Smaller breeding herds and lower production costs could help struggling US pork producers turn a modest profit this year, according to a leading agricultural economist.
Purdue University economist Chris Hurt said a slight decline in production would lift hog prices, helping farmers cover their costs of production and get their margins back on track.
In his analysis of the US Department of Agriculture’s March Hogs and Pigs report, published on the website farmdocDAILY, Hurt said two years of pig-herd expansion had left producers losing money and struggling to make their businesses sustainable.
But producer plans — outlined in the USDA report — to cut farrowing numbers by 1% this spring and by 3% in the summer would help farmers’ bottom lines.
“If they follow through on these intentions, pork supplies will be smaller than previously anticipated next fall and winter,” said Hurt. “Smaller anticipated supplies will likely boost price prospects.”
Hurst said he expected live hog prices to range from $49 to $54$ ($1= 0.87, May 2016) per hundredweight for the rest of the year — about $1 higher than last year.
“Current prices in the higher $40s are expected to move to the higher $50s or low $60s by June and July,” he added. “Strong prices are expected until September when the normal seasonal pattern begins a sharp decline.”
Production costs were expected to be at their lowest level for nine years thanks to low feed costs, estimated to be at about $50 per live hundredweight for the whole of 2016.
This meant that the outlook for 2016 was for an average profit of about $6 per head, compared to an estimated $3 per head of loss for 2015.
In future, Hurst said producers needed to keep breeding-herd expansion limited to 1% per year if the industry was to continue to make a profit.
“At this time of year, producers are reminded of the threat of higher feed prices if weather should turn harmful to the growing US crops,” he added.
“Some coverage of new-crop feed supplies should be considered with current price prospects at the lowest level in nine years.”