Pork Industry on Road to Recovery

Profits won't be back until spring of 2010.

Published on: Oct 22, 2009

Pig producers, like poultry, dairy and beef producers, have been losing a lot of money because of the recession. They've all cut production but demand for red meat is down worldwide. Their cuts haven't been deep enough to stimulate a return to profits, but there is a glimmer of hope. Purdue University Extension Economist Chris Hurt says pork producer profits are expected to turn positive in the spring of 2010. According to Hurt, that hope lays in a world wide economic recovery.

 

"We've kind of fallen down the well in economic activity and the start of recovery still says we're recovering from a very low level, from the bottom of that well," Hurt said. "But still that's going to be a more positive tone; we're going to see both beef and pork supplies down somewhat later this year and going on into 2010. Smaller supplies, recovering world economy, that finally gives us the reason to say we've got hope, we can see fairly substantial recoveries in prices."

 

Hog prices are expected to average in the high $30s on a live-weight basis for the final quarter of 2009. Prices are expected to rise to the low $40s this winter and then move into the mid-$40s for second quarter averages. Next summer's prices are expected to rise into the high $40s for an average and the low $50s for weekly highs. Margins would turn to small profits of about $2 a head in the spring and $12 a head in the summer.

 

"We won't get back to profits for the hog industry until the spring of 2010; still losses this fall," Hurt said. "We're thinking about $15 a head this fall; another $7 a head through the first quarter of '10 before we get back to some profits."

 

Hurt says lower corn, soybean meal and energy prices will be helpful in reducing losses this fall and winter. Current forecasts for the whole of 2010 suggest producers will average a year-long profit of $3 per head. That compares to losses of $22 per head in 2009 and $17 of loss in 2008.