2014 could see return of profits – climate decides
Dr Steve Meyer of Paragon Economics states that the year 2014 could be a profitable year for swine producers, provided that the weather conditions will take a normal course as from this World Pork Expo, in Des Moines, Iowa.
There has been some hardship in the past 3 years, notably due to the drought in 2012 which caused feed prices to skyrocket – causing losses in 2012 and likely to be felt even stronger this year as well.
“Last year was terrible,” Meyer said. For 2012, producers lost $9.60 per head sent to slaughter on average – and for this year, he expects the figure to be even higher, at $13.40 – not a situation pork producers can endure for very long.
The year 2014 could bring change, Meyer said, if weather conditions return to normal. “Hog prices have not been that bad,” he said, with the national average being around $93-94 per pig (carcass weight) at the moment. “It’s cost of production.”
Due to the excessive rains all over the US corn belt over the last few weeks, a very late corn and soybean crop will be planted. Soybeans, Meyer said, are more flexible, but in case of the corn crop, delayed planting may result in a reduction of 2 to 5 million bushels off the prospected corn planting.
Meyer had some good news for pork producers saying that pork was relatively competitively priced in comparison to both beef and poultry meat.
Beef prices have been high since the drought in 2011 when entire herds had to be slaughtered in order to be able to feed all animals. The industry is still suffering from this causing high prices.
Poultry meat is in high domestic demand recently causing higher prices – of over $2 per pound.
For the coming year, Meyer expects hog prices to be in the mid-90s ($) for a hundredweight (45 kg) in the third quarter of 2013; in the low 80s for the fourth quarter and in the mid-80s for the first quarter of 2014. With that, pork production could become marginally profitable again.
Meyer takes a positive view on the recent takeover by Shanghui International Holdings of US’ largest pork producer and processor Smithfield. He said, “Exports to China will be growing faster than without this deal. By doing this, Smithfield have created new opportunities to grow – not only for themselves, but for many in the US.”
He added, “I can’t see any negative sides – or it would have to be that you don’t want your companies to come into foreign hands. But then again, the Chinese are mainly going to learn how to produce better – I don’t think it will give them access to any new technologies.”
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