The United States saw record corn and soybean crops in 2016, which added to already bulging world stocks of those crops as well as wheat. That means pork producers should have ready access to the largest input in pork production.
Increasingly, the prospects for major price changes in both markets are linked to South American production outcomes and the ability to export corn and soybeans into foreign markets, said Todd Hubbs, Department of Agricultural and Consumer Economics, University of Illinois.
“In assessing the prospects for corn and soybean prices in the current marketing year, South American production and the ability for the U.S. market to meet export forecasts provide key supply and demand indicators,” Hubbs said. “Since the South American planting season is off to a good start and current U.S. export levels are significantly higher than in the 2015/16 marketing year, poor weather in South America or strong economic growth indications in major importer markets should provide pricing opportunities for this record crop in the next few months.”
Steve Meyer, Vice President of Pork Analysis, EMI Analytics, noted that with lower bean prices, producers can book bean meal and hedge, “or go to a crusher and book it just as far out as you can.”
The U.S. had record crops and South American planting is off to a good start. Meyer says beans may go down to $270, “but locking it in now is probably a good idea. It’s near the bottom side of the range,” he said.
Still, grain prices have remained higher than expected due to strong demand. World demand is using the record supply the U.S. produced this year.
Things Could Be Worse
With the expansion the industry saw after 2014, and steady productivity improvement, the U.S. just has more pigs than it does slaughter capacity. That trend will continue into 2017 but producers should feel fortunate that prices aren’t lower than they are. Packers are making good profits, so there’s no huge need for lower prices. Plus, fewer pigs are sold on the spot market, and it’s to packers’ benefit to have a steady supply of pigs during good times and bad.
For producers who don’t have a strong relationship with their packer, the environment will be more challenging.
“With lower prices, we’re incentivizing people to eat more meat, and we’ll have a high level of availability,” Meyer said, “but we’ll have huge slaughter numbers, and we don’t see an end to the growth at this time.”