Looking back, the spring of 2008 was certainly a wild ride for pork producers — along with just about everyone else associated with agriculture.
As pork producers attended last year’s World Pork Expo spring rains and rising flood waters placed mounting pressure on the season’s unfolding crop outlook. All of agriculture faced uncertainties, and specific to pork producers, it meant corn racing toward $8 per bushel. Oil prices were on a steep, continuing incline — which meant the same pattern for ethanol — further fuelling worries about pork production’s profitability and sustainability.
On the plus side, domestic pork demand was on solid footing as export sales were red hot. U.S. pork supplies were record high but moderating, and the overall economy for the United States and the world looked relatively rosy.
What a difference a year makes
Fast-forward 12 months and an entirely different and broader-reaching picture has emerged; the financial sector’s economic meltdown has blighted the global markets and shaken both consumers’ and producers’ confidence. To say that there’s a deep and pervasive nervousness is not an overstatement.
Seeking out ideas, solutions and perspective is even more important today as you work on revising risk-management strategies to fit new and changing paradigms. At World Pork Expo, June 3-5, this year’s Marketing Information Center will include seminars on managing every aspect of your production operation, while keeping overall profitability in mind.
Always a popular feature, the Marketing Information Center’s lunchtime program is expected to pack the house. You will have the opportunity to hear first-hand from respected economists Glenn Grimes of the University of Missouri and Robert Wisner of Iowa State University. Grimes will present the hog market, export and competing meats outlook, and Wisner will outline the crop and feedgrain production and use scenarios. Elywnn Taylor, professor of ag meteorology at Iowa State University, will discuss weather and crop growing conditions that the markets will focus on through the summer and into harvest.
A snapshot look ahead
In anticipation of World Pork Expo, Grimes shared his insights about what pork producers should be watching as the spring and summer unfold.
For U.S. consumers, “pork is a bright spot as an affordable quality protein,” he says. “The best we can tell, (domestic) demand is holding very well. Over the past three months, we’ve actually had some growth in demand.”
There is still plenty of protein on the market, but pork, beef and chicken are all working to reduce supplies. Poultry in particular has shown significant cuts, as USDA projects 2009 supplies to be down 3 percent — an unheard-of development in a sector that traditionally records only annual growth.
Grimes points to chicken’s adjustments as being a benefit to pork in terms of a competing protein source. “Due to the reduction in flock sizes,” Grimes notes, “the pork consumer market is in somewhat better condition than it was last year at this time.”
However, export sales are a point of concern. For the past 17 years, U.S. pork export markets have grown exponentially, setting a new record each year. In 1990, exports made up just 3 percent of demand; today they make up nearly 25 percent. According to the National Pork Producers Council, the United States exported 2 million metric tons of pork products last year, valued at nearly $5 billion.
Much of the growth in U.S. pork exports can be attributed to market access gained through trade agreements. Producers received nearly $44 for each hog marketed because of exports, according to Iowa State calculations.
“The United States is still the low-cost provider of high-quality protein products as far as exports are concerned,” Grimes notes. Globally, pork producers elsewhere are facing even higher costs and tighter profit margins than U.S. producers. However, export growth for the 18th consecutive year looks highly unlikely at this point, he adds.
Grimes does expect pork producers to move into profitability in the second and third quarters of this year. However, the fourth quarter could be a problem since herd size has not been reduced as much as Grimes believes it should be in order to better manage supply levels.
“If I were a pork producer today, I’d watch the futures market very closely in order to find profits,” Grimes says. “I’d watch the grain markets and try to minimize the high prices I’d have to pay there.”
Also on the WPX Market Information Center agenda will be presentations from AgroSoft North America, which will show how technology can play an important role in finding and maintaining efficiencies within an operation. Wednesday afternoon will feature a presentation from Chris Voell, biogas and energy expert from the Environmental Protection Agency’s AgSTAR Eastern Region Group. On Thursday, the American Protein Corporation will present a sow seminar focusing on the role nutrition plays in sow and pig performance and, ultimately, profitability.
The best chance of profitability comes with vigilance, Grimes says, and that includes marketing, management and production.
New Days for World Pork