High feed prices have cut into profits for pork producers. Steve Meyer - who leads Paragon Economics - has the outlook…
“Well, I think the whole situation with the grain situation has certainly damaged the profit outlook for next year. My calculations back in August showed about $10 a head for next year, and they’re down to break-even. So, higher costs, some sell-off on the lean hog futures, now those for the distant months for next year have certainly had a rally recently. Right now it’s pretty negative, we’ve had a lot of hogs, and they’re great big hogs, and so I think the outlook is better than where we are right now, but certainly not as good as it was a few months ago.”
This summer, Meyer says, the financial outlook was improving in pork production. That changed when feed costs surged higher…
“It basically levels out our building of equity for the next year based on futures market right now. Back in July, you had the prospect of getting back well over half of the losses of the last year, last three years, now that is kind of dead in the water right where we are right now, which is about a quarter of the way back. So, this certainly hurts the prospect of building equity, and because of that, I think it’s probably poured a great deal of cold water on any expansion that’s going on. I’ve heard of a few sow units that might be having some sows put back in them, but there aren’t very many of those.”
According to Meyer - the pork export story remains positive…
“Trade has been good, I mean we’ve had exports up this year. July and August weren’t great, but certainly up for the year. I’ve been kind of judging trade relative to a 2004 - 2007 trend, and we’re on that for the year. So, that’s a positive. We’re not going to match 1998’s total, but, we’re actually going to export a higher percentage of our production this year because production got smaller. There’s still a lot of trade issues out there with Korea and some others that we need to be resolved, and open those markets up, but, I still think that’s till a bright spot for the US industry. Everybody’s feed costs went up too, and this is a very competitive, from a technical standpoint, a very competitive industry, and I think we’ll be very competitive in world markets.”
In the competitive meats - Meyer says the beef inventory is shrinking. Meyer expects chicken supplies to increase - putting pressure on the hog trade.
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