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Profits are coming - but how big?

by 5m Editor
8 July 2003, at 12:00am

US - US Swine Economics Report - 7th July 2003. - Regular report by Ron Plain on the US Swine industry, this week reporting on the uncertainties faced by the hog producer over the coming 12 months.

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Ron Plain
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How much money hog producers will make in the coming 12 months is tough to predict because, as always, it depends on so many uncertainties. Among the most important of these is the level of pork production in the coming year. Hopefully, pork production will be down and profits will be large enough to offset the losses of 2002 and 2003. Unfortunately, there are reasons to worry that production won't be low enough.

For the 12 months ending in May, the average dressed weight for barrows and gilts was down by 0.1 pounds compared to the year before. This was the first drop in the June-May average weights in 13 years. If lighter dressed weights are a new trend, then this is good news as it implies lower pork production in 2004. If, however, the lighter weights of the past 12 months are only an aberration, then a return to trend will mean a lot more pork in 2004. The previous six years had an average increase in barrow and gilt dressed weights of 2.1 pounds per year. A large corn crop this year would push down corn prices and most likely raise slaughter weights. A return to trend by barrow and gilt dressed weights will, by itself, add nearly 2% to pork production in the coming year.

Another important factor in the "trend or aberration" category is what's happening to the number of pigs produced per litter. For the 12 months ending in May, pigs per litter was up 0.48% compared to the 12 months ending on May 2002. This was a larger increase than for three of the previous four years. Increasing pigs per litter reduces breakevens, but in the short-run, adds to total pork production.

USDA said the swine breeding herd was down 4.5% on March first and down 4.3% on June first. This is a strong indication that pork production will be down and profits good during the coming year. I certainly hope so. But if pigs per sow increase and slaughter weights rebound, pork production in the coming 12 months could be very close to the last twelve.

5m Editor