This year looks profitable for pork producers, but Steve Meyer says producers should be ready to pounce if they see a pricing opportunity.

Meyer, an economist with Express Economics and EMI Analytics, says the fourth quarter could be especially troublesome.

“There are eight or nine weeks where we will be at (packer) capacity, which is 2.461 million pigs,” he said at the annual meeting of the Iowa Pork Producers Association here Jan. 26.

“You have to be current coming into August and September, because if you aren’t, it’s going to be too late. You may want to price some fourth quarter hogs.”

Overall, Meyer says the industry should see black ink this year. Recent rallies in lean hog prices as well as lower feed costs should help offset larger production. The outlook is promising for pork and demand. Unemployment is at 5 percent, oil is below $30 a barrel, and interest rates have only ticked slightly higher.

“We have been on a great run for all meats,” Meyer says. “The reason is price. Beef had a great year until November, and pork demand was up 3 percent.”

Feed costs should continue to be bullish. He says world grain stocks have been rebuilt, and most corn should fall in the $3.50 to $4 per bushel range.

“We’re looking at production costs at $66 to $68 for lean hogs, with the best operators in the $62 range,” Meyer says. “There will not be much red ink in 2016.”

He says cow/calf producers have seen record returns, with an estimated profit of about $200 per head this year. That should continue expansion plans.

“We have seen much lower heifer slaughter, with 270,000 fewer head on feed on Dec. 1,” Meyer says. “That has created an incentive to feed cattle longer, and something had to give. It did in September, and combined with rough weather, that has pulled weights down a bit.”

He expects beef production to increase about 2 percent this year and another 4 percent in 2017. That will lower prices.

The poultry industry has recovered from the avian influenza outbreak, and Meyer says despite a recent case in Indiana, he is optimistic production will not be impacted as severely as it was in 2015.

“I really don’t see a lot of fallout at this time,” he says.

Meyer expects turkey production to be up 4 to 5 percent this year. A strong U.S. dollar has hampered meat exports, and Meyer says he does not see any signs it will weaken.

“Exports have come up recently, and USDA is forecasting they will be up 5 percent his year,” he says. “I think that’s a little ambitious, but we are expecting to see exports increase.”

The amount of pork in cold storage has decreased significantly, Meyer says, while beef, chicken and turkey have all increased.

He says there are several factors which could impact estimates. Porcine epidemic diarrhea (PED) has returned, but Meyer says thus far the spread has been minimal.

Pigs per litter figures broke records over the last three quarters, and Meyer expects to see three more records set this year. That puts more hogs in barns and more pork in the food chain.

“I think 2016 is going to look a lot like 2015, except that fourth quarter could be huge,” Meyer says. “I would keep an eye on it, and if you think you are seeing that futures price hitting a ceiling, I would take advantage of it.”

Original article February 4, Iowa Farmer Today

Economist predicts profitability for pork producers