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How Long Will Pork Profits Continue?

by 5m Editor
8 October 2010, at 10:07am

US - Pork producers are enjoying a good run of profitability right now—and many are wondering how long the good times will continue.

According to Brownfield, University of Missouri ag economist Ron Plain says the world economy and demand for pork will play a key role in determining live hog prices in 2011. Dr Plain says if the global economy continues its recovery, there should be a few more months of prosperity in the hog business. But, if the recovery stalls out, Dr Plain warns that profits could start to fade away.

Another question many are asking is if the recent stretch of profitability will encourage an expansion of the sow herd. The president of the Nebraska Pork Producers Association, Troy McCain of DeWitt, Nebraska, says he doesn’t see any expansion taking place right now. He says the hesitancy of lenders to fund expansion, combined with the recent run-up in grain prices, is discouraging expansion.

“A lot of producers really had to stretch themselves pretty thin when the price were low—and some of them got pretty close with their bankers,” says Mr McCain, “and it just might be that some of the lenders may be a little hesitant—and it’s understandable—to jump back into this thing. So along with the lenders—and just the farmers’ hesitation on his own—it’s probably going to delay that a little bit.”

Missouri’s Dr Plain notes that bacon and pork bellies have experienced record prices this summer. He says that bacon seems to be an “in” food right now. That increased demand is moving lots of that product and it has helped push the cutout value of hogs to record levels. But, Plain says, hams are not doing quite as well and have a softer price situation.