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At World Pork Congress

By Staff | Jun 13, 2012

There could be a substancial increase in pork a year from now, said Steve Meyer, president of Paragon Economics, of Adel, who spoke to producers at last week’s World Pork Expo.

By DARCY

DOUGHERTY

MAULSBY

Farm News staff writer

DES MOINES – While hog profits reached $19 per head in February, dipped this spring and rebounded recently, now’s the time to assess the market-moving factors that likely lie ahead.

“You’ll have opportunities to lock in profits in the months ahead,” said Steve Meyer, president of Paragon Economics, in Adel, who spoke at the 2012 World Pork Expo in Des Moines.

It will also pay to keep an eye on a number of factors that could influence the markets, including:

  • Feed demand. While feed demand is expected to increase in 2012 into 2013, Meyer questions why the U.S. Department of Agriculture has pegged a whopping 900 million bushels for the feed category. “That’s about 20 percent more than last year,” he said. “I don’t know how we’re going to get there, especially since there are lower cattle-on-feed numbers, slow growth in the sow herd and no rapid growth in the turkey and poultry industries.”
  • Weather trends. While there has been no major drought in corn-growing areas of the United States since 1988, many parts of the Corn Belt have been unusually dry this spring and early summer. This could lead to below-trend crop yields. “Corn is strictly a weather situation,” Meyer said. “If we have good yields, prices will probably be around $4 per bushel. If we have a real drought, $8 corn could still happen.” The weather will also influence the soybean market, where it appears that normal yields will boost prices into the $13 range.

“Cash soybean meal isn’t going to be cheap,” Meyer said, who noted that soybeans fought for acres in 2012, but lost.”Overall, the grain situation is a ‘Smokey and the Bandit’ thing. We’ve got a long ways to go and a short time to get there.”

  • Ethanol. While Meyer stressed that he is not opposed to ethanol, it has driven up the cost of production for livestock producers. Although ethanol was profitable in 2011, this is not the case this year. “I don’t expect the ethanol industry to grow much in 2012,” Meyer said. The E10 market is completely saturated, and many retailers have not accepted E15, even though it has been approved.

In addition, there are no incentives for building new plants, Meyer said, so the key issue to watch is whether corn-based ethanol will be deemed an advanced biofuel.

“Carving out a mandate this way is a bad idea,” Meyer said. “Ethanol is a mature industry, and it needs to stand on its own.”

  • Consumer sentiment. Due to the slow U.S. economy, personal per-capita disposable income is stagnant. Revised numbers in May showed that the trends were worse than projected.

“The dollars that people have to spend are not growing,” Meyer said. “In addition, the impact of the lean finely textured beef issue this spring was very negative for meat in general, not just ground beef.

While domestic meat demand had improved in 2011, the results through April of 2012 have been mixed. In addition, the current freezer stocks of meat are up more than 7.5 percent – the highest since 2008. “We’ll have to move these inventories.”

  • China. As China expands its swine industry, this Asian nation remains a major corn customer. “China wants to become self-sufficient, but they have many small farms and very low corn yields, compared to the United States,” Meyer said. “The big question is, ‘How much corn will China take?'”

Expansion in pork

While the preceding issues could have widespread influence in ag markets, a number of other key factors will directly influence the pork industry, including:

  • Exports. U.S. pork exports shattered records in 2011, reaching all-time highs in both volume and value. For the year, pork exports equated to 27.5 percent of total production, when including muscle cuts, variety meats and sausage casings. This was up substantially from 23.7 percent in 2010.

“Any blips in our exports in the months ahead will leave more product in the United States, which will put downward pressure on prices,” Meyer said.

  • Future pork supplies. Based on the latest USDA Hogs and Pigs Report, the U.S. breeding herd grew a little faster than expected.

In addition, litter sizes have grown in the past few years. “We could have a substantial increase in pork a year from now,” Meyer said, who noted that year-to-date pork production is up 2.2 percent from 2011.

“We’ll need more harvest capacity if we’re going to grow.”

Contact Darcy Dougherty Maulsby by e-mail at yettergirl@yahoo.com.

At World Pork Congress

By Staff | Jun 13, 2012

ISU’s Ag Climatologist Elwynn Taylor expects below-trend corn yields if La Nina weather patterns regains strength this growing season.

By DARCY

DOUGHERTY

MAULSBY

Farm News staff writer

While Iowa is now in neutral territory for La Nina-influenced weather conditions, the potential for greater yield volatility highlights the need for risk management.

“It looks like La Nina may have ended around April 22, but we don’t know for sure,” said Elwynn Taylor, an Iowa State University Extension climatologist, who spoke at the 2012 World Pork Expo in Des Moines. “Strong La Ninas – and this one was one of the strongest since the 1950s – tend to come back.

“We’ll know by the week of July 10.”

During a La Nina episode, the U.S. average corn crop has a higher risk of being below-trend line, Taylor said, adding that the U.S. is due to enter a period of volatile yields.

Extremes won’t be uncommon in this 25-year cycle, in which yields could be cut by 30 percent nationally or could rise 20 percent nationally.

“While the price of crops has been far above the cost of production in recent years, we don’t expect this to persist,” Taylor said. “Risk management will become even more important thing in your life in the months ahead.”

To keep track of precipitation levels, heat stress levels and weather conditions for every state in the Corn Belt, log onto mesonet.agron.iastate.edu/index.phtml.

Contact Darcy Dougherty Maulsby by e-mail at yettergirl@yahoo.com.