Hog Prices on the Rise Due to Strong Demand
26 April 2017
According to the USDA’s hog and pig inventory report, growth has increased in the pork industry due to domestic and international demand. The March 30 report indicates a four percent increase in pork production from last year. With the support from stronger demand thanks to a growing economy and an eight percent growth in exports, pork prices are expected to go up. Decade low production and feed costs are contributors to the one percent increase in pork production with packer capacity expected to add to stronger bids for hogs.
Hog prices are expected to be $3 to $4 higher this year. For the first quarter of 2017, live hog prices came in at around $50 per hundredweight. Prices for the second and third quarters are predicted to be at an average in the low $50 range. It’s likely that prices will be lower in the fourth quarter topping out at $49 for the year.
At $315 per ton, soybean meal costs are at the lowest calendar year price since 2010. Total costs of production may reach 10 year lows. An estimated total cost of production reached $67 per live hundredweight in 2012 pushed by high feed prices. This year that could drop to $49.50 which would make it the lowest total cost of production since 2007, another 10 year low.
There are a few expected negatives to occur this year. First, the meat and poultry competition is expected to be high this year. With the added three percent pork production, the beef production is expected to be up four percent and poultry is looking to be up two percent. These increases will make for a lot of competition for consumers’ food dollars. Second, the positive outlook for the U.S. economy that has been present in early 2017 could disappear. That outlook consists of a stronger job market, low unemployment, and record seeking stock market indexes. The stimulus package of the new administration has also been a contributor that is if Congress can agree on the legislation and move it forward.
The decade low feed costs will help pork producers pay for all of their costs this year. All eyes will be on the weather as that will play a major role for yields and feed prices. According to a NationalHogFarmer.com article, Purdue University Extension economist Chris Hurt says, if the industry can have a one percent growth in the breeding herd and a one percent growth in higher weaning rates each year, it could mean the pork production would increase two percent each year. This alone would work to cover a one percent growth in domestic population and a one percent annual growth needed to expand exports. If the breeding herd expands more than one percent, the industry could shift once again back into losses.
If pork consumption in the U.S. continues to hold the interest of domestic consumers and exports remain strong, 2017 could turn out to be a recipe for success in pork production. Thanks to the low production and feed costs, overseas competition could be hard for some countries to compete with. Time and weather will tell if the U.S. can keep up the momentum of positive pork prices and feed costs.