Despite Lower Margins Hog Producers Expected to Remain Profitable

Jul 03, 2015

By Bruce Cochrane

An agricultural economics professor with the University of Missouri says, despite reduced margins, well managed hog operations should be able to make money this year and again next year.

In June, the highest U.S. slaughter numbers ever, resulted in the value of hogs on a carcass basis dropping from a record of $103 per hundredweight on average last year to an average carcass price in the upper 60s.

Dr. Ron Plain, an agricultural economics professor with the University of Missouri, expects June 2015 hog slaughter numbers in the U.S. to come in about 11% higher than a year ago and to stay high for another month before starting to decline.

Dr. Ron Plain-University of Missouri:
Domestic demand here in the states is looking good.
As a general rule when the economy does well and people have money to spend then domestic demand for meats do well and that seems to be the case this year.

We're not doing near so well on export demand for U.S. pork.
Exports are down about 7% in the first third of this year, in part due to a strong value of the U.S. dollar, in part due to some logistical problems in getting product moved out of the west coast and then in part due to more competition from other pork exporting nations.
Margins aren't near as good for hog producers right now as they were in 2014, we had record prices.

But if we have a good corn crop this year and feed costs stay in line, well managed hog operations should be able to make a little bit of money it looks like both this year and again next year.

Dr. Plain says how the summer growing season turns out and how much crop we have to harvest come fall, will determine in a big way the cost of production and, if we're able to recapture some of the lost exports, that could help boost prices.

He says how the economy goes impacts demand and then the big one is whether the decline in PED death losses stays low or rebounds.

Source: Farmscape

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