Pork Profit Maximizer – Retail Edition
US hog producers have been expanding rapidly in the last three years thanks to low feed costs and robust meat protein demand in domestic and export markets. Hog slaughter last fall was at all time record levels and significant new processing capacity has been added to accommodate the increase in hog numbers. Coming into the June report there was some speculation that low spring hog prices and a trade war with China and Mexico might induce producers to ratchet back expansion. Some of this was reflected in the analyst estimates of the breeding herd prior to the report, on average expecting a 1.7% increase in the breeding herd. But producers appear unwilling to scale back until and unless they start to feel some real pain in their pocketbook. The June USDA survey pegged the total breeding herd at 6.320 million head, 3.5% higher than the previous year. The magnitude of the increase in the breeding herd caught futures participants by surprise and fall/winter hog prices were down sharply. At this point we have a two-tiered hog market. Prices for the summer are expected to hold firm due to the seasonal decline in hog numbers and lighter carcass weights. Fall and winter supplies are expected to be plentiful, however, and potentially lower export demand could push more product into domestic channels further depressing prices.