Eager consumers help boost U.S. hog profits

Things are “going swimmingly” for American hog producers as prices reach $120 per hundredweight for the summer and almost $100 for October.  | Reuters/Nicholas Pfosi photo

Higher hog prices are more than keeping up with the rising cost of inputs such as feedgrain and construction materials

In a surprise to all, 2021 has been a great year for American hog farmers.

Prices of around US$120 per hundredweight for summer months and close to $100 for October are keeping U.S. hog producers in solid profitability.

“It’s going swimmingly,” said hog market analyst Steve Meyer in an interview during the World Pork Expo.

“We’re doing quite well.” That is occurring despite sky-high input costs for everything from feedgrains to energy to construction materials.

“It certainly looks like we’re going to have pretty high cost of production for the next year, but at these high pork prices I’m not sure anybody’s worried about that,” said Meyer.

Many had predicted that U.S. hog production would fall in 2021 due to the pandemic’s disruptions, but that didn’t occur. Instead, producers have kept the hogs flowing and the pork has found eager consumers both within the U.S. and in export markets.

Meyer thinks the strength of pork demand comes from a combination of factors.

People who buy pork at grocery stores rather than restaurants tend to buy and eat larger quantities.

They are also probably eating pork more often. At restaurants and in institutions pork is less available as a choice than chicken and beef.

“In the U.S., if you want to be eating pork at a restaurant you’d better be eating breakfast,” said Meyer.

Most hog farmers are profitable today when prices are in the mid-US$80 per cwt., Meyer said. That’s allowing the top 25 percent of producers to earn about $36 per head this year and average producers to make $20-$25.

There are some dark clouds on the horizon. A recent U.S. court ruling threatens to slow production speeds at slaughter plants, which could be a problem in the fall when slaughter hog numbers surge and packer capacity gets squeezed.

California’s Proposition 12, which imposes housing standards that most producers don’t meet, threatens sales to that large market.

And the return to “normal” as the pandemic winds down in North America might see demand affected.

But Meyer is optimistic that pork has “staying power” as a meat choice today. The past year has made many appreciate pork’s affordability and to consider it as an option beyond breakfast. That makes 2021 a great year for the pork industry.

“It’s turned out a lot differently (than expected,) and it’s all because of demand,” said Meyer.

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