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Good news for hog farmers
Things are finally looking up in the hog industry.
There's reason to be optimistic after a recent report from USDA showing the breeding herd hasn't change much in the last year. Couple that with lower feed costs and profit margins finally are "back into solid black for the coming year," says Purdue University Extension livestock economist Chris Hurt.
"Pork producers have largely settled for the status quo because of the uncertainty over feed prices. As a result, USDA says the breeding herd has expanded only slightly as producers awaited the corn and soybean yield and price outcomes of the troubled 2011 growing season," Hurt says. "USDA indicated that the breeding herd has increased just 0.6% over the past year."
Add to that better per-sow productivity and overall production has grown without any additional inputs, Hurt says. Coupled with lower feed costs, this makes up a big chunk of what was in the red territory earlier this year.
"This summer, the number of pigs per litter set a new quarterly record at a bit over 10 pigs. This establishes the possibility that the yearly average will be at 10 pigs or higher for the first time," Hurt says. "This represents an annual productivity growth of about 2%. Pork production for the coming year will be up 2% to 3%. This will be led by the higher sow productivity and by somewhat higher market weights with lower feed prices."
Even though productivity's up, that doesn't necessarily mean prices will be sliding anytime soon. Demand is still strong, both at home and abroad. That's got live hog prices projected at $66/CWT for the next year, $4 higher than the last 12 months, Hurt says.
But, there's still some uncertainty in the grain markets, and the prospect for a return to $7/bushel or higher corn could strip away current profitability. That could quickly erode profit levels Hurt estimates should reach $20 per head, the highest returns in 5 years.
So, does this mean the industry's poised for another round of expansion? "Uncertainties remain so large. Those uncertainties include concerns about world economic growth and the impacts on pork demand as well as feed prices. When corn prices can change 40 cents in one day, pork producers know the profit outlook can be altered quickly as just witnessed in the month of September," Hurt says. "If the current profit outlook holds over the next six months, then further expansion can be expected by the March or June reports in 2012."