What is in this article?:
- Profitable year expected for pork industry
- Loss years will be offset
• Profits in 2012 are currently forecast to be near $17 per head, which would be the highest since 2006.
• Although a return to profitability is welcome news, there are deeper and more important implications.
The pork industry is expected to have a profitable year in 2012.
In fact, the level of profitability could be the most favorable during the high-priced feed era, said Chris Hurt, a Purdue University agricultural economist.
"Profits in 2012 are currently forecast to be near $17 per head, which would be the highest since 2006. That was the last year of the low feed-price era when corn prices received by farmers averaged about $2.30 per bushel for the calendar year and estimated hog profits were $27 per head," he said.
Although a return to profitability is welcome news, there are deeper and more important implications, he said.
"The first is that the pork industry, like most other animal industries, has made the adjustments necessary to live in a world of high-priced feed.
“The second is that the pork industry probably has turned the corner on high feed prices as we look to 2012 with abundant and cheap feed wheat, prospects for moderation in the rate of growth in corn use for ethanol, the potential for a larger South American soybean crop, and hope for a return to higher U.S. corn and soybean yields," he said.
The pork industry had a difficult road making the transition to the high feed-price era, as did all animal industries. High feed prices and recession in 2008 and 2009 and H1N1, unfortunately termed swine flu, led to large losses in 2008 and 2009, estimated at $17 and $24 per head, respectively.
"These large financial losses resulted in some downsizing of the industry through discouragement and bankruptcy. As a result of downsizing and robust pork buying from foreign countries, the amount of pork available to U.S. consumers will drop from about 51 pounds per capita in 2007 to around 46 pounds in 2012. This 9 percent reduction of per capita supply has enabled retail pork prices to rise from $2.87 a pound in 2007 to $3.43 a pound in 2011, a 20 percent increase," he noted.