livestock

Hog prices have collapsed to levels far below breakeven. There is worry that there are more hogs headed to market this fall than available packing capacity, and the latest USDA inventory indicates there are more hogs than had been anticipated.

The longer-term economic implications of Brexit may be the most important and could reduce the rate of world economic growth. If Brexit does slow world income growth, that could be negative for global sales of pork and other U.S. agricultural products.​​

Two important factors determining margins this year are the potential for higher pork exports and thus higher hog prices and the potential for higher feed prices. These are tugging at margins in opposite directions.

The nation’s pork producers have indicated to USDA that they are not expanding the breeding herd and, in fact, intend to reduce farrowings this spring and summer. This means pork supplies will be somewhat less than had been anticipated and that hog prices will be somewhat higher.

The outlook for the pork industry has turned somewhat more optimistic in recent weeks. The sources of that optimism include a $2 to $4 increase in spring and summer lean hog futures prices since the first of the year and slightly lower new-crop soybean meal prices. A bit higher hog prices and a little lower cost add to the potential for a profitable year.

Pork producers in 2016 are expected to experience another year of tight margins similar to the year just completed. Pork production is expected to rise by about one percent, but beef production will rise by four percent and poultry by about three percent.

Live hog prices fell below $40 per hundredweight last week. This means hog prices are at their lowest level since November of 2009 when the U.S. was just beginning to pull off the bottom of the great recession.

The pork industry has largely overcome the impacts of the 2014 PED virus. Pork producers have been disciplined in limiting expansion after record 2014 profits.