Tight Margins Expected for Pork Producers in 2016

Pork producers in 2016 are expected to experience another year of tight margins similar to the year just completed. Purdue University's Chris Hurt says pork production is expected to rise by about one percent, but beef production will rise by four percent and poultry by about three percent.

Hurt says there will be plenty of meat and poultry for consumers and retail prices will likely fall to encourage them to buy more.

He says the global marketplace is also casting shadows on the U.S. pork industry with weak income growth in some countries that buy our pork and a strong U.S. dollar that encourages more pork imports and stimulates pork production in competitive countries.

For the year, live weight hog prices are expected to average in the higher $40s after averaging near $50 in 2015. First quarter prices are expected to average in the mid-$40 before moving upward to average in the low-to-mid $50s in the second and third quarters. Prices then are expected to drop to the mid $40s for the final quarter.

Hurt says 2015 costs of production estimate for farrow-to-finish production was $51 per live hundredweight. A modest reduction to $50 cost is expected for 2016. The slight reduction is due primarily to lower soybean meal prices that will be the lowest since 2007.

He says margins are expected to be negative for the year with an average loss of about $4 per head. There will be large differences by quarter with loses near $16 per head in the first and the fourth quarters and profits of about $8 per head in the second and third quarters.