John Nalivka
John Nalivka

The National Pork Board hosted a teleconference Thursday afternoon with economists, following release of USDA’s first-quarter Hogs and Pigs report. Continued losses are predicted for now, but margins will likely improve going forward into the second, third and fourth quarters of 2013.

Livestock economists aren’t painting a rosy picture for 2013, but at least it should improve from what producers experienced last fall and in the first quarter of this year. National Pork Board hosted a teleconference Thursday afternoon, following release of USDA’squarterly Hogs and Pigs report. Continued losses are predicted for now, but margins will likely improve going forward into the second, third and fourth quarters of 2013.

Participating on the speakers panel were John Nalivka, President, Sterling Marketing, Vale, Ore., Victor Aideyan, Senior Risk Management Consultant, HISGRAIIN Commodities, London, Ontario, and Jim Robb, Director, Livestock Marketing Information Center, Denver, Col.

“Producers were losing about $32 per pig in March,” says Nalivka, “I think we’ll continue to see losses but they should fade back as we get into June. If we go from losing $32/head in March to losing $10/head in June, it’s going to have a lot to do with where the industry is headed in terms of sustaining any growth.”

Aideyan says one of the industry’s redeeming factors is its level of efficiency. “We have an industry that has been able to do more with less,” he says.“We’ve seen higher efficiencies, and this report confirms that the trend is continuing, with a 1.1 percent increase in efficiency for this quarter.

“Looking forward, we can expect larger numbers going into the second quarter and beyond,” he continues. “We have to ask ourselves the question: The industry is efficient and is getting better, but we’re seeing tougher prices with increased supplies.”

Aideyan says it’s difficult to interpret this report along with corn acre plantings, because everything will change on Monday morning when corn futures open up, and lower corn prices that might affect producers’ attitudes toward expansion. At least, in his opinion, the industry is holding the line rather than pulling back.

“The anticipation is that we could end up with a pretty big crop this year,” says Nalivka, “But if we don’t have enough moisture and the drought carries on, a lot of that talk will go away.”

Robb notes the corn market reacted in terms of stocks. “Acres came in on-line but stocks came in much larger,” he says.“The key to profitability for pork producers is the corn price, and producers are showing only modest signs of expansion.”

More pork than beef?
The economists said 2014 may the first year the U.S. produces more pork than beef. Pork producers have the opportunity to fill in the hole from reduced beef supplies.

“Pork has a great opportunity to replace other protein sources,” says Nalivka. “But we’re looking at pork prices well below where they should be, which has to do with demand. The pork industry must continue to fill that need and build on it.”

“Beef is pulling back, but pork and chicken clearly are not pulling back,” says Robb.“U.S. pork production eclipses beef production for the first time in history but beef consumption is still larger than pork.”

Exports will have a lot to do with prices this year, say the economists, and the good news is that other countries show significant economic growth. “Income drives the purchase of animal-based protein products,” says Robb. “The U.S. industry can continue to grow and provide protein. The long term outlook is brighter than the short-term.”

Barring any unusual circumstances, including continuation of the drought, here are their price projections.

Robb: Second quarter - $83-86; third quarter - $82-86; fourth quarter, more modest. “I expect overall prices to be down two percent from last year,” he says.

Nalivka: “I use the western corn belt weighted average carcass price; my projections are an average of $81 for the second quarter, $85 for the third quarter and an average of $77 for the fourth quarter. I’d have difficulty going into next year and seeing an increase in prices – it’s so dependent upon demand.”

Aideyan: “I use the Iowa-Southern Minn. price, carcass basis,” he says. “I estimate the second quarter will average $85, the third quarter will average $83 and the fourth quarter will average $77. Regarding next year, there are too many factors to digest. The big challenge is the demand side – we can’t have any significant trade disruptions and we can’t have anything on the domestic front that throws the economy in the wrong direction.”