Unlike corn and soybean producers, pork producers can expect profits in 2015; but there may be some risks awaiting in 2016. Overall pork production is expected to be 7% higher in 2015 than in 2014. Hog prices are forecast to average about $51 on a live weight basis, with pork production forecast to increase only 1% in 2016. Purdue economist Chris Hurt says supply and demand should be in balance for the next 12 months, “But this also serves as a warning to the industry that any expansion plans should be modest.”
There are some clouds on the horizon says Hurt, one being a recent jump in Fed Cattle Prices, “Lower finished cattle prices should begin to translate rather quickly into lower retail beef prices.” He admitted those beef prices will still be higher than pork, but they will provide another source of competition for pork in the meat case. He added beef supplies will continue to increase over the next few years and poultry supplies will also continue to grow.
Hurt says pork exports may also be down in 2016 which could put more meat into the US meat case next year, “And this is a result of the slowing world economic growth that we are in at this time. This is resulting in a strong US dollar which raises the cost of US pork products on the world market.”
He urges pork producers to take advantage of low grain prices this fall and not to assume that grain prices will remain at current levels for 2016.