Asian Markets and Hog Production Cycles
Jeffrey Farmer – Jefferies & Company asked: I am looking for some color on the Asian export countries, specifically where South Korea and China are in their own hog production cycles. Does that matter in terms of seeing continued export strength moving forward?
C. Larry Pope – President and CEO responded: Yeah. (That doesn’t leave) any question that we compete against the domestic markets. So, when those markets are strong, the exports are robust. Your guess on where China is, is as good as mine and anyone else on this call.
I think that the Chinese issue is a longer-term one and I think that they will see–they will be forced to make export buys.
South Korea has been hit this summer and we will see how much of that returns back but the Korean free trade agreement will be taking effect at the same time.
So, that combined with Japan, which is also very strong, I think those export markets will probably getting a little bit of a bubble here but even the midterm I think is pretty solid for all those countries.
Bo, do you have any impact on that?
Robert W. Manly, IV – EVP and CFO responded: I think historically we’ve seen when, I’ll call them French countries in the production area, those that don’t have surplus of corn when they have got to be buying corn in the open market. When they had difficulties health-wise and their industries had shrunk they rarely come back to their original levels.
I guess Taiwan would be probably the best example and we probably have some examples in the Japanese area as well that that they typically don’t come back if they’re not truly competitive in the world markets.
European Hog Supply
Christina McGlone – Deutsche Bank asked: Can you talk about what’s going on in European hog supply? The fact is I think they have been losing money for a couple of years and now you have facing environmental kind of regulations. Do you think that we are going to see the European herd continue to shrink?
Robert W. Manly, IV – EVP and CFO responded: All indications are that for the fundamental reasons you described, it will continue to shrink.
They have been going through some very, very high priced corn. They have had welfare legislations now coming to bear on their industry which is causing certain farmers to rethink whether they want to stay in the business.
There has been some indication though that the cheaper corn that we now have could spur some growth as they move down the road; but frankly you are probably 18 months to 24 months from that production reaching the marketplace.
So, if they do see more optimism then I think you may start to see that here in this country in the coming months as well. People starting to put some plans back up on the table, we don’t see any yet, but it’s hard to believe that economics won’t cause that to happen.
But I don’t think you are going to see any increase in the European volume probably for 18 to 24 months.