Four Key Issues Impacting the Pork IndustryFri, 24 Sep 2021 12:58:26 CDT
Dr. Steve Meyer, an economist at PFPAg, says these four key issues have the potential to affect the pork industry for the remainder of 2021 and into 2022.
Q: Will the current market continue to be demand-driven?
A: Much can transpire the rest of the year. Retail sales surged during COVID-19 and the shift to retail and away from foodservice has had some apparently lasting positive impact on pork demand. Domestic per capita pork availability will be slightly lower this year versus 2021 but retail prices are very strong. In fact, they are strong enough to conclude consumer-level demand is up from last year. Real per capita expenditures for pork, a measure of consumer level demand, are up 5.1% year-over-year through June.
Q: As China recovers their sow herd, will exports slow or are there new markets to tap into?
A: Exports to China will almost certainly be significantly lower this year. However, there are many pieces of conflicting information regarding domestic Chinese pork output. China was the industry’s top customer in 2020 but will not likely be so this year as shipments to Mexico, Japan, Korea and Philippines grow. In total, PFPAg expects exports to be slightly lower in 2021 but still the second highest total ever. Exports to China will be lower.
3. Hogs and Pigs Report Numbers
Q: Will the herd continue to grow despite rising feed costs, gilt availability and higher prices for building materials?
A: Producers limited the number of pigs they produced as a management decision during COVID-19 related slowdowns and shutdowns of packing plants. The U.S. breeding herd was also reduced by 256,000 animals from December 1, 2019 to March 1, 2021. While the herd is smaller, the industry must realize the genetic potential of this herd to produce piglets is still growing. Should management objectives return to raising every possible pig to market weight, hog slaughter and pork production could grow rapidly.
Q: How will current and future feed ingredient prices affect producer decisions moving forward?
A: The cost estimates, which are based on parameters from the Iowa State University Estimated Costs and Returns series, would put breakeven costs for farrow-to-finish operations in the mid- $80 range, the highest since 2013 and the fourth highest ever. Drought conditions in the northwestern corn belt have limited yields but the eastern corn belt appears poised to harvest record crops. Significant increases in the value of soybean oil (driven by regulations favoring renewable diesel in California) have allowed soybean meal prices to remain somewhat in-check despite higher soybean values. This pattern may continue, giving some respite for hog producers.
Click or tap below to hear Steve Meyer, an economist for PFPAg, share key issues that could affect the pork industry.
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