Pork producers in 2016 are expected to experience another year of tight margins similar to the year just completed. Pork production is expected to rise by about 1%, but beef production will rise by 4% and poultry by about 3%.
Live hog prices fell to their lowest level since November of 2009. The source of the current downturn in prices seems to have components from both supply and demand.
Cattle markets have seen dramatically high and low prices during the past year. In time, high cattle prices may solve high prices.
To answer those questions we first look at the areas of the country that had the biggest reductions in beef cow numbers due to drought, high feed prices, and financial losses.
The pork industry is expected to have a profitable year in 2012! In fact, the level of profitability could be the most favorable during the high priced feed era. Profits in 2012 are currently forecast to be near $17 per head, which would be the highest since 2006. That was the last year of the low feed price era when corn prices received by farmers averaged about $2.30 per bushel for the calendar year and estimated hog profits were $27 per head.
The quantity of beef available to consumers in the U.S. has declined a startling amount in recent years and that trend is going to continue. The declining supplies are related to continuing liquidation of the cow herd in the past few years due to high feed prices, a weak U.S. dollar that is spurring beef exports, and of course drought in the southwest and southeast. Declining supplies will support prices across the cattle complex at new record highs in 2011 and again in 2012. Unfortunately, even higher retail beef prices can be expected for consumers.
There's an old adage among farmers in the Midwest that when corn is cheap you have to "walk it to market." The concept of "walking corn to market" is not some new genetic modification, but rather the simple principle of adding value to corn on your farm by feeding it to livestock. And so, "walking to market" simple meant feeding your corn to livestock rather than selling it as cash grain. That principle worked well when corn was $2 per bushel, but what about $4 corn?