July 20, 2011

 

US pork processors postpone expansion

 

 

The US pork producers are keeping a watchful eye in the swine sector before completely proceeding with expansion, even though agricultural economists said that potential profit exists in the industry for the rest of this year and into 2012.

 

"Producers are really holding their breath right now," said Chris Hurt, an agriculture economist from Purdue University. "They will be reluctant to expand until they see the size of the US crop."

 

During the June-August 2011 quarter, US pork producers intend to have 2.87 million sows farrow, down 3% from the actual farrowings during the same period in 2010 and down 3% from 2009, according to the June Hogs and Pigs report. Intended farrowings for September-November 2011, at 2.85 million sows, are down 1% from 2010 and down 2% from 2009.

 

The Hogs and Pigs report showed the US inventory of all hogs and pigs on June 1was 65 million head, up 1% from June 1, 2010 and up 2% from March 1, 2011.

 

Totaling 5.8 million head, the breeding inventory was up slightly from last year and from the previous quarter. At 59.2 million head, the market hog inventory was up 1% from last year and up 2% from last quarter.

 

The March-May 2011 pig crop, at 28.9 million head, was up slightly from 2010 but down 1% from 2009. The big story, however, was the average pigs saved per litter hit a record high of 10.03 for the March-May 2011 period, compared to 9.81 last year.

"This is the first time the average litter size has been this high," said Daniel Vaught, a market analyst with Vaught Futures Insights, Altus, Ark., and a participant in the Pork Checkoff's media teleconference. "This is one of the most interesting aspects of the report, since it has efficiency implications for the pork industry."

 

Feed costs continue to challenge pork producers, although moderating corn prices in mid- to late June provided welcome relief from record-high grain prices, Hurt said.

 

"There are still many unanswered questions about the 2011 crop, though," he added. "Will we be able to move this crop forward into good yields? We will need average yields or higher with most of the US corn acres."

 

Profit potential still exists in the months ahead for pork producers. Hurt projects US$11-$12 profits per head in the latter part of 2011 for farrow-to-finish operations. His price projections on a national lean basis equal US$89-$93 in the third quarter of 2011; US$81-$85 in the fourth quarter of 2011; US$82-$86 in the first quarter of 2012; and US$88-$92 in the second quarter of 2012.

 

"I'm also anticipating average profits of US$6 per head for 2011 and US$7 per head for 2012," he concluded.