Swine industry eyes profits if ’13 yields are up
DES MOINES – If there is adequate rainfall, and if there are trendline yields in corn and soybeans, then some profitability is expected to return to the swine industry, but not likely until later this summer and most likely will allow pork producers to break even.
This assessment came from Dr. Steve Meyer, president of Paragon Economics Inc., based in Adel.
He was speaking to an estimated 80 pork producers Jan. 22 at the 2013 Pork Congress.
Meyer said if timely rains throughout the growing season creates the potential yield of 15 billion bushels, the present price of corn could fall less than $5 per bushel as harvest draws near.
But if the drought continues through 2013, Meyer said, “I doubt there is the financial strength to sustain a dry 2013 and we are likely to see the massive reduction in hog numbers that many think should have happened already.”
Meyer pointed out that despite the low pork market and the high costs of feed, pork producers have not been culling their sow herds.
In fact, he said the current sow herd culling rate is well under the five-year average.
Meyer offered two factors influencing this trend – producers are toughing it out, and lenders don’t believe the pork status is as bad as economists are saying.
“They think financial positions are better than the cash models suggest.”
U.S. corn demand has been ruined through industry rationing, culling cattle and poultry numbers and export sales are 48 percent behind, on Jan. 10, compared to a year earlier.
On Jan. 13, Iowa State University the U.S. corn balance sheet showing a carryover of 536 million bushels on Aug. 31, about 4.5 percent of the total supply.
If farmers harvest a large yield this fall, ISU estimates the carryover at more than 2 billion bushels, or 13.7 percent of supply, which will drive the market down. Meyer thinks that scenario would be less than $6 and possibly less than $5 per bushel.
It would cheaper feed costs for all livestock feeders, but cut drastically into row crop growers’ income stream, since inputs have not lowered for 2013.
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