For many U.S. pork producers, 2012 was one for the record book: record corn and soybean prices, record summer temperatures and, for some, record production losses. The challenges posed by the 2012 drought and the highest-ever corn and soybean prices made most producers happy to turn their calendar to the new year.
In addition to crop-withering summer heat and record-setting feed prices, many restaurants, supermarkets and institutional food suppliers have stacked another layer of challenge on the industry. The move to eliminate gestation stalls from pork supply chains by major food retailers, including McDonald’s and Kroger, will require considerable investments by those operations that comply with retailers’ directives.
In yet another setback for the industry, the U.S. Environmental Protection Agency was unable to find evidence of severe “economic harm” associated with its Renewable Fuel Standard which will require the ethanol industry to purchase some 4.9 billion bushels of the nation’s corn crop in 2013. Instead, the EPA found that waiving the mandate would only “reduce corn prices by approximately 1 percent.”
While 2012 was a severe challenge to your operation, you now turn your attention to the trials that 2013 has in store. Will we get a break from the drought? Will input costs moderate? When will hog prices be sufficient to yield a profit? Here to provide perspective on some of the issues you will face in the new year are several industry analysts with their outlook for 2013.
Providing the 2013 outlook on hogs, corn and soybeans are three economists from Doane Agricultural Services, a sister company of Pork magazine. Rich Pottorff, chief economist, gives his outlook for hogs while Marty Foreman, senior economist, provides his corn forecast for the new year. Bill Nelson, senior economist, offers the outlook for soybeans.
Rich Pottorff , Chief Economist, Doane Agricultural Services
Hog Outlook 2013
The drought has resulted in some breeding herd cutbacks that will affect pork production in 2013, according to Pottorff. Futures market prices suggest that hog production profitability will return by the spring of 2013.
Pottorff sees a reduction in breeding herd inventory and farrowing intentions as the key to the return to profitability. In recent hogs and pigs reports, the breeding herd inventory was down compared to previous quarters as well as previous years. “Reductions in farrowing intentions are an even stronger indication of the potential adjustment,” Pottorff says. ”If producers follow through on these intentions, the result will be fewer hogs by spring.”