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Pork Market on an Export Roll in 2017
While President Trump talks tough about trade agreements that don’t well serve U.S. interests, the U.S. pork industry is quietly setting export records this year. As a result, it’s basking in a profit windfall.
Hog market consultant Steve Meyer is telling pork producers at the World Pork Expo this week in Des Moines, Iowa, that pig prices are playing out better than many people expected when the year started. “Mostly, it’s because exports have outperformed expectations,” he says. “Pork exports were predicted to be up about 7% from last year. So far, they are up 14%. About 24% of our total production has been exported.”
Mexico, the main focus of Trump’s trade taunting, has been a particularly strong pork market in 2017, Meyer says. It started last fall. While Mexico takes all kinds of pork cuts from the U.S., the country has been a particularly good buyer of “green” hams, Meyer says. South Korea, along with several Central and South American countries, has also increased its purchases of U.S. pork.
“If we, for some reason, should lose our pork export markets [disease or canceled trade agreements], it would put a third more pork back on the domestic market. That would send the price of pork down at least 60% on the retail market,” he adds.
As of now, U.S. pork producers are moving product and making good money. With relatively low corn prices, the average cost of production for pork producers is about $60 to $65 per cwt (carcass) right now, Meyer says. Meanwhile, futures prices through the summer and early fall are well into the black, some around $80 per cwt. “I’m seeing average profits per head of about $20 for good producers this year. I consider futures right now a little on the high side, and pork producers should take advantage of them.”
Later this year, there’s more beef and poultry coming. With all of the meat industries in expansion mode, Meyer thinks it is possible that in either 2018 or 2019, the U.S. could match or exceed the all-time record for per capita meat consumption. That was set in 2006 at 220 pounds. “I wasn’t sure we’d ever reach that level again,” he says.
Meyer thinks total pork production will be up 3% this year and 4% in 2018. But it won’t take a 4% bigger sow herd to accomplish that, because average litter weaning size continues to grow at roughly a 2% clip per year. With that level of growth in litter weaning size, it only takes 1% more sows in the breeding herd (now at just over 6 million U.S. sows total) to get a 3% expansion in market pigs.
“There seems to be no end to the improvement in litter size,” Meyer says. “I think there may be some things coming on the genetics side that will accelerate it even faster.”
As for corn prices, even with the summer starting out on the dry side, Meyer says it’s too early to worry about drought and a crop shortfall. With record corn production in two of the last three years, we’ll have a 2.6-billion-bushel carryover this fall that should keep prices from moving up quickly.