Hurt said that the confidence in this more favorable pork outlook is still "skating on thin ice." Concerns over further erosion of pork exports remain.
"Japan, our largest pork buyer, has recently announced a major move by their central bank toward quantitative easing that will depress the buying power of the yen relative to the dollar. This will make it more costly for Japanese consumers to buy U.S. pork.
"The biggest of the worries will remain over feed costs," Hurt said. "While the recent USDA Grain Stocks report seemingly 'discovered' more old-crop corn and soybeans, those reports have swung sharply between bearish and bullish in recent years. There is little assurance that this latest report has the correct magnitude of remaining old-crop supplies," he said.
Weather this summer and the size of 2013 crop production is the other uncertain part of feed costs.
"Current dry soils in the western Corn Belt and Great Plains states are well known," Hurt said. "Ending inventories of corn and soybeans will be limited, and thus another below-normal production year could push up new-crop prices rapidly. On the other hand, a return to more normal production could still depress new-crop prices from current levels, given the prospects for relatively weak demand for corn use for ethanol and increased international completion for export demand from the United States.
"If U.S. yields do return to near normal, it's likely that stocks would build and provide some cushion against the next small crop," Hurt said. "If this were to occur, not only would feed prices move lower, but there is a higher probability of prices staying lower and less volatile for multiple years. This would be a favorable business environment for all animal industries to move toward expansion," he said.
Hurt concluded that feed price uncertainty remains very large. Feed prices by mid-summer could be much higher, much lower, or about the same as they are today.
"One thing is certain. We will know a great deal more about 2013 crops 100 days from now," he said.
Source: University of Illinois; Purdue