Conditions now seem right for hog producers to begin expansion plans, according to Chris Hurt, Purdue University agricultural economist.

“The losses of 1998 have been covered and producers are now earning large positive cash flows and the long-term outlook appears positive,” says Hurt. “International trade may not be as positive for hog prices in the last half of the year, but with sow productivity growth now leveling off, some small sow expansion could now take place.”

Continued low prices for corn and soybean meal only add to producers’ profitability and fuel the fires of expansion.

Hurt is careful to add that the expansion needs to remain at 2 percent or below for this year and that keeping a controlled expansion in place has never been easy for the pork industry.

Hurt says that fewer market hogs and producers hesitant to expand the breeding herd are providing an environment where profitable production is expected through the next 12 months.

While conditions may seem ripe for expansion now, producers should exercise caution when considering expansion. Right now, it appears that slaughter capacity may be sufficient through 2002, but it is expected to be tight. That could change with another increase in productivity, more live hogs coming to the United States from Canada, or another packing plant closing. There is not enough time to increase packing capacity before the fourth quarter rush of hogs in 2002, so a decrease in capacity is the only possible change.

Expansion may or may not be right for your particular operation. There certainly are factors that would indicate sow herd expansion. But at the same time, think of the industry as a whole, and remember that if packing capacity would happen to be exceeded again, there is nothing to stop live hog prices from reaching $8 per hundredweight or maybe even lower.