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Wednesday, September 30, 2015

Limited Pork Expansion

ifr151002–122
Limited Pork Expansion
Chris Hurt, Purdue Extension Agricultural Economist

The nation’s hog farmers have done a nice of job of not over reacting to last year’s record profits. Todd Gleason reports they’ve limited their expansion plans and consequently should see a good bottomline again for this year, and maybe next.

For all of 2015, pork supplies are expected to be…
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For all of 2015, pork supplies are expected to be seven percent higher than in 2014. That year the price of pork averaged $76 mostly because the PED virus wreaked havoc on the industry. This years supplies have been farm more stable and supplies for 2016 should only be about one percent higher than in 2015. Hog prices are expected to average about $51 on a live weight basis for this year. Current projections for 2016 are for a similar average price and it means hog farmers will make money says Purdue Extension Agricultural Economist Chris Hurt.

Hurt :29 …that further expansion plans remain moderate.

Quote Summary - After the record profits of 2014, there has been concern that the industry would over-expand. At this point that concern has not developed with supply and demand anticipated to be in balance for the coming 12 months. This also serves as a warning to the industry to make sure that further expansion plans remain moderate.

There seem to be growing threats in the future for the meats sector. Those include, says Chris Hurt, the continued expansion of total meat supplies into 2016 and 2017 with a rapid ramp up of poultry and increased beef production.

Hurt :63 …world economic growth and a strong U.S. dollar.

Quote Summary - The large drop in finished cattle prices in recent weeks suggest that retail beef prices could begin to drop this fall and provide added competition for pork. In the longer run, beef supplies will continue to expand for multiple years. Potential weakness of meat and poultry exports is also a concern with slowing world economic growth and a strong U.S. dollar.

A strong dollar makes it more difficult to sell U.S. products overseas as they become higher priced. Speaking of price, feed prices will remain low for the next 9 months due to strong yields for 2014 and 2015 crops and weakened exports. Animal product producers will want to take advantage of harvest price lows this fall states Hurt. However, he thinks longer-term, managers need to remain aware that low feed prices are not guaranteed if weather should turn more adverse in some important growing areas.