U.S. pork exports, which comprised about 23% of pork production in 2011, hold the key to profitability in 2012, says Steve Meyer, who provided a market outlook report to attendees at the Minnesota Pork Congress in Minneapolis this week.
Meyer, president of Paragon Economics, Inc., Adel, IA, says the viability of pork exports can make or break producers’ balance sheets.
“I think if we can hold pork exports for 2012 to virtually the same levels as 2011, it will be a victory,” he says.
The U.S. dollar won’t strengthen much in the coming year and that will be a boon to pork exports. However, the dollar is strengthening against the Mexican peso, which raises concerns for that top market for U.S. pork, Meyer says.
Export volume to Mexico in November was down 12% but value did remain steady at $94.7 million, according to the U.S. Meat Export Federation. Overall volume to Mexico for the year was down 3%, but Mexico remained the leading volume destination for U.S. pork. And for the first time, in 2011, export value to Mexico may break $1 billion.
Domestic demand for pork will suffer in 2012 until its chief competitor, chicken, works its way out of a downward spiral which has seen chicken demand dip 8%.
With a low 867 million bushel corn carryover, expect farmers to plant a record corn crop, and plant corn on corn, to try and recoup grain supplies, Meyer says.
Corn prices may range $6-7/bushel in 2012, but if the weather holds, it’s possible that corn prices could drop to $5.50/bushel later in the year, he predicts.
Soybean meal should average just about $300/ton.
Production costs will average about $82 carcass weight for the year and could dip to $80 in the second half of the year, slightly lower than 2011, Meyer says.
Based on those costs, hog producers should enjoy another very profitable year, averaging about $14/head in profits.