"Forecast often!" is the mantra for all market forecasters. While it sounds like — and usually is — a monumental copout, the admonition is based on sound economics and decision making. Virtually all economic analysis aims at stating an expected outcome ceteris paribus or "other things held constant."

The rub, of course, comes in that other things are never constant. The environment we work in is always changing thus necessitating another run at the forecasting methods to see what the new result is under new ceteris paribus conditions. I'm not likely to garner any sympathy from non-economists with that explanation but weather forecasters know exactly what I am talking about. They and we are a miserable lot at times.

Last week was maybe the best and most maddening example I've seen in a long time of how things can change on a dime. Consider:

So what do I think after all of this?

First, demand both at home and abroad is terrific. If Phase 2 of the China trade deal can officially roll the retaliatory tariffs back, it could get even better. I put the word "officially" in there because is it widely believed that Chinese importers are paying few retaliatory tariffs on U.S. pork. That's primarily because state-owned entities such as COFCO are, we think, doing most of the buying. But getting that hurdle out of the way could open up China's vast market to even more companies and more U.S. products.

Second, in spite of all of the difficulties, China has been a huge customer and our world in the United States would have been much worse had they not been so active in our market. December U.S. pork output was 9.45% larger than last year while the cutout value was more than 10% higher than one year ago. Those figures for all of 2019: plus-5.0% and plus-2.6%, respectively.

Third, hog prices didn't fare as well as the cutout, but they did remarkably well for the year given a 5% increase in annual pork supply. National net prices across all purchase methods fell just $0.04 per hundredweight (less than 1%) to $69.43. The average price of producer-sold barrows and gilts increased 4.1% for the year while the national net negotiated price, though $8 less than the previous two prices, also gained 4% on its 2018 level. Even the Iowa-Minnesota negotiated base price grew by 2.1% last year.

But the past is the past so what about the present? Lean Hog futures prices aren't what they once were, but they are still offering profits for 2020. In fact, as of last week, the producers represented by Iowa State University's costs and returns estimates (we think those are the low-cost 25% or so) could lock-in roughly $20 per head for the year. Average producers would be closer to $10 per head. Those figures are good enough to be in a horse race for the fifth best year ever, trailing 2015, 2004, 2005 and 2010 and, at present in a dead heat with 2017.

I'll keep saying it until hopefully proven wrong: I am still scared about fourth quarter 2020 as it appears at present that breeding herd growth, productivity growth and high pig survival rates will severely tax packing capacity. Strong demand helps but you have to get them in a box first. And that could be a huge challenge.

I would say I'm sorry to sound like a broken record but hardly any readers would know what that means. So, I'm sorry to keep repeating myself. See you young'uns learned something today.

Source: Steve Meyer, who is solely responsible for the information provided, and wholly owns the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.