The nation’s pork industry is likely to become smaller, says Steve Meyer, agricultural economist and president of Paragon Economics. In addition, Meyer believes retail pork prices will rise through 2010 and into 2011. The comments were made in a presentation at Iowa Pork Congress.
Although a reduction has already occurred in the U.S. swine breeding herd, more reduction is needed to support a return to profitability for pork producers, according to Meyer. “The U.S. needs to be at around 5.5 million to 5.6 million sows to support profitability for producers which is about 250,000 fewer sows than we currently have, he says.
Slaughter of market hogs will decrease in 2010, Meyer predicts. The economist predicts 111.8 million hogs will be slaughtered in 2010, down about 1.4 percent from 2009. Meyer adds that for every 1 million fewer hogs slaughtered he expects a corresponding reduction of 330 pork production jobs and 680 pork processing jobs. Meyer said cost of production is the main culprit for the expected decrease in the size of the industry.
The losses experienced by producers in recent years have resulted from higher costs, not lower hog prices, Meyer stresses. He points to risk management as the key for continued survival in the pork industry. “In 2010, pork producers will need to be aggressive risk managers,” Meyer said. “Have your banker on board, have your finances in line and have a plan.”
Meyer adds that in recent weeks, lean hog futures have been friendly again and suggests that producers sell at least a portion of their output if they haven't done so already.
Meyer does not see a significant downside for corn prices. “Positive ethanol margins will drive corn bids,” he says. Currently, there are 193 ethanol plants in operation which could use up to 5.2 billion bushels of corn. Meyer says that the new range for corn price is between $3.00 and $4.20 per bushel.