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Prairie Swine Centre is an affiliate of the University of Saskatchewan
Prairie Swine Centre is grateful for the assistance of the George Morris Centre in developing the economics portion of Pork Insight.
Financial support for the Enterprise Model Project and Pork Insight has been provided by:
ECONOMICS: GRAIN AND HOG OUTLOOK
Posted in: Economics, Pork Insight Articles by admin on May 10, 2017
Rapid growth in U.S. ethanol production produced very high grain prices during 2006 to 2013. This caused a great deal of financial stress for livestock and poultry producers. Slow growth in ethanol production combined with record corn harvests in 2013, 2014 and 2016 have pushed down feed prices and aided livestock profits. The death of nearly 7 million baby pigs from the PED virus reduced hog slaughter and pushed 2014 hog prices to record highs. Since then hog numbers have increased and prices decreased. The outlook for 2017 is for record hog slaughter and prices slightly below the breakeven level.
If USDA’s numbers are close to right, 2017 hog slaughter will be above 120 million head, up 3.3% from 2016, and a new record. For 2017 look for hog slaughter to be up 3.8% on a daily basis with 51-52% lean hogs averaging in the upper $40s/cwt live and Iowa hogs averaging in the low $60s/cwt on a carcass basis. We anticipate only a modest slowdown in herd growth during the second half of 2017. On average, hog slaughter drops below the year-earlier level 15 months after losses begin.
Financial losses by hog producers were modest in 2016 and are expected to be small again this year. Given corn prices under $4 per bushel there is no clear signal that producers should cut back the sow herd. USDA’s long term year forecast has U.S. farm prices for corn averaging between $3.50 and $4.00 per bushel over the next ten years.
Pork production is expected to increase at an average rate of 1.3% per year. Hog prices are expected to bottom in 2017 then steadily increase through 2026.