Pork Production, Prices Could Both Grow This Year

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Published on January 6 2017 8:26 am
Last Updated on January 6 2017 8:27 am

The size of the swine herd and total pork production could grow this year, but that doesn’t necessarily mean hog prices will plummet.

Chris Hurt, Purdue University Extension economist, recently predicted live hog prices this year will average $48 per hundredweight, about $2 higher than last year. The slight price boost could materialize despite the fact U.S. pork production could grow 3 percent this year to 25.7 billion pounds. If realized, 2017 production would represent a 12% increase since 2014 when porcine epidemic diarrhea virus decimated some hog herds and pushed prices to record highs before a more recent downturn in the market.

“With 3 percent higher production, one might expect annual prices to be lower,” Hurt said. “But there are additional items to consider.”

Hurt believes lower retail pork prices will spur more demand this year. Meanwhile, lower margins at the processing stage, caused by new processing capacity, actually could contribute to stronger bids to hog producers, and USDA expects pork exports to expand by 5% this year, which would move more of the increased production to foreign customers.

“From a production standpoint, we’ll continue (to grow the herd in Illinois),” said Jason Propst, president-elect of the Illinois Pork Producers Association. “Producers continue to increase the number of new barns going up, and they want to increase sow numbers. This is all basically because of access to markets, relatively good roads, and we’re fortunate (in Illinois) to have access to major and smaller packers (located in Beardstown, Monmouth, Rantoul and just across the border in Indiana, among other locations).”

In Illinois, the inventory of all hogs and pigs as of Dec. 1 totaled 5.1 million head, up 2 percent from the previous quarter.

Hog prices throughout 2017 could average $45 per hundredweight this quarter and in the low-$50s in the second and third quarters before slipping to just $43 by the fourth quarter. If realized, hog farmers might squeeze out a small profit in the middle quarters bookended by losses in the first and last quarters this year.

Costs of production could average around $50 on a live-weight basis in both 2016 and 2017 based on current feed price projections, according to Hurt.

Overall, hog producers this year could lose an average of about $6 per head, which would be an improvement from losses of about $12 per head in 2016, the economist added.