USDA released its Quarterly Hogs and Pigs Report on Friday and Purdue University ag economist Chris Hurt says there weren't any surprises. The report was well anticipated and shows that the hog industry is currently in a "status quo" situation.
"The breeding herd has been increasing just very, very slightly; I would even hesitate to say we are in an expansion it is so small," Hurt said. "We saw the USDA indicate that the breeding herd was up six-tenths of 1% versus a year ago. While that says that's a slight bit of expansion, just even the sampling error is bigger than plus six-tenths of a percent. So I think what we have to say is a pretty stable industry and primarily the reason for that stability is just a lot of uncertainty."
Hurt says that uncertainty lies mostly on the feed cost side. Looking at the markets response to the planting intentions and stocks reports that were released Friday morning, he says seeing grain prices up sharply is an indication that pork production profitability could be jeopardized pretty quickly.
Many people for quite some time have been predicting a large expansion of the hog herd in 2012, but Hurt says that is becoming more and more unlikely.
"I think it is a very cautious industry," Hurt said. "Really large losses for the pork industry in 2008 and 2009 were most directly related to high feed prices. So I think all those producers know that the crop, the 2012 crop in the United States is going to be absolutely critical to determination of whether we can get these corn prices and maybe meal prices lower."
Hurt says that the spike in soybean prices the past two months as a result of poor crops and loss of yield in South America has pushed meal prices significantly higher.
With all the factors at play currently Hurt expects this year to be kind of a break-even type of year when it comes to pork production.
"We have been projecting as little as a month or six weeks ago that we'd see $10 to $12 of profitability per head," Hurt said. "But right now with the weakness in the lean hog futures we've seen in the last three weeks and now strengthening rather quickly of the corn and meal prices this puts profitability at jeopardy."