Despite a mixed bag of economic factors, pork producers will have opportunities to lock in profits in the months ahead, says Steve Meyer, president of Paragon Economics and author of Market Preview in National Hog Farmer’s Weekly Preview.
It will pay to keep an eye on a number of issues that could influence the markets, says Meyer, who spoke at the Pork Checkoff’s Producers Opportunity for Revenue and Knowledge (PORK) Academy at the 2012 World Pork Expo last week in Des Moines, IA. These include:
• Consumer sentiment. Due to the slow U.S. economy, personal per-capita disposable income is stagnant. Revised numbers in May 2012 showed that the trends were worse than projected, Meyer says. “The dollars that people have to spend are not growing. In addition, the impact of the lean finely textured beef issue this spring was very negative for meat in general, not just ground beef.” While domestic meat demand had improved in 2011, the results through April of 2012 have been mixed. In addition, the current freezer stocks of meat are up more than 7.5% — the highest since 2008, Meyer adds. “We’ll have to move these inventories.”
• Weather trends. While there has been no major drought in corn-growing areas of the United States since 1988, many parts of the Corn Belt have been unusually dry this spring and early summer. This could lead to below-trend crop yields. “Corn is strictly a weather situation,” Meyer says. “If we have good yields, prices will probably be around $4 per bushel. If we have a real drought, $8 corn could still happen.” The weather will also influence the soybean market, where it appears that normal yields will boost prices into the $13 range. “Cash soybean meal isn’t going to be cheap,” Meyer notes.
• Exports. U.S. pork exports shattered records in 2011, reaching all-time highs in both volume and value. For the year, pork exports equated to 27.5% of total production, when including muscle cuts, variety meats and sausage casings. This was up substantially from 23.7% in 2010. “Any blips in our exports in the months ahead will leave more products in the United States, which will put downward pressure on prices,” Meyer says.
• Future pork supplies. Based on the latest USDA Hogs and Pigs Report, the U.S. breeding herd grew a little faster than expected. In addition, litter sizes have grown in the past few years. “We could have a substantial increase in pork a year from now,” says Meyer, who noted that year-to-date pork production is up 2.2% from 2011. “We’ll need more harvest capacity if we’re going to grow.”