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Hog producers dealing with diminished prospects for 2011-12

For a year that started out so full of promise, hog farmers are having to lower their sights as they reach the mid-point of 2011.

Back in February, producers were looking at the prospects for $10 to $14 profit per head, says Dr. Steve Meyer, president of Paragon Economics and a speaker at the Pork Academy Lunch at the World Pork Expo today (June 9).

“We had a pre-Memorial Day rally that was impressive,” said Meyer. “But that didn’t hold up. Since then, we’ve had two down weeks in a row. Prices may go higher in August. But higher costs of production are likely to offset those.”

From the $10 to $14 of profit per head at the beginning of the year, Meyer says farmers are now looking at losses of $5 per head on average for 2011. For the balance of 2011 and into 2012, the outlook could become even more dim.

“I think the key issues for this year are what’s going to be happening with cost and demand,” he said. “Cost of production is quite questionable at this time because of all the problems we’ve had planting the corn crop. It does look like we’re going to have record cost of production.

At the present time, Meyer said it does not appear hog prices are not going to be sufficient to cover those costs. “Hog prices are probably going to be sideways for the rest of this summer before falling seasonally in the fall. Exports have been very good this year, and it’s going to be important that they remain strong to keep this product moving.

“All in all, it’s going to be one of those years where we sell hogs for lots of money, but maybe not have much left over at the end of the year in terms of profits due to costs.
Meyer said beef demand is going to be a big factor in the outlook for hog prices in the months ahead.

“Demand for all the species is important, but beef demand had been strong this year as well,” he said. “They’ve had record levels of production, but they’ve had excellent exports as well and U.S. consumers have been able to purchase beef.

“But the whole beef situation should be quite supportive to the entire meat complex over the next 12 to 18 months as supplies fall. We think these feedlot inventories will not maintain the kind of levels they are now based on the calf crops of the last two years. So we should see higher beef prices which should be supportive of pork demand.”

Meyer also talked about the weather phenomenon that continues to worry corn and hog producers: Is the Midwest overdue for a drought.

Current weather forecasts are for slightly cooler and wetter conditions for the remainder of the growing season. But meteorologists have also been looking at the long-term weather records and shaking their heads.

The average time period between droughts in the Midwest is 18 years, but it’s now been 23 years since the Midwest endured its last major drought in 1988.