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Hogs Won’t Resume ‘Mortgage Lifter’ Role

Hogs won’t return to their role as a “mortgage lifter” for Midwestern family farmers, says Purdue University Extension marketing specialist, Chris Hurt.

This year’s profitable prices should not be expected to last for an extended period of time, remarks Hurt.

The Purdue economist says don’t expect feed costs to stay at current low prices once crop yields return to normal. And, he adds, “The current level of pork exports will likely retreat when U.S. beef exports are restored. Finally, marketing margins will likely return to more normal levels in late 2005 and 2006.

“The one positive that remains is that domestic pork demand appears to be very good this year, with retail prices up nearly 5% even with almost 3% higher pork production.” Hogs had a history of being mortgage lifters, providing much-needed cash-flow relief to family farms, with a little extra to pay off land debt, he recalls.

“That reputation was lost after the early 1990s, as technology and size of operations changed, leaving mostly negative margins for family farms that could not meet the new industry standards,” Hurt says.

Profit margins for 2004 will average about $22/head, compared to less than $4/head from 1992 to 2003. The current margins have even small producers thinking, “at $22/head and 20 pigs/sow/year, one sow will generate $440 of profit and 100 sows will generate $44,000 profit/year,” he says.

But that vision fades when producers realize current profitability is due to three non-production factors: extremely low feed prices, the loss of beef exports due to mad cow disease and retail featuring of pork products.

“There are positives, however,” asserts Hurt. “The growth in U.S. pork demand seems to suggest that meat demand has turned the corner in favor of animal-sourced proteins, in general. Secondly, while pork exports have been extra strong this year, the overall trend remains positive.”

TAGS: Marketing