1. What Is This?
2. What If I Don't Want This Newsletter?
3. Markets & Prices -- 2006 and Beyond
4. Pork Demand
5. Packing Capacity -- Key to '07 - '10

Many of you know me, but for those who
don't, let me introduce myself. I'm the CEO of MetaFarms,
Inc. We build and sell management software -- as a service
over the Internet -- that pork producers use to help run their
business. We have grown to the point that our software is
tracking about 500,000 sows, 4 million finishing pigs, and
4.5 million carcasses.

By training I'm a veterinarian with advanced degrees (MS,
PhD) in epidemiology, statistics, and information systems.
I designed the PigCHAMP software - it was my PhD thesis,
in fact. And then I led the group at the University of Minnesota
Vet School as we commercialized it throughout the world. I left
Minnesota in 1990 and consulted for many of the largest US pork
producers during the go-go years of the 90's.

Some of you may know that I started the PorkNet
web site and daily email newsletter in the late 1990's. It's
subscriber-based ($) and still going strong; today the editor
sits about 30 feet away from me. We send daily email
newsletters out to thousands of people involved in the
global pork business every weekday.

Now I'm starting a personal email newsletter - my take
on what's happening in the pork industry. It will come out
weekly and it’s FREE, so forward this to anyone
you want. I’m planning to focus mainly on practical
production topics along with business processes, markets,
cost, and profitability.

But I also have another agenda, which is to talk about
what we're doing at MetaFarms and go into detail on
i-Production, the software we've built
for running pork production businesses.

Those who know me know that I won’t be giving you
marketing bulls..t. I will go in-depth on showing reports,
showing how to analyze the data, how producers are using the
system, benchmarking, new ways of looking at information, and
what we’re learning as we go.

I look forward to writing this and building a community
of readers. I'm also very interested in your comments
and feedback on my articles. I'll respond to and publish
the comments I get so if I touch a nerve, tweak your
interest, or you want to say hello just send me an
email at tomstein@metafarms.com.

Happy Holidays,

Tom

My hope is you'll find this of value. It's free. But if you
don't want yet another email message cluttering up
your inbox, or for whatever reason you don't want this,
simply click on the unsubscribe link below. It's an automatic
process, and you'll be off the distribution list immediately.

Looks like demand will be the key to the kind of year
and level of profitability producers can expect in 2006.
Demand has already affected prices, especially during
the 4th quarter of '05. Supplies are up slightly, but not
enough to drive down prices the way they've moved
recently.

Here's how Chris Hurt, Purdue University livestock economist
says it: [Compared with last year at this time] ...."these are
tremendously different hog prices with supplies not that
much different," said Chris Hurt, . "So, if supplies are not
contributing to the lower prices, my guess is demand has
something to do with it and wider retail margins."

"There doesn't seem to be any other logical reason of
why pork is weaker at this point. I don't see much that
has changed in the export market, and the bird flu
concerns should be helping out pork. So, I struggle with
trying to figure out the reasons pork demand is down,"
Hurt said. read full story

And in his November 14th report, Ron Plain, University
of Missouri, indicated that “per capita pork consumption
is down by 3.6%.”

Analysts had expected ham demand to help keep live hog
prices up, but last week ham prices, especially for light hams,
simply crashed.

No answers on demand right now. Looks like the
rate of pork exports has fallen and retail prices haven't
come down enough to up demand. With more
weaned and feeder pigs coming down from
Canada in light of the corn duties imposed last week, we'll
likely see more supply than expected late in the year.

Time to lock in margins for 4Q '06.

Next-generation software for
running pork systems.
Customers from the smallest
independents to the
largest integrated systems.
Seven (7) of the Top 20 US pork
producers. Tracking 500,000 sows,
4 million nursery pigs, 5 million finishing
pigs, and 4.5 million carcasses.
Growing numbers each month.

Discover what some of the
smartest producers already know. Call or email to schedule a demo:
Sara Clark / 651-905-7436

--------------------------------------------------------------

The key strategic issue over the next five years will
be the balance between production capacity and
packing capacity. The industry's on a tightrope, and
has been since the late-90's. Whenever production
comes near to or exceeds packing capacity, hog prices
drop dramatically (something about demand elasticity,
according to my economist friends).

The production side over-expanded in the mid to late
90's, relative to packing capacity, and the result was
10-cent hog prices in December 1998. [I'll never forget
giving a speech in Indianapolis on December 9th titled
"Opportunities in the New Swine Industry." I threw the
speech out and tried to prevent a riot.]

Now it looks like the packing side is over-expanding.
A new Triumph plant coming on in Jan '06, and another
one just approved by the East Moline city council
this past Monday night. In Canada, Olywest will build
a 2.25 million head per year plant in Winnipeg and is
expanding its plant in Red Deer, Alberta. Maple Leaf is
planning a new plant for Saskatoon and will add a second
shift to its Brandon plant. All in all, it looks like a 10%
capacity increase over the next few years.

So, more than likely we'll have unused capacity on the
packing side. Let's think about what that means. My mind
immediately jumps to two scenarios (that's all I can hold
in my head at a time)...

1. Over-capacity on the packing side continues for the
next 5 years. Prices for live hogs will be pulled higher
(packers chasing hogs), assuming consumer demand
and exports hold. Older, inefficient plants gradually
close, production doesn't expand too quickly, and
capacity rationalizes over time. Call this the good scenario
with a soft landing.

On the other hand...

2. Older, inefficient plants don't close gradually but wait
until the end of the decade and all close at nearly the
same time. Sudden, big squeeze on capacity, hog prices
drop like a rock. Call this the bad scenario with a hard
landing.

Which one will play out? We won't know until it starts
happening, but the key will be to pay close attention
and watch for early warning signs of production starting
to chase packing capacity. If production expansion starts
to accelerate, you can bet the production-side will overshoot
the mark (it always does) and we'll be back into 1998-like
pain.

Inside the Swine Industry is brought to you as a FREE service by MetaFarms.
At MetaFarms, our big deal is building and delivering next-generation
Web-based software for running pork production systems.
We call it i-Production.

To learn more about our company, go to www.metafarms.com.

To learn more about our software, go to i-Production.