Hog prices are expected to be somewhat stronger in 2013 due to small beef supplies, continued strong pork exports, and modestly improving consumer incomes.

Live prices averaged about $62 in 2012, but are expected to rise to near $66 for 2013. Prices are expected to average near $63 in the first quarter, $71 in the second quarter, and $69 in the third quarter.

Fall 2013 and winter 2014 prices are expected to reflect higher pork production with prices averaging around $61.

For the immediate future, losses will continue in the first quarter of 2013 and are expected to average about $15 per head.

The return to profitability is expected to come in late-April or early-May when the spring hog price rally is under way and as meal prices edge lower with the South American soybean harvest.

Profits are projected at about $10 per head for the second and third quarters before returning to breakeven in the fall of 2013 and winter of 2014. Breakeven means that producers cover all costs, including full labor costs and full depreciation on buildings and equipment.

With the return of a profitable pork production outlook, some producers will be discussing expansion plans. Most realize that the level of feed prices are both the biggest threat to those anticipated profits and the greatest opportunity for extraordinary profitability over the next two years.

The threat is of course related to the continuation of the extreme drought in the western Corn Belt and the Great Plains states. Poor crops there in 2013 could send corn and soybean meal prices to new record highs. Such an outcome would likely extend losses for another year.

Alternatively, normal world yields in 2013 will likely send feed prices lower than current new-crop futures are indicating. Such an event would multiply pork profitability.

The U.S. pork industry has suffered with high feed prices partially driven by three consecutive years of poor U.S. corn crops.

Eventually, better yields will likely result in lower and less volatile feed prices. Almost everyone in the animal production industries, including pork producers, hope 2013 is the year that scenario begins.