Despite everything 2020 has thrown at the pork industry, Scott Brown, an ag economist at the University of Missouri, says hog production is lining up reasonably well right now.
For the week ending Nov. 20, USDA estimates put the industry around a 2.7-million-head slaughter for the week, Brown told AgriTalk host Chip Flory last week.
“This is what we need to do given what we have in terms of a little less than a 3% increase in overall slaughter for the year. So we’re there. We just need everything to keep working really well to not get into a further backlog situation,” Brown said.
Is more shackle space on the horizon?
If it wasn’t for the shackle space that has been added to the industry over the last two years, Flory said, the industry would be swamped.
“Let’s just understand how positive this is,” Brown agreed. “We often talk about big numbers and the problems with shackle space, yet when you think about the industry, the growth has been phenomenal.”
Given just how much production has increased, Brown said it’s been a better year than he anticipated. But he’s not sure there’s enough incentive on the profit side of the processing industry to encourage additional slaughter capacity expansion.
“I think that’s going to be a little tougher road moving forward. Maybe there’s the profitability, but I think a lot of concern about just having enough labor in some of these plants to talk about expansion. I don’t think it’s the profitability that matters, it’s, ‘Can I find workers able to fill that plant?’” Brown said.
Although there are some plants that could increase capacity, the holdback is finding enough workers, he added.
“That labor question is a big one,” Flory said. “I’m sure they’re looking at ways to automate as much of the process as they possibly can. But, we’re not talking about cookie cutters here. These carcasses that roll in are very similar, but they’re not exactly the same.”
That’s a big part of the problem, Brown agreed. Looking 10 years down the road, he believes the processing industry will look a lot different than it does today as more automation finds its way into the plant. But that will take time.
How long will strong domestic demand last?
“Strong domestic demand in the face of COVID-19 and some of the issues we worried about, has been a good ride for us,” Brown said. “Now we’re at the upper end of where we would tend to sit in terms of per capita consumption. So, it’s been really great, but I worry we’re at the high end.”
Exports have helped the demand situation, but more work is needed to keep domestic demand strong. Positive demand as the country moves forward from the COVID-19 pandemic will be critical.
“As an industry, the hog industry needs to continue to do everything possible to encourage that consumer out there to continue to buy pork and consume pork,” Flory said.
A cautiously optimistic outlook
Brown said he’s cautiously optimistic about the 2021 pork outlook. He believes the industry will end up with higher hog prices on average in 2021 than it had in 2020.
“I’m not sure whether or not they’ll offset what I think will be anywhere from $6 to $8 higher feed costs that we’ve seen here over the last few months,” Brown said.
Uncertainty with China remains. 2020 was supposed to be a huge recovery year, Flory said, because of Chinese demand after African swine fever (ASF) decimated their pig herd.
“I don’t want us to forget, over the 2015 to 2018 period, we were looking at 56 million metric tons of pork being consumed in China. The best estimates for 2021 right now, say about 46 million metric tons, that’s still 10 off of where they used to be,” Brown added. “There is a lot of room left If Chinese consumption goes back to the levels that we saw and the growth we’ve seen in their hog herd gets them in the right direction.”
But it doesn’t get them all the way back, he pointed out. There’s still a long road ahead there, and that could be positive for the U.S. on the trade front.
Brown said there have been some good opportunities for producers to lock in profitable returns for at least the first half of 2021 and he expects that’s going to keep a lot of people in business.
“We’re going to continue to run a lot of hogs and need a lot of shackle space yet again in 2021,” he said.
More from Farm Journal’s PORK:
2021 U.S. Pork Outlook: Volatility and A Little Optimism
Don’t Assume Anything in 2021, Economists Advise Pork Producers
