Livestock Expansion Set to Begin
High hog prices and low feed prices are fueling a major expansion in the pork industry, according to Purdue Ag Economist, Dr. Chris Hurt. The latest USDA report indicated that US hog numbers were still well below a year ago, but a record corn crop being harvested. Hurt says producers are ready to expand, “We at the point where producers are beginning to retain gilts, some may be a month or two into that; and we are expecting to see fall and winter forewings up 4%.” He is forecasting total hog numbers in the 4th quarter to be down about 1% from a year ago but market weights could be a little higher this fall and winter, driven by low-priced feed and favorable profit margins.
The extreme profits currently being seen in the pork sector will also attract some new producers into the business. “In the 3rd quarter of this year we saw profits averaging about $80 a head,” Hurt noted. “With a sow able to produce about 25 pigs in a litter, do the math, those profits are going to be attractive to a lot of folks.” Hurt says. with the prospect for several years of lower corn and soybean prices, some grain producers may get into pork production. However, he believes these newcomers will not have much of an impact on total production, “Only about 30 of pork production is accounted for by smaller operations with 70% accounted for my larger operations. So while new folks getting into pork production may increase production somewhat, it is still the larger operations that control most of the industry.” Hurt added that the days of the “inners and outers” is gone. He sees pork profits averaging about $30 a head in 2015.
Expansion is also underway in the beef sector, with heifer retention on the rise. But Hurt says beef supplies will not likely increase until 2017 simply because it takes a long time to rebuild the beef herd. He says, on the pork side, consumers should start seeing lower prices at the retail meat counter by next spring.