In Throwback Thursday articles, we look back at the history of Pork Network and the pork industry. This week, we're throwing it back to February 1997 as hog supplies were low and prices high. This article orginally appeared as "1997: A Very Good Year" by Marlys Miller.
You don’t have to be a connoisseur to know that some years are better than when it comes to wine. Sunshine, temperature, soil conditions and many other factors influence the quantity and quality of fruit produced.
When it comes to pork production, you don’t have to raise hogs very long know that multiple factors influence your product and your profitability.
Four times each year the USDA Hogs and Pigs Report offers insight into some of those factors and your product’s near-term future.
The December producer survey was released just as you prepared to flip the calendar to a new year. A year, as it turns out, that will be filled with tight hog supplies and high prices.
While market analysts were betting on an expanded sow herd producing more market hogs, the 50-state report revealed the opposite. It unveiled a Dec. 1 breeding herd of 6.66 million head, the smallest ever recorded for the winter report. Market hog numbers fell short of last year’s levels by 4 percent.
The numbers are less of a mystery if you look over the production side of the fence. Corn was expensive in 1996. The memory of a record-setting $5-a-bushel corn does not fade quickly. Nor do reports of non-existent carryover supplies. From corn to wheat to soybeans, the feed grain prospects were dismal.
The impact of swine diseases often goes overlooked. Porcine reproductive and respiratory syndrome and the diseases that surround that complex have turned into production nightmares for many. Now a new disease is creeping its way through the Midwest and North Carolina, which may or may not be associated with PRRS. Sows and litters are dying. Reports of 50 percent to 70 percent aborted litters are common. That doesn’t do much to promote breeding herd or market hog increases.
Perhaps the most underrated area -- except by producers -- is the inability to expand. Moratoriums, law suits, legislation and the public are keeping even long-time neighborhood producers from expanding their operations. Anyone who’s tried to upgrade or build a facility in the past few years understands why hog numbers haven't grown.
But looking ahead, if you haven’t raised a glass to toast 1997, I suggest you do so. From a price standpoint, it is going to be a very good year. Live weight prices are expected to average $60 a hundredweight in the first six months. Ron Plain, University of Missouri agricultural economist, believes prices could rally into virgin $70-territory in the second quarter. Even into 1998, projections are for prices to hold into the mid-$405. Of course, that can still change.
The grain complex is in a healthier position than anyone could have imagined six months ago. USDA’s Feed Outlook Report tells us there’s 50 million bushels of corn in carryover, more than double last year’s level. A slowdown in US. grain exports, fewer hogs and a liquidating beef herd, spells lighter feed- grain demand than in 1996. Poultry will eat up some of that as the industry re- turns to its 5 percent annual growth.
But while you're drinking in the riches of 1997, packers will be left with the hangover. They operated under fairly tight margins last year. This year, the red ink will flow.
What do you care? Remember, you are part of a pork chain. If a packer closes its doors, that reduces slaughter capacity. Limited slaughter capacity tanked live hog prices in the fall of 1994. Had there been more shackle space, you would have seen another $7 to $10 per hundredweight in your paycheck.
High hog prices for you eventually mean higher pork prices for consumers. At some point, it becomes too much and even the most loyal switch alliances.
It’s times like this that product quality becomes even more essential. If people are asked to pay more for your product, the quality better be there. If it’s not, your product’s long-term reputation will suffer. That’s true in the domestic and export market.
With such tight hog supplies, any packer that planned to start measuring quality will likely delay that move. But you shouldn’t. This is going to be a profitable year for you. Use some of those profits to improve your product. It may involve upgrading nutrition, genetics, facilities, herd health, business arrangements, marketing strategies, whatever. But it must include pork quality.
A wise businessperson thinks long term. And producing a juicy, flavorful, high-quality product will pay off in the long term.