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Northwest Iowa Dairy Outlooks

A local discussion of current science and issues concerning dairying in northwest iowa

The U.S. agreed yesterday to import pork products from Brazil, the Brazilian Minister of Agriculture Mendes Ribeiro  Filho said yesterday in a press release.

The USDA has authorized six processing plants in the Brazilian state of Santa Catarina to export their pork to the U.S., the Brazilian online newspaper DCI.com.br reports. Santa Catarina is the only FMD-free state in the country.

“The opening of the U.S. [market] is a reward for all the work done by Brazil …. We will reach new heights with this decision and the Brazilian production will gain a lot from this,” the Brazilian Minister said in a statement. “We intend to increase our pork exports to China, open the Japanese market and resume sales to Korea.”

“The United States allowed us to chose the processing plants. There was no limit. We could indicate as many that meet the requirements. It is a vote of confidence, “said Luiz Carlos Oliveira, Inspection Department of Animal Products.

According to Globo Rural, the initial U.S. concern was the lack of federal tax on authorized processing plants, but the Brazilian Ministry of Agriculture is already committed to meet this requirement.

Santa Catarina will initiate pork exports as early as this week, with authorization from the Brazilian Ministry of Agriculture.

At the moment futures are pricing hogs for 2012 at about the same level as in 2011 having taken almost a dime off the valuations made back in October when pork and hog prices were flying high. According to CME reports the April contract closed on Tuesday at $87.35/cwt, about 38 points higher than the previous close but some $8/cwt. or 8.3% lower than where the contract was trading back in October. The pullback has been driven in large part by lower hog and pork prices into the year-end as well as speculation that producers will respond to the improvement in their profit outlook by expanding production.

Some market participants think that producers may be chomping at the bit to expand production after being at a standstill for a number of years. So far any growth in the industry has happened via improvements in productivity and operators have learned to become ever more efficient in the face of escalating feed and energy costs.

Eventually, however, producers will start to grow the herd. This speculation runs counter to what the latest hogs and pigs report showed, with producers indicating in their surveys that they expect farrowings to be slightly lower in first part of 2012. Exports remain a wild card going into 2012. The free trade agreement with Korea and improving economic outlook for the global economy are positive for US pork exports.

So how is it helpful to US producers to import Brazilian pork?

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