Pork producers may see a bit more red ink but the tide could change, predicts Ron Plain, University of Missouri agricultural economist.
“I think producers will make some pretty good money in the summer months of 2009,” he says. Looking further out, Plain expects 2010 to be profitable for producers.
“I’m estimating a breakeven price, on a live-weight basis, will be somewhere around 55 cents per pound for slaughter hogs in 2009,” Plain says. The economist points to the nation’s biofuels policy as driving feed costs. “Ethanol price determines corn price today,” he says. “Until we change our biofuels policy, this is what will drive corn prices and drive the cost of raising pigs.”
For 2008, about one-third of all the corn raised in the United States will have been used for ethanol production. For each bushel of corn that goes to produce ethanol, about 17 pounds of distillers’ dried grains with solubles are produced. Still, DDGS is not cheap, he says. Corn and DDGS prices track pretty closely together. However, Plain attributes the fact that cattle consume more DDGS during the winter as a seasonal price driver. “As a result, DDGS tends to be a good buy in the summer months,” he adds.
Plain estimates an average negotiated live-base hog price equivalent for 2009 at $51 to $55 per hundredweight. He expects the 2008 hog-slaughter number to be 116.8 million. He looks for a slight reduction in 2009 to about 113.7 million head.
One unknown is U.S. consumers’ demand for and apprehension to buy meat during the challenging economy. “Domestic pork demand has more to do with prices than hog numbers,” Plain contends. Americans consume about 48 pounds of pork per person per year, which hasn’t changed much in 50 years. “Export demand has been fabulous,” he adds. On that front, the U.S. dollar’s rising value could slow that activity, however. “As goes the exchange rate, so goes export demand,” he notes.
Hog slaughter weights for 2008 were down slightly. However, Plain predicts that carcass slaughter weights for 2009 will return higher, and he looks for a 1-pound annual gain. “We’re producing carcasses about 50 pounds heavier today than 50 years ago, and 50 years from now look for weights to be another 50 pounds heavier,” he says.