US pork producers to delay expansion

by Meat&Poultry Staff
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DES MOINES, Iowa – US pork producers are maintaining a “wait and see” approach regarding expansion, even though agricultural economists said the potential for profit in the swine industry exists for the rest of this year and into 2012.

“Producers are really holding their breath right now,” said Chris Hurt, an agriculture economist from Purdue University who participated in the Pork Checkoff’s media teleconference to discuss the June 24 Hogs and Pigs Report from the US Department of Agriculture. “They will be reluctant to expand until they see the size of the US crop.”

During the June-August 2011 quarter, US pork producers intend to have 2.87 million sows farrow, down 3 percent from the actual farrowings during the same period in 2010 and down 3 percent from 2009, according to the June Hogs and Pigs report. Intended farrowings for September-November 2011, at 2.85 million sows, are down 1 percent from 2010 and down 2 percent from 2009.

The Hogs and Pigs report showed the US inventory of all hogs and pigs on June 1was 65 million head, up 1 percent from June 1, 2010 and up 2 percent from March 1, 2011.

Totaling 5.8 million head, the breeding inventory was up slightly from last year and from the previous quarter. At 59.2 million head, the market hog inventory was up 1 percent from last year and up 2 percent from last quarter.

The March-May 2011 pig crop, at 28.9 million head, was up slightly from 2010 but down 1 percent from 2009. The big story, however, was the average pigs saved per litter hit a record high of 10.03 for the March-May 2011 period, compared to 9.81 last year.

“This is the first time the average litter size has been this high,” said Daniel Vaught, a market analyst with Vaught Futures Insights, Altus, Ark., and a participant in the Pork Checkoff’s media teleconference. “This is one of the most interesting aspects of the report, since it has efficiency implications for the pork industry.”

Feed costs continue to challenge pork producers, although moderating corn prices in mid- to late June provided welcome relief from record-high grain prices, Hurt said.

“There are still many unanswered questions about the 2011 crop, though,” he added. “Will we be able to move this crop forward into good yields? We will need average yields or higher with most of the US corn acres.”

Profit potential still exists in the months ahead for pork producers. Hurt projects $11 to $12 profits per head in the latter part of 2011 for farrow-to-finish operations. His price projections on a national lean basis equal $89 to $93 in the third quarter of 2011; $81 to $85 in the fourth quarter of 2011; $82 to $86 in the first quarter of 2012; and $88 to $92 in the second quarter of 2012.

“I’m also anticipating average profits of $6 per head for 2011 and $7 per head for 2012,” he concluded.
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