Whether USDA’s June Hogs and Pigs Report will reveal growth in the U.S. breeding herd, it will eventually happen. “At some point, producers can’t suppress the urge to expand,” says Glenn Grimes, University of Missouri agricultural economist.
He’s hearing more talk about plans to add sows in the next year or two or three. “We have a breeding herd that’s hard to downsize,” he notes. “In the past, when an operation left the business, it would stop producing hogs. Not so today.” That’s especially true with large operations, as they simply can’t sit idle.
The industry has seen 2.5 percent to 3 percent productivity growth for several years, and Grimes doesn’t look for that to change. “It has slowed some, but there’s still room for more and I expect it to happen.” He looks for a 2.5 percent annual growth over the next three to five years.
Along with this, production costs will most certainly rise. In the long term, ethanol production will compete with hogs for corn; energy prices will continue to rise, as will interest rates. “You will have to have deeper pockets to ride out the lower price cycle,” says Grimes.
While the hog cycle has been extended a bit, a price decline will return. Here’s Grimes’ live-hog price projections for 2005 and 2006:
Period – 2005 2006
1st quarter – $52.64 $40-$43
2nd quarter – $49-$50 $42-$45
3rd quarter – $45-$48 $39-$42
4th quarter – $40-$43 $33-$36