No question, pork producers' profitability is not what it was a year ago, however, it's sitting in a better position than for beef and poultry producers, according to Chris Hurt, Purdue University Extension ag economist.
That's largely because pork producers had a string of healthy profits before corn prices pushed feed costs higher. For about three years, hog margins showed a profit, nearly $7 per hundredweight for a full year before last fall's corn prices began to rally. Producers' margins have dropped to $2 per hundredweight on average, with higher feed prices accounting for the lion's share, notes Hurt.
While beef and poultry producers have scaled back production to accommodate higher corn prices, pork producers have increased their breeding herd. "Rather than trim the size of the herd, hog producers have largely absorbed higher feed prices in the form of reduced margins," says Hurt.
Late summer production is running 2 percent, than last year's level, but domestic pork demand has held up. Less competition from the beef and poultry industries have helped, says Hurt.
He projects the beef and poultry supplies to recover some in the next 12 months. Pork producers should face near break-even margins. The two key factors remain uncertainty over feed prices and export markets, particularly with regard to China's growing demand and how much it might of might not buy from the United States.
Source: Purdue University, Meatingplace.com