Hurt: Low Prices Enough to Stop Pork Expansion

By: Greg Henderson, Farm Journal’s Pork

Purdue University economist Chris Hurt tells AgDay reporter Tyne Morgan the strength of the U.S. economy has been a boost to strong beef demand.

Chinese tariffs and increasing supplies are pressuring prices—enough to put a hard stop to expansion. ( Farm Journal )

“There are a lot of people working, low unemployment, and a lot of jobs and rising wage rates those are all positive to meet consumption,” Hurt says. “We’ve got a world that has an economy doing very well, and what that says exports are doing very well.”

In 2017, Hurt says, demand outweighed the supply increase. “I think this year we’re talking about the demand will not be strong enough to outweigh the supply increase. We’re going to have 4 or 4-plus percent more beef in the marketplace, 3.5% to 4% percent more pork, and about 2% more poultry. And what that says is while we have strong demand we’re probably going to sell it at lower prices than we did last year.”

In terms of outlook for pork prices, Hurt says at the start of the year the price was $53 per cwt., with costs about $50 per cwt.

“That’s reversed as we’ve seen higher corn and meal prices. So now we’ve got our costs up to about $53. And with these Chinese tariffs we’re now down to about $48 or 49 on hogs. That’s a $4 to $5 per cwt. loss, or a $12 to $13 per head loss this year shifted from a little profitability early in the year to some losses that we’re anticipating now for 2018.”

“Now again, the losses aren’t won’t be big enough this spring and summer to force contraction, but as we get into the fall we think and winter time we think we’ll see losses $20 to $25 dollars a head. That’s big enough to start stopping the expansion leveling off the herd or maybe even some contraction into 2019.”

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