 7.5%.
It’s extremely hard to imagine how a program that reduces sow inventories, provides marginal
loan benefits to a relatively small portion of Canada’s industry, and that, at best, guarantees loans
at levels equal to about half of variable costs could ever have any negative impact on North
American prices, let alone one as large as is claimed. Several potential issues that must be
addressed in a proper analysis of the supply response to this program have been identified in this
paper.
Nevertheless, an official of the NPPC, quoted today (August 26), says that the program will put
the onus on poor American producers to adjust and relieve the responsibility from Canadian
producers. No one should have any sympathy for this type of woeful spin. The fact is that
Canada has already reduced its herd by 14.5% from its peak in 2004, and total inventories of
hogs in Canada the second quarter of this year were down 19.4% since mid-2004. During the
same period, US mid-year inventories of hogs grew every year until 2008 before dropping
slightly by 1.4% this year. Meanwhile, US producers have added to this summer’s poor prices
by loading another 4-5 lbs of weight on each hog they ship to market. The market expects that
August 2009 pork production in the US will set a record.
I don’t know whether this Canadian program is good policy or not from a Canadian perspective.
I do know it is responsible from an international trade perspective. It appears inevitable that
there will be threats and the potential reality of yet another trade action by the NPPC. One can
only hope that, when it occurs, the US industry will be held responsible for its failure to adjust to
an ugly market situation, and that proper economic analysis is used in the argument.
One of the major reasons for the current situation in the hog industry is domestic and
international reaction to the outbreak earlier this year of the new H1N1 virus, which is daily
misnamed swine flu in North American media. It has scared domestic consumers and
international customers away from pork and has reduced demand. The NPPC might better use
its resources and influence to fight that real battle than to blame its trading partner for nonexistent
negative effects of a benevolent program.

A joint test of market power, menu costs, and currency invoicing

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This article developed a theoretical ERPT framework accounting for menu costs and different choices of currency for
invoicing purposes. Menu costs make it costly for exporters to revise their prices in response to exchange rate changes. This introduces a nonlinearity between the exchange rate and the export price. This nonlinearity motivates the empirical specification of a two-regime pass-through model to analyze the pricing decisions of pork exporters from two Canadian provinces to the U.S. and Japan. The choice of currency used for invoicing purposes imposes theoretical restrictions on the pass-through in the first regime (i.e., when menu costs are high relative to the profits arising from a price change) which can be tested empirically. The empirical model rejects the null hypothesis of no menu costs in three of the four equations. Statistically significant menu costs are identified in the export pricing decisions of Quebec and Manitoba exporters in their dealings with U.S. buyers. Manitoba pork exporting firms also appear to face menu costs in their dealings with Japanese buyers. We argue that the nonrejection in the case of the Quebec–Japan ERPT equation is more likely attributable to the small length of our sample than to the actual significance of menu costs faced by Quebec firms. Overall, the empirical evidence favors threshold pass-through models over linear ones.

For more information the full article can be found at http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1574-0862/issues

China Became Largest Pork Importer in History in 2008

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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. 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.

Opening the Throttle and Applying the Brakes: The Disconnected Policy to Support (Stifle) the Canadian Pork Sector

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In addition to fundamental public policy precepts stating that specific policies ought not
to contradict one another, there is something singularly perverse about giving false hope
and setting an industry up to fail. Based on the assistance package, some people who
have been losing money in the pork sector may feel comforted, and they (along with
lenders and investors) may even begin to reinvest in the pork segment. But when the
natural comparative advantage is being structurally eroded by policy backing ethanol
mandates and subsidies to make ethanol from grain, the investments in pork will later
prove less profitable, magnifying existing losses and probably driving a demand for
future public assistance.
The ramification is that by simultaneously assisting the pork segment to recover and
underwriting grain-based ethanol production with subsidy and mandates, governments
are paving the way for future losses in pork and increased industry support measures in
the future. Consistency would demand that pork (and beef) policy and bio-fuel policy be
coordinated; to do otherwise is disingenuous to pork and beef producers and a waste of
public money. A means of recognition and implementation of this is to stop further
funding of new grain-based ethanol development in consideration of the pork strategy,
and for that which can be anticipated in beef.
The notion of opening the throttle and applying the brakes at the same time is that
something must give, eventually. Simultaneously assisting the pork and beef segments
on one hand, and legislating and subsidizing grain-based ethanol on the other puts
policies at odds with themselves. Beyond the insincere treatment of hog producers and
the future demand for public support created, the Canadian manufacturing sector is not in
a position to tolerate the fallout in food manufacturing that will be created. The
recognition of these dichotomies appears not to have reached senior political levels.
The Canadian pork segment is grappling with a range of factors outside Canadian control
– exchange rates, burgeoning red meat supply, H1N1, etc. The CPC strategy anticipates
much of this, and presents a cohesive approach that warrants public support. There are
others for which Canadian governments bear direct responsibility. The CPC strategy
makes reference to the enormous problems created by US COOL, which was allowed to
occur on the foreign affairs watch of the federal government. The CPC strategy does not
acknowledge the detrimental impact of Canadian ethanol policy; nevertheless, it has
seriously weakened the competiveness of hog production. These failings, among the
several challenges facing Canadian pork and beef, fall within the control of Canadian
policy makers, and the pork segment is justified in requesting compensation for them.
Moreover, disconnected policies relating to bio-fuels and trade must be resolved with the
red meat strategy if a cost-competitive Canadian pork segment is to reemerge as
envisioned.

Comparing the epidemiological and economic effects of control strategies against classical swine fever in Denmark

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The objective of this study was to explore the epidemiological and economic consequences of different control strategies against CSF under typical Danish conditions with respect to herd demographics and geography. Another objective was to investigate the effect of extra biosecurity measures on farms. Based on this simulation study, it is concluded that the strategy consisting of the minimum control measures required by the EU plus depopulation of contact herds is the most effective among the evaluated strategies with respect to limiting the size, duration and cost of the epidemic. However, regarding the number of culled animals, the vaccination-to-live strategies appear to be more effective. Epidemics become larger and last longer if the index case is a nucleus herd. This implies that biosecurity in nucleus herds is extremely important to avoid transmission of CSF to these herds. Simulations showed that the size and duration of a Danish CSF epidemic will be moderate in most cases. However, for some iterations, long-lasting and large epidemics were observed. Irrespective of the size and duration, an epidemic is expected to be very costly due to
export losses.

For more information the full article can be found at http://www.sciencedirect.com/science/journal/01675877

When Do Legislators Pass on Pork? The Role of Political Parties in Determining Legislator Effort

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Most explanations of large interjurisdictional variations in policy outcomes in democracies are institutional
(e.g., the electoral rules of the game), informational (what citizens know about the effects of politician actions on their welfare), and societal (e.g., the extent of social polarization). Our evidence underlines the importance of a generally neglected factor: variations in voter attachment to political parties. These results have implications for several lines of research and for policy. The evidence indicates that evaluations of constituency development funds in nascent democracies of Africa and East Asia should take into account their effect on the development of programmatic political parties. On the one hand, the results here suggest that they will have less of an impact when voters are attached to political parties.On the other hand, they raise the possibility—although one that requires much more
investigation—that CDFs could slow the emergence of programmatic political parties.

Advanced swine manure treatment and utilization in Brazil

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Animal production that has been central to public discussions in Brazil because of the large amount of waste generated by swine operations and its potential impact on air, soil, and water resources. The aim of this paper is to present some recent advances in swine manure management research and practices in Brazil, and assessing their technical and economic performances. It was found that because of environmental concerns for the disposal of large amounts of swine manure generated under animal confinement, Brazilian swine producers have several technological challenges.
These challenges depend on several factors, like soil/plant support capacity, land availability, and producers investment capacity for adoption of advanced manure treatment technologies. The development of new advanced manure treatment technologies that can solve several environmental problems linked to manure disposal,
are compatible with the new reality of Brazilian’s industrial swine production, which has emerged as a major competitor in the international market. With the adoption of advanced technologies like enhancement of solid–liquid separation using flocculants and treatment processes (SMTS), economical considerations need to be done, particularly in Brazil and other developing countries that do not have government subsidies like the Europe Union or United States.

For more information the full article can be found at http://www.sciencedirect.com/science/journal/09608524

Do alternative marketing arrangements increase pork packers’ market power?

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In this article, we use structural econometrics to formally test whether the use of the AMAs by pork packers is the source of their market power on the spot (cash) market for live hogs. We extend Schroeter’s (1988) beef packing industry model and specify the packers’ conjectures of the change in total market procurement of live hogs through the spot market with respect to their own changes as the explicit functions of their AMAs supply stocks. Testing whether these stocks are significant determinants of the packers’ equilibrium conjectures can be taken as a test of whether the
use of the AMAs is a source of market power on the spot market for live hogs. The test is carried out using the USDA mandatory price reporting data. Our results show statistically significant market power of pork packers on
the spot market for live hogs, but the source of that market power cannot be narrowed down to the existence of AMAs stocks.

For more information the full article can be found at http://ajae.oxfordjournals.org/content/by/year

June 2009 Quarterly Hogs & Pigs Report Summary

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The major problem in the hog industry is not the supply of pork, it is production costs. Corn price near $4
per bushel and soybean meal comparably high have increased the cost of producing pork $12 to $13 per
hundredweight compared to 5 years ago. High priced crude oil resulted in high priced gasoline and high
ethanol prices resulted in high corn prices relative to the 35 years prior to 2008. In fact, the profit per hog
in the second quarter would have been $7 to $12 per head with $2 corn. In the June Hogs and Pigs report, the inventory of 180 lb. and heavier market weight hogs was relatively
close to the June slaughter. However, slaughter in the second quarter has been larger than indicated by the
March 1 market inventory when one considers the smaller live hog import from Canada. Hog weights
indicate marketings were not kept current in the second quarter with a year earlier by at least 2 days and
possibly 3 days. Barrow and gilt carcass weights for the most recent week in June were 4 lbs. heavier than
last year. The bottom line is that the June Hogs and Pigs report confirms our belief that producers need to reduce the
breeding herd another 5% or more to get the industry profitable.