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Swine Grist

VOL 11 ISSUE 3 | SUMMER 2010

A P E R I O D I C N E W S L E T T E R P R O D U C E D B Y G R A N D V A L L E Y F O R T I F I E R S LT D .

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Jim Ross, Chairman Dear Friends, Its been a fantastic spring with crops being planted in record time! Lots of heat and now some timely rains. For the dairy farmers we’ve had good haying weather with some excellent quality hay and haylage being stored away. For the hog producers, it is great to see hog prices finally coming into a profitable position. It will take many months of profitable production to recover from the impact of the devastating losses of the last few years. However, this is not a time to relax. This is a time when we must pursue actions which will strengthen our industry so that what has occurred in the recent past will not happen again. We believe our American friends and particularly the integrated large pork houses in the U.S. will continue to follow their pernicious ways to ensure that they will be able to secure their needed live animals at the lowest cost possible.

was able to share regarding the Taskforce and found that there is a considerable amount of congruent thinking between the Taskforce and Canadian Pork International. We are encouraged with the progress being made and will press on! With regards to hog markets, we believe we are going to see a shortage of market hogs in North America for at least the next 12 months, perhaps quite a bit longer. Ron Plain reports that the sow numbers in the U.S.A. are now down 7% from a year ago. Last week, U.S. shipping’s were at 1.94 million head, the first time shipping’s were beneath 2 million in a long time. This situation is going to continue for the foreseeable future which bodes well for improved hog prices over the next year. With regards to the soybean meal market we look to see a summer top in the market in early July. If the good growing season continues into July and August, we expect to see the Chicago soybean market to work lower into the fall. We are also expecting to see the U.S. dollar fall in the later summer which should result in a lower basis and lower priced soymeal. n

The June 1st USDA planting progress report showed corn at 97% complete and ahead of last year’s pace as well as the 10 year average and soybeans at 74% planted which is ahead of last year’s pace and equal to the 10 year average. The crop conditions report showed corn and winter wheat rated ahead of last year and the 10 year average.

We believe that Canadian producers must follow a different path and strategy which will result in greater stability and sustained profitability for Canadian pork and pork producers. It is to this end that we all must strive. The pork industry Taskforce initiated by Grand Valley Fortifiers last November is active in assisting in the development of such a plan. Meetings have been taking place with significant people in the packing industry, supermarkets, government, and the Ontario Pork Board. Recently Ian Ross, our president, had the opportunity to meet with John Knubley the Federal Deputy Minister of Agriculture. He was able to share a copy of our Taskforce document with him. Ian also had the opportunity to meet Jacques Pomerleau, Executive Director of Canada Pork International, and Jurgen Preugschas, the President of the Canadian Pork Council. Ian

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USDA SUPPLY AND DEMAND REPORT

By: Steve McGuffin

With this high rate of planting and frequent rains, we certainly have the potential for large crops again. Other bearish factors are the strong USD which makes U.S. commodities more expensive in world markets, and also the cooling of the Chinese economy. With the financial uncertainty spreading throughout Europe, world equity and commodity markets are being pressured and the CAD has weakened, relative to the USD. Today as I write this the Bank of Canada increased their key interest rate ¼ of 1% strengthening the CAD briefly before further negative global economic news knocked it down again. This is great news for domestic pork and grain prices but it does add to the price of your soybean meal. Steve McGuffin

Bullish factors: We’re currently seeing a slow pace of producers selling in South America as they see their currencies depreciate against the USD increasing the price of their commodities. This is pushing the availability of their beans into our new crop period. The North American soybean pipeline is still running lean as world buyers have continued to

GRAND VALLEY FORTIFIERS LTD. 486 Main Street East, PO Box 726 Cambridge, ON N1R 5W6 1-800-567-4400

Ian Ross, President & CEO | Jim Ross, Chairman Clarke Walker, VP & COO Dr. Martin Clunies, Monogastric Nutritionist David Ross/Dan Goertz, Publishers


buy from the U.S. At least two U.S. soybean processing plants have been idled which has better matched soybean meal and oil supply with demand and we’re getting into the time of year where the plants have scheduled maintenance shutdowns which will reduce available supply keeping offers for available inventory firmer. U.S. corn exports are good and industrial demand (ethanol) for corn remains strong. It is still early! Weather during the critical pollination and flowering periods can still be a factor. To summarize, there’s a bullish bias to old crop soybeans, soybean meal and a bearish bias to new crop. The U.S. needs good corn production to keep ending stocks at decent levels. On dried distiller grains last summer we saw the ethanol plants cycle through scheduled maintenance shut downs and the available supply tightened up increasing the price. Forecasting of your requirements is critical through this period. n If you would like to receive daily or weekly commodity/market reports from DSC, please contact Steve McGuffin at stevemcguffin@grandvalley.com

MAY 2010 HOG MARKET UPDATE: PROFIT RETURNS TO THE INDUSTRY

By: Steve Dziver, Phoenix AgriTec

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Positive net margins have returned to the hog industry however the losses incurred over the past 3 1/2 years have changed the landscape of this industry for likely the next half decade. Chart 1 illustrates calculated net margin of a typical farrow to finish operation in Canada from the beginning of 2006. It is quite easy to see that excluding the last 3 weeks and a couple in August 2008, net returns since July 2007 have been negative. Not only have margins been negative but they have been at a magnitude greater than those seen south of the border which has contributed to the level of liquidation seen today in Ontario and across the country. Numerous weeks in the last 3 years have exceeded a $40 per head loss for Canadian producers. When compared to the U.S., the losses there were not as large nor did they last as long as is shown in Chart 2 representing calculated net margin of a U.S. farrow to finish operation in U.S. dollars. The leading contributor to profitability discrepancies has been and will always be the foreign exchange rate used in calculating daily and weekly cash or forward prices in Canada. Since the early 90’s when the current pricing mechanism’s were readily adopted, hog price, net margin and profitability have all been driven by the value of the Canadian dollar. The industry does not need to look back that far to see the impact of how a sub 0.8000 cents Loonie (April 2009) makes all the difference to Canadian producers and conversely how a Loonie at par threatens all that has been created in this industry (April 2010). These graphs illustrate the importance of currency fluctuations and the ability to keep the Canadian hog industry competitive to that in the U.S. Of the 3 most influential factors affecting domestic margins including U.S. regional hog prices, currency and feed costs, currency levels are the most likely to manipulate Canadian margin during the remainder of 2010. Chart 3 illustrates the Canadian dollar (red) against the U.S. dollar Index (blue) and their existing inverse relationship. The Loonie, which hit an 8-month low (0.9300 cents U.S.) in the last week has added 10 dollars per hog to producer margin since reaching PAR on April 26th.


Lean hog fundamentals, although soft during the second half of May due to foreign financial stress and a higher U.S. dollar, continue to show signs of impressive underlying support. Recent cold storage numbers, the current rate of pork exports and lower than projected supply numbers point towards above average base pricing in the months ahead. The key however, to a Canadian producer in capturing these prices, is managing the exchange rate. Disclaimer: This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as arequest to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial if not used for hedging purposes. Any reproduction or retransmission of this report without the express written consent of Phoenix AgriTec Inc. is strictly prohibited. n

RWA UPDATE By: Ron Gunson

NEW NATURES BLEND® 100

Swine Grist

Recently we launched Grand Valley Fortifiers new Natures Blend® 100. Utilizing this new formula will yield similar performance results that you have come to expect from our Natures Blend® product line, while delivering you significant cost savings. This newly formulated premix costs $575 less per tonne than the older formula which results in a savings of 26 cents per piglet. We have made the decision to move all of our RWA/VGF/NAB customers to this new formula every time you call in your Natures Blend® 100 order. This new product can also be used in a conventional operation as well. Not only will you notice a (nice) difference in your pocket, but it should be noted that the new Natures Blend® 100 premix does look different from the old formula, and you will see a visible difference in your feed troughs. This new formulation has been shown on farm to increase feed intake. We are committed to ongoing research and development to ensure that our producers get the highest possible production at the lowest possible cost. n

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THE IMPORTANCE OF INVESTING IN ONTARIO’S SLAUGHTER FACILITIES

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Pictured from left-right: Ron Gunson, Grand Valley Fortifiers; Galen Weston, Executive Chairman, Loblaw; Ladka Sweeney, President, Leeson Food Group; Paul Uys, VP Fresh Foods, Loblaw

On Tuesday, May 25, I had the distinct pleasure of attending The Canadian Club of Toronto’s business luncheon with Galen Weston, Executive Chairman of Loblaw, giving the keynote address. Mr. Weston shared his vision for Loblaw, and the need to embrace more functional foods and healthy lifestyle options in the grocery industry given the disturbing health trends in North America and in particular, the extreme rate of obesity sky rocketing. I was amazed at how congruent his message was with our own here at Grand Valley Fortifiers as well as Quality Meat Packers. Afterwards, I had the opportunity to connect with Mr. Weston and we talked about Grand Valley Fortifiers’ direct involvement in Loblaw’s Free From™ pork program and our shared common values. It is exciting to work with Canada’s largest grocery chain knowing that they understand and value the importance of what we are doing. Together, I believe we have created a truly differentiated, scalable Canadian production system resulting in a line of products that is second to none in terms of its consistency, quality, integrity and value for the Canadian consumer. In our ever changing industry, we will continue to seek out additional opportunities to provide value added options. If you are interested in learning more about our RWA/VGF/NAB program, please contact your Grand Valley Fortifiers’ Swine Specialist. n

By: Ian Ross

In the Spring edition of The Grist we shared of the creation, initiative and general findIan Ross ings of the Canadian Pork Advancement Taskforce. As we have witnessed a 20 percent reduction in the sow herd in Canada, and now have weekly shipments of approximately 85,000 hogs per week in Ontario, the Taskforce’s concerns about having too few hogs for our existing slaughter and processing infrastructure are quickly coming to fruition. This week, MLF announced that the Burlington slaughter facility is back on the market. This is not surprising as the plant is rumoured to be running at 68 percent of its capacity – certainly not a profit generating scenario. The question must be asked, “if sufficient hogs are not available to run the plant at a minimum of 75 percent of its capacity, who would agree to purchase it at any price?”. Thankfully, the federal government has begun supporting Ontario’s precious slaughter facilities with favourable term loans. In the last number of weeks, it has been comforting and gratifying to hear of multimillion dollar loans being provided to Conestoga Meat Packers, Quality Meat Packers – Great Lakes Specialty Meats and Cambridge Meat Packers. These loans have all been provided to improve slaughter and processing infrastructure, allowing for greater efficiencies, capacities, market access and carcass utilization and further processing. This investment by the federal government is necessary and gratefully received. w w w.grandvalley.com


Going forward, there continues to be a need for a sizable world class plant in Ontario which is certifiable for maximized global market access, and segregated slaughter and processing streams for differentiated products, allowing for growth and further investment in the Ontario swine industry. We trust that a viable plan for the Burlington plant will emerge and with the backing of the Ontario pork industry, along with the provincial and federal governments, that we will not see Ontario’s federal slaughter capacity shrink resulting in the further contraction of this important and passionate industry. n: ?

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supply bulk limestone, mono-dicalcium phosphate and salt to you at competitive rates. Bundled together with your premix order they can provide even further savings. Direct Sales Commodities, a division of Grand Valley Fortifiers, can also work with you to help source single or multiple ingredients economically and ship them direct to your farm. For more information about our Micro Sound premixes, please contact your Swine Specialist or Grand Valley Fortifiers swine nutrition department. n

MICRO SOUND PREMIXES By: Bruce Schumann Over the last couple of months hog prices are slowly improving, but these past few years have certainly been tumultuous for the hog industry. Producers who have survived have Bruce Schumann done so because they have been successful in creating viable solutions to maximize the efficiency of their farm. For some, an “opportunity bin” has been a definite asset this year allowing the incorporation of an additional, and cheaper feed ingredient such as DDGS or wheat shorts to offset the cost and use of other more expensive inputs like soybean meal. Taking this a step further, a sector of customers manufacture their own feeds on farm using micro-systems. A micro-system that is complemented with multiple bulk bins for a wide array of commodities provides a tremendous amount of flexibility with changing ingredients based upon availability and price. Our new micro premix line up under the Micro Sound brand is targeted specifically for these producers. Micro Sound micros have been specifically designed for each individual stage of production – nursery, grow – finish and sows. They provide a full compliment of vitamins and trace minerals in a low inclusion premix, while still providing all the additional technologies, such as pro-biotics, chelated minerals and gut acidifiers that are found in our proven macro premix lines. The technologies we use have demonstrated to provide significant improvements in overall health, as well as growth and reproductive performance, which we believe are important for you to maximize the performance within your operation. One of the biggest challenges with micro-systems is ensuring that the feed is manufactured uniformly. Validation of your on-farm mixer, especially if it is a micro-system, is critical to the overall performance of your animals, since many of the ingredients are added at very low inclusion rates. Poor mix-ability of feed can negatively impact reproductive performance, growth, feed conversion and increase the variability in nursery and grow-finish units. Your Grand Valley Foritifers swine specialist will work with you to assess your mixer performance and make any changes needed. The additional benefit to the Micro Sound micro premixes is that many of the macro nutrients, such as calcium, phosphorus, salt and amino acids, can be controlled at the farm level and adjusted according to the incoming ingredients at any given time without the need to change premixes. Grand Valley Fortifiers can also

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Advanced animal Nutrition for Improved Human Health

THOUGHT FOR TODAY For over 50 days now we agonize over the results of an unplugged new oil well spewing its black much into the beautiful Gulf of Mexico. Investigators reveal that the real cause is well drillers taking short cuts and ignoring regulations and safe practices. The result – the Gulf suffers, marine life suffers, and the world suffers. Let us pray that the oil gusher will soon be stopped, stronger regulations enforced and man kind will be saved from our greedy selves. Wishing you good farming and looking forward to seeing you at the Ontario Pork Congress in Stratford. Sincerely, Jim Ross On behalf of all our Grand Valley Fortifiers Family

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Swine Grist 2010 - Summer