LAFAYETTE, Ind. — Keeping trade lanes open and friendly is a big key to helping U.S. pork producers — and the grain farmers who grow the feed they use — return to profitability in 2017.
“I think trade is one of the areas where we have a question mark, you kind of ask, what could happen?” said Chris Hurt, professor of agricultural economics and livestock economist at Purdue University.
“We need Mexico. We absolutely need to keep Mexico open,” said Dermot Hayes, Pioneer chair in agribusiness and professor of agribusiness at Iowa State University.
Hayes said Mexico, one of the U.S.’s three leading trade partners, is a vital market for U.S. hams.
“They could easily buy hams from Europe, but they are buying them from us,” he said.
Hurt said that the future of trade and relationships with the U.S.’s major trading partners poses a major question at the moment.
“I think that is one of the concerns that is going to cut across all agriculture is some of the rhetoric from the president-elect and is there really going to be follow-through on that, and the hope for agriculture is, no, we’re not going to follow through,” he said.
Losses To Lessen
The outlook for U.S. pork producers is brighter than 2016, with losses expected to drop and new slaughter plants meaning more money in the pockets of producers and make hog prices stronger.
“We’re going to have two new large processing plants that come online probably in the second half of 2017, so we shouldn’t have this capacity issue that we had this year,” Hurt said.
He projected about a $2 increase in prices.
“On a liveweight basis, we end up with about $46 per hundredweight in 2016, and we’re projecting about $48 for 2017,” he said.
In addition, ongoing plentiful supplies of corn and soybeans, along with expected larger soybean acres could keep cost of production low.
“Cost of production looks like they’ll be fairly similar in both years. That’s on a liveweight basis, $50 per hundredweight, so losses in 2016 ended up being about $11 per head. We think those will diminish to about $6 per head in 2017,” Hurt said.
Even with the two new processing plants, Clemens Food Group in Coldwater Township, Mich., and the Seaboard Triumph plant in Sioux City, Iowa, he cautioned against more expansion.
“We’re still looking at a year when overall we think there will be modest losses, that will be the second year in a row. What that means is we need demand to improve some or we need to supply a little bit lower. This is really a red flag for expansion in 2017, for the industry to really be cautious about any expansion of the breeding herd,” he said.
Hayes said exports are running about 4.5 percent over 2015 and expected to finish at 5 percent over last year.
He said there is cautious optimism that the industry will see less red ink in the coming year.
“Even though we have a strong dollar and even though Europe is killing us on export markets right now, I think people are cautiously optimistic. It all depends on China, and it comes back to us. In countries like Thailand and Taiwan, Canada and Europe are killing us because of ractopamine, and they are really killing us in China. We need to get that straightened out,” he said.
Hurt said the outlook for feed prices, corn and soybeans, looks positive for pork producers.
“We’re using 3 to 4 percent more soybean acreage, that will come at the expense of reduced corn acreage and wheat acreage, so that will tend to strengthen corn prices. We’re looking for about 20 cents per bushel higher corn prices for the ’17 crop versus the ’16 crop. Soybean meal will probably be somewhat lower, not a huge amount, but $10 to $20 a ton lower on soybean meal prices for the ’17crop versus the ’16 crops,” he said.
Hurt said improvements in the pork markets are part of what he sees as an overall good year for U.S. farmers in 2017, with farm incomes starting to climb back out of the darkness.
“I think we’ve got farm incomes improving next year, just a little bit. It’s not dramatic yet, but I think overall we may be bottoming out and seeing a little turn to the better, still overall low farm income, but we have a little bit of hope that maybe we can do a bit better,” he said.