Ron Plain

Each July for the past 16 years, I have surveyed agricultural economists who do price forecasting and market analysis to obtain their opinions about the future direction of commodity markets. This year's survey of 20 members of the American Agricultural Economics Association predicts further expansion in pork production and lower, but still profitable, hog prices over the next 17 months.

On average, the group expects commercial pork production during the third quarter of 2004 to be up 3.2% and fourth quarter production to be up 0.8% from last year's level (there is one less slaughter day in the fourth quarter this year than last). The increase in production is expected to continue in 2005 with first quarter pork production up 0.9% from a year earlier and second quarter production 1.5% higher than in 2004. The group foresees third and fourth quarter pork production 1.6% and 1.7% higher, respectively, than this year. For calendar year 2005, the group expects commercial pork production to be 1.4% higher than in 2004. If the consensus forecast is correct, then 2005 will be the fourth consecutive year with record pork production.

Survey respondents expect the live price of 51-52% lean barrows and gilts in Iowa/Southern Minnesota to average $54.10/cwt during the current quarter and $47.54 during the fourth quarter of 2004. They estimate the 2004 annual average at $50.11/cwt, which would be $10.66/cwt higher than last year and the highest for any year since 1997.

The averages of the group's quarterly live barrow and gilt price forecasts for 2005 are $48.13, $50.68, $50.05, and $45.55, respectively, for the first through fourth quarters. The consensus prediction of an annual average price of $48.40/cwt in 2005 is $1.71/cwt lower than the group's price forecast for this year, but nonetheless, the second highest annual average price since 1997. The most optimistic forecaster in the survey predicted a $53.75/cwt average price for live hogs next year. The most pessimistic forecaster thinks Iowa barrows and gilts will average only $46.00/cwt in 2005.

Most members of the group are forecasting lower feed cost in the coming year than occurred during the first half of 2004. The group's average forecast for the U.S. farm price of corn is $2.40 per bushel for the marketing year beginning on September 1, 2004. Soybean meal is forecast to average close to $185/ton at Decatur during the coming 12 months.

This group of economists is very optimistic about producer profits during the next year and a half. I certainly hope they are right.