What’s the Swine Market Outlook?

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The hog market is changing rapidly—but the future is bright for U.S. pork.

The hog market has changed rapidly the past year. Operators did well on the open market in the first half of 2016, but lost ground in the fall before rebounding late in the year. Conversely, producers who planned well with strong balance sheets are expected to have an easier time weathering the current downturn. And, while we used to see the hog market cycle up and down more readily than it does today, the cycle now is deeper and wider because less producers move in and out of the industry.
 
The future is bright for U.S. pork
 
Hog production is still a growth industry. American pork producers are among the leaders in global hog production for a reason — we are the best place in the world to raise pork with highly developed infrastructure, knowledge, feedstuffs availability and markets to buy the product. While we experienced a slug of extra production in late 2016 that got ahead of market demand, we foresee continued increases in long-term demand from local and global markets. There’s no doubt that a growing middle class with rising incomes in China and other emerging markets will demand more meat protein. Guessing when demand will catch up with current production, however, is an inexact science. That’s why farmers, even as they add sows and expand production, must keep an eye on efficiency and staying a low-cost producer.
 
When will the market turn up again?
 
While no one can predict how the market will perform, we do know that the typical hog market cycle is about four years. And there are concrete reasons to be optimistic. Three large hog slaughter plants are being built right now in Michigan and Iowa, with two of them scheduled to come online in 2017 and the other scheduled for 2018, while two smaller plants being built in Missouri and Minnesota should be complete by early 2017. These plants will increase packing capacity and have a positive influence on the cash hog market.
 
Producers have been expanding too, with each new operation adding between 2,500 to 5,000 sows or more. Expansions that began one to three years ago are just starting to contribute to the supply pipeline now.
 
Overall, pork producers should focus on low-cost production and carefully weigh considerations of expanding. As always, working and communicating closely with your lender and financial team is sure step to make sure your operation can cope with the fluctuating industry and cycle.

Ron Durre, Regional Vice President of Agribusiness

Ron Durre is the Regional Vice President of Agribusiness for Farm Credit Mid-America. He is based in Louisville, Kentucky.

More from this author: Plan Ahead for Swine Profitability

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