WEST LAFAYETTE, Ind. — The U.S. pork industry has started a
slow expansion driven by lower feed costs, which should lead to more rapid
growth of pork supplies in the latter half of this year, Purdue Extension
agricultural economist Chris Hurt said.
That could result in 2014 turning into the best year for
pork producers in nearly a decade.
If corn and soybean meal prices stay low as expected, hog
weights and pork production should continue to increase into 2015, Hurt
“The U.S. Department of Agriculture reports the number of
market hogs to be down fractionally in 2014, but weights are expected to run
about 2 percent higher and result in a 1 to 2 percent increase in pork
production for the first half of 2014,” he said.
“Farrowing intentions for this winter and coming spring are
up 1 to 2 percent. With pigs per litter about 1.5 percent higher and higher
weights, pork production in the last half of 2014 will be up 3 percent.
“Pork production is likely to continue to expand into
That continuing growth will be met with strong demand, both
based on limited competition domestically and strong export demand. Total meat
supplies of beef, pork, chicken and turkey combined are likely to remain
unchanged this year.
While chicken production is expected to grow by about 3
percent and turkey by about 2 percent, Hurt said beef supplies will fall by as
much as 6 percent on the tails of a small calf crop and higher heifer-retention
“Retail pork prices will be much lower than beef and will
thus continue to pull some consumption away from beef at the retail counter,” he
said. “USDA analysts expect pork export demand to increase by 4 percent and
represent nearly 22 percent of total production.”
Last year, live-hog prices averaged $65 per hundredweight.
Hurt said they are expected to average about $66 this year, with the highest
prices ranging from $69 to $71 in the second and third quarters.
Increased production during the summer and fall will then
drive prices back down to below the 2013 levels. Low production costs, however,
will help maintain strong profit margins for pork producers.
“From 2000 to 2006, the estimated total costs of raising
hogs was about $36 per live hundredweight,” Hurt said. “That reached a high on a
calendar year basis of $67 in 2012. Costs were estimated at $64 last year and
are expected to average about $56 for the 2014 calendar year.”
Part of what continues to drive low production costs is low
feed prices. Corn averaged an estimated $6 per bushel in 2013. That price could
fall to an estimated $4.45 per-bushel average for the 2014 calendar year.
Soybean meal averaged about $440 per ton last year and
likely will drop to an average of $395 per ton in 2014.
According to Hurt, profits could reach about $27 per head,
making this year the most profitable for pork producers since 2005. As supplies
increase, he said those margins will tighten, but not disappear.
“Profit margins are expected to narrow in the fall of 2014
and into 2015 as pork supplies increase,” he said. “Returns, however, still look
to be profitable at least until the fall of 2015.”
Hurt’s full report, “Pork Industry Starts Modest Expansion,”
is available for download via the University of Illinois Extension’s Farmdoc
Daily at http://farmdoc.illinois.edu/marketing/weekly/html/010614.html. A
podcast version is available on the site.