Economist Says Hog Producers are Making Wise Decisions

Purdue Extension agricultural economist Dr. Chris Hurt believes hog producers have – made a wise decision – and remain cautious about expanding their breeding herds despite the industry’s return to profitability. Hurt notes – there is still much economic uncertainty for them. Although USDA has estimated that pork production will rise by 2 to 2.5 percent this year, Hurt says most of that increase will be attributed to there being more pigs per litter, rather than expansion of the herd.

As the U.S. economy improves in 2012, Hurt says pork demand should remain strong. Exports are expected to comprise 22 percent of all production, meaning pork availability in the U.S. will increase only by about 1 percent. Smaller supplies of beef and poultry, however, will drive pork demand. But even with the strong demand, pork producers are likely to see a slight decline in profits.

Even after the bearish January grain reports, world inventories of corn and soybeans are still tight and will keep feed costs high by historical standards. Should worldwide crop yields increase this year, Hurt says feed prices could come down, especially by fall, if the U.S. has a good crop. But if there are yield reductions in major production areas, feed prices could climb again.