Is Pork’s Expansion Rate Sustainable?

From September’s Hogs and Pigs Report, producers learned one lesson—grow.

Last week, Rabobank’s pork analysis showed the U.S. pork industry could grow by 11% from 2017 to 2025. But will expansion over pressure prices for 2017 and 2018?

A breeding herd expansion of about 1% is sustainable, says Chris Hurt, an ag economist at Purdue University. With increases in packing capacity and consistently strong export demand, the industry can grow at a rate of 2% to 3% per year and not generate excess supplies that would depress prices below costs of production.

The other side of that increase is improved production: more pigs saved per litter and heavier carcass weights.

Rabobank pigs saved per litter, carcass weight
Heavier carcass weights and more pigs saved per litter are more likely to contribute to the U.S.'s increasing pork supplies in the next few years than expansion in breeding herds. Source: USDA and Rabobank 2017

 

Pork supplies this fall are expected to be about 3% higher than year-previous levels, Hurt reports. In the first three quarters of 2018, pork supplies are expected to be up about 2%.

Feed prices will stay moderate for the fourth year in a row in 2018, Hurt adds.

 

Chris Hurt’s Quarterly Price Forecast:

Live hog prices are expected to average in the mid $40s in the final quarter of this year and then move upward to the higher $40s in the first quarter of 2018. Prices are expected to rerun to the mid-$50s in the second and third quarter next year and then be back around the mid $40s in the final quarter.

For calendar year 2017, prices are expected to average about $50 on a live weight measure. For 2018, current futures estimates are for hogs to be about $1 higher, near $51. Production is anticipated to rise by 2.4 percent in 2018 and that would generally mean slightly lower prices. However, strong pork demand and reduced packer margins may help bolster hog prices somewhat above those of 2017.

 

 

 

 

 
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