Hog production in 2006 is looking to be only 1 percent higher than 2005 levels. That comes as something of a surprise, considering producers' tremendous profitability levels of the past couple of years.
So, the nagging question continues: Why isn't there more growth?
Some of it is due to the restrictions that producers face in terms of expanding existing facilities or building new ones. "There have been a lot of new houses built in the past few years-- on agricultural land," notes John Nalivka, president of Sterling Marketing, Vale, Ore. "Some of the complexes have very expensive homes, and the owners don't want hog complexes anywhere near them."
Environmental and siting issues have limited both the location of hog units and the number of producers, says Daniel Bluntzer, with Frontier Risk Management, Chicago, Ill. "I put a lot of emphasis on area restrictions in terms of limiting production. Guys are getting bigger, but their not pouring concrete; they're buying or expanding smaller units."
The lack of growth continues to reflect producers' memories of 1998. "People won't build without knowing whether the packer has the capacity and will buy their hogs," notes James Minert, Extension economist at Kansas State University. "That was not the case in the 1990s."
As a mature industry, there's the acknowledgement that producers themselves can ruin a good thing. "There's been an evolution in the business during the the past six to eight years," says Bluntzer. "Producers are comfortable with their production and will expand slowly. The mood is, 'let's not work our way out of a profit'."
Water availability, allocation and demand is a future issue that Nalivka says will garner more attention and impact on agriculture, including pork production. "Competiting demand for water is going to be an increasingly heated issue," he notes. Both urban centers and agriculture are big users of what's becoming a limited resource.