"The industry will have small pork supplies, declining beef supplies, strong domestic and export demand, stable and moderately low interest rates, and sharply lower cost of production," he says.
The USDA reported that farrowing intentions for this fall were nearly unchanged from those of a year ago, and winter farrowings are expected to be down by about 1 percent, Hurt says. "These numbers appear to be consistent with the size of the breeding herd and market expectations. The declines in the breeding herd were greatest in the traditional family hog farm states, with 10 to 12 percent reductions in the breeding herds of Nebraska, Iowa, Illinois, Wisconsin, Indiana and Ohio," Hurt says. "There also was a surprising drop of 32 percent in the breeding herd in South Dakota and 23 percent in Kentucky."
Hurt says states that expanded their herds were Kansas (28%), Missouri (16%), North Carolina (11%), and Oklahoma (10%). States not among the largest 17 had breeding herds up an estimated 28 percent. He says most of the expansion is expected in Texas, Colorado, and Utah.
How are family farms doing? "Farrowing intentions indicate the family farms probably will not return," Hurt says. "Farrowing intentions for Iowa are down 11 percent and 14 percent for the next two quarters, respectively. In Nebraska, they're down 11 and 9 percent." Farrowings also continue to drop in Indiana, Wisconsin, Illinois, South Dakota and Kentucky. Other signs of family-farm decline: old age of operators and corn prices that are high enough to grow corn only.
However, Hurt says family hog farms have a strong incentive to come back, because of the high profit potential. "Family operations with 100 sows can generate an anticipated $40,000 to $50,000 of net income above all costs from a farrow-to-finish enterprise," he says. "The corn crop is large in the western Corn Belt, and prices are sharply lower. Corn fed to hogs in a farrow-to-finish operation can generate near $5 per bushel rather than around $3 from selling off-farm. Many of the families have little or no debt on buildings and equipment. They can respond more quickly to current market conditions than corporate farms."
Hurt says he expects live hog prices at terminals to be in the mid-to-upper $50s this winter. Summer should bring $60 prices, with a drop back to the high $40s or low $50s next fall.
Production costs for the coming year are expected to be in the $43 to $45 range, given current corn and protein prices. Terminal prices averaging $55 mean $10 to $12 of profit per hundredweight.
Pork supplies are expected to be down about 4 percent through March. By summer, supplies will rise 2 percent to 3 percent -- still small by historic standards. Expansion will begin with higher sow farrowings in spring, resulting in sharp increases in supplies by next fall. Buildup in the breeding herd can be expected through mid-1998, he says.
CONTACT: Hurt, (765) 494-4273; e-mail, Chris_Hurt@acn.purdue.edu
Purdue News Service: (765) 494-2096; e-mail, firstname.lastname@example.org
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