Profit Picture Improving for Pork Producers
Pork producers from around the nation gathered in Iowa last week for the annual World Pork Expo. After another rough year financially, pork profits are returning, says a leading pork industry economist. Red ink over the past 24 months has kept pork producers conservative, but Steve Meyer with Paragon Economics told pork producers at World Pork Expo in Des Moines last week that better times are ahead, “Some black in finally, for average pork producers this summer, but I don’t think it is going to last unless we have a very good corn crop.” He does not expect that to be the case and sees losses for pork producers in the 4th quarter of 2013.
During a question and answer session with the media, Meyer said he expects to see continued breeding herd expansion in this month’s Hogs and Pigs report and, with at least an average corn crop, profitability will be in the cards for 2014, “With a corn crop that had a national average yield around 140 bpa, we could have pork producer feeds costs down in the mid $80’s. We could have profits again by first quarter of 2014.” He added that if that occurs producers will be set for a profitable 2014. He noted that producers are still doing fairly well due to better risk management techniques over the past three to four years.
But, the effects of the drought of 2012 are not over. A short crop last year has meant there is very little corn left from 2012 production, and Meyer predicts corn supplies will be extremely tight this summer, “I think the corn situation between now and the end of August is going to get very tight and we are not going to have an early harvest of the 2013 crop like we did back in 2012.” Due to the late planting, corn harvest will not likely begin until late September. He said it is likely that in some areas there may be no corn at all by late July. He said the same goes for soybeans. Meyer said basis levels of a $1 over Chicago will be common this summer.