Summer is almost here, and the sun isn’t the only thing that’s shining a bit brighter. At least as I’m writing this, the hog market has offered a break in pork producers’ ominous profit forecast. Even at that, it’s a matter of reducing future losses, not reaping profits.
But, hey, who’s to argue? Any reprieve is welcome.
Of course, corn planting ran behind schedule, and you know all too well the weight that market has added to your production costs. All eyes will now focus on the crop-growing season and future yields.
While profitability, not price, is the true business driver, at least hog prices have tried to do their part. In mid-March live-hog prices were $35 per hundredweight; by late-May they had climbed to $58 — a dramatically better-than-average seasonal price shift.
In the past five years, live-hog prices have averaged an $11-per-hundredweight increase from early-April to early-June. As of late-May, this year’s seasonal gain was $23. But what’s most stunning about this scenario is that it occurred with
So what’s up? Well, Thomas Friedman is right, and you are benefiting from a flat world. Oh yeah, and a weak U.S. dollar.
Without improving world economies and rising food demand, the
Demand is the most likely answer for recent hog price support.
First, let’s take a quick look at domestic demand. Americans are bargain shopping, as food and fuel are grabbing more of their paychecks, and pork is a value. For example, in April retail beef averaged $4.17 per pound and pork was $2.86. At a difference of $1.31 per pound, that is significant.
Then there’s USDA’s commitment to purchase $50 million worth of pork products for federal food-aid programs.
But if demand is the driver, exports represent a Formula-1 race car.
Trade data lags several months, so a look at first quarter 2008 is the best we can do. That data shows plenty of good news, as
Translate export sales into a
Who are your big customers?
That’s all good news. But, while exports have been something of a savior this year, relying so heavily on that market places you in a tenuous position.
Expanding export sales has occurred after years of hard work. It has allowed the
Being the world’s No. 1 pork supplier changes your business dynamics. Watching world markets and developments must be part of your decision-making process. Also, participation in USDA’s National Animal Identification System becomes a vital
While the hog markets still point to spring 2009 before the industry will move back into the black, understand that you are an international player like never before. Enjoy the reprieve that seasonal price gains and export markets may bring; just be sure to think broadly and keep your eyes open.