Downward Profitability Expected in Medium Term

8 March 2012, at 10:46am

US - As producers increase the sow herd in response to better returns, profitability will again turn downward in the medium term, according to the Food and Agricultural Policy Research Institute.

Despite strong growth in hog prices in 2011, farrow-finish returns suffered due to much higher feed expenses.

Profitability prospects for 2012 and 2013 are bright, as hog prices should remain strong and feed prices fall.

The pork industry began 2012 with a slightly larger sow herd than the year before, after three consecutive years of contraction.

Sow inventories are expected to continue to grow modestly into 2014, though producers are likely to expand cautiously due to recent volatility in feed prices.

Even though the US sow herd is now 20 per cent smaller than 20 years ago, pork production in 2012 is expected 35 per cent above the 1992 level. Productivity growth will continue in the next decade.

US residents on average consumed 12 per cent less pork in 2011 than in 2003.

However, pork exports tripled from 2003-2011, allowing the industry to grow during that period.

Pork exports are expected to grow at a slower rate, so more of the increase in pork production will be available for the domestic market.

Further Reading

- You can view the full report by clicking here.