This year, economic pressures lead the discussion among pork producers, and this year’s market conditions promise to bring a new level of urgency.

Consequently, producers attending the 2008 World Pork Expo won’t want to miss the seminars at the Marketing InformationCenter, presented by Pork magazine. They will be offered Thursday and Friday, June 5 and 6, in the VariedIndustriesBuilding, meeting room C, on the Iowa State Fairgrounds.

Among the presenters will be Glenn Grimes, University of Missouri agricultural economist, who says this year is unlike any other in recent history in terms of producer profitability and market conditions.

“There are a lot of challenges in the market that are impacting producers today,” Grimes says. “First of all, we have lots of hogs, really too many hogs.”

However, the good news is that pork demand is strong. “That’s due to a combination of factors. Consumer demand is strong domestically, and the pork export market is on fire, mostly due to the swine health problems in China,” he adds.

Domestic demand for pork, broilers and turkey is quite high, while beef demand is down, a situation Grimes attributes to the condition of the overall U.S. economy.

“This is specifically due to the fact that pork and these other proteins are more economical than beef for the average American consumer to purchase,” he explains. “For a population under economic stress — a recession, some would say — pork is a more affordable product.”

He adds that you can’t rule out the industry’s efforts to move pork domestically and internationally. Product promotion increases consumer awareness and helps keep pork out front, particularly when supplies are abundant.

Live hog prices are expected to improve somewhat through the spring, while summer looks to be around breakeven at best, Grimes says. He predicts continued losses into the fall and winter.

“We’re looking at 116 million head going to slaughter this year, which is quite a bit higher than the 109 million we slaughtered in 2007,” he points out. “There are signals that producers have started reducing the breeding herd, but that won’t show up in the market until 2009.”

Of course, input prices are the burden on profitability this year.

“Producer profitability pressures are due to high input costs this time around, not low hog prices,” Grimes says.

What can you do to improve your profitability position?

Grimes says they should look into futures. “The futures market has offered producers the opportunity to minimize losses, even make a profit, in this cycle. Only about 10 percent of producers use futures, and those pricing results have been higher than the spot market,” he says.

Darren Frye, president of Agri-Business Solutions, a Peoria, Ill.-based agricultural consulting firm, agrees. “Pork producers are experiencing a very confusing time in the markets right now,” he says. Between sky-high input costs and pressures of a volatile market, it’s tough for a producer to keep track of which direction his profitability is going.

“Most producers are good at balancing the components of raising hogs, but when economic conditions turn quickly, like they have for the past year, it’s easy to make a bad marketing decision based on an emotional reaction,” Frye says.

Producers who also grow grain have been tossed around even more, he notes. Some sold corn at $3.50 a bushel because it seemed like a high price at the time, and now it’s hard for them to watch where the market has gone.    

“In most cases, producers will be wise to work with a trusted advisor who can help them be confident that they’re in a good position and help make marketing decisions,” Frye notes. “That way they can ride out the volatility and end up with a positive outcome in the longer term.”

One thing that’s certain, with economic pressures come change. The industry has been through major change in the past 50 years, with the last 20 being the most pronounced. “In the late 1980s, one-third of the pork produced in the United States came from small farms. In 2006, that number was down to 19 percent. I don’t foresee that trend changing,” Grimes  says.

He predicts the current profitability pressures will hit small producers hardest. “Since large producers experience a lower per-head production cost, they will be more likely to come out ahead,” Grimes predicts. “Large producers also have a tendency to use the futures market more, so that’s also a factor.”

But an operation’s size does not guarantee its longevity. That is a multi-faceted process that includes seeking out knowledge and using it to outline and implement strategies, which is why a stop at the WPX MarketingInformationCenter is time well-spent.


WPX MarketingInformationCenter Schedule

Sponsors: Pork Magazine, National Pork Producers Council and Validus

Thursday, June 5

10:00 a.m. – Noon – AgroSoft North America:

10:00 a.m. – New Products: What has happened since last year? Tom Barragy

10:30 a.m. – Implementing AgroSoft in company-managed farms, Carthage                   Veterinary Service

11:00 a.m. – Implementing AgroSoft programs and new added items, Paul                    Fredsted and JonTomsen

Noon – 2:30 p.m. – Lunch and Market Outlook Session (Sponsored by the                        National Pork Board)

• Weather Situation and Outlook, Summer 2008, Elwynn Taylor, Iowa State

   University

• Feed Cost Outlook, 2008/2009 and Beyond, Steve Meyer, Paragon Economics

• Hog and Pork Economic Outlook, Glenn Grimes, University of Missouri

Friday, June 6

10:00 a.m. – Noon – Repeat AgroSoft NorthAmerica Session

Noon – 2:30 p.m. – Repeat Lunch and Market Outlook Session

3:00 p.m. - 5:00 p.m. – Nedap Agri, North America:

3:00 p.m. – The Start Up, Gary Wyse

3:30 p.m. – Why You Need Velos, Gerard Weijers

4:00 p.m. – Group Housing for Sows – How to Do It, Kase van Ittersum

4:30 p.m. – Ventilation, Tim Kurbi