FarmPolicy

September 19, 2019

Hog, Cattle Market Issues

Reuters writer P.J. Huffstutter reported on Monday that, “For decades, Chuck Souder relied on corn and soybeans to keep his 400-acre Iowa farm running, but with corn selling for half its price two years ago and soybeans slumping, Souder has shifted to what he hopes will be a more profitable crop: Pigs.

“Souder spent $850,000 last year to build a wean-to-finish barn, which can house nearly 2,500 animals at a time. He is not alone.

Since 2013, Iowa farmers have filed nearly 700 construction applications for new or expanded hog buildings, a six-fold increase from five years earlier, records show. Minnesota, Missouri, Illinois and other states are seeing a similar surge, said state agriculture officials.”

[Note: For related implications on this development in Iowa click here].

The Reuters article pointed out that, “But farmers are finding that their gleaming new barns have had an unintended consequence, contributing to a glut of hogs that has sent pork prices to their lowest levels in years.

Hog futures prices hit a four-year low this past week. A strong dollar has made U.S. pork more costly than meat from competing countries, which has led to a slowdown in exports, especially to China. And cargo slow-downs due to a labor dispute at West Coast ports has left stocks of pork products piling up.

Pork prices followed beef prices to record high levels last year, as the cattle herd shrank and a swine virus diminished the U.S. hog herd.”

The Reuters article added that, “The building boom has facilitated a surge in the U.S. hog and pig herd, which has rebounded from an eight-year low of 65.1 million this past September, to 66.1 million as of December, according to Agriculture Department data. The agency expects pork production to increase by 4.6 percent in 2015 over 2014.

“Pig farmers, meanwhile, could be facing declining margins and rising debt payments in the years to come.”

Also with respect to U.S. pork supply, today’s chart of the day update form USDA’s Economic Research Service indicated that, “The emergence of Porcine Epidemic Diarrhea virus (PEDv) in the U.S. swine herd in the spring of 2013 caused a sharp—but temporary—drop in litter rates. PEDv afflicts young piglets in particular, and caused millions of newborn pigs to die as the disease spread to herds in 33 States…Litter rates rebounded in the spring of 2014, responding to the warmer, dryer climates and to aggressive actions by producers, including increased biosecurity measures and vaccination. These measures contributed to lower disease incidence and limited losses of newborn pigs from PEDv; they are also expected to limit the incidence of the disease this winter and will help to minimize the impact of future outbreaks.”

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Also, Reuters writer Tom Polansek reported yesterday that, “Texas rancher Jim Rackley would like to add more cattle to his herd of about 50 to take advantage of sizzling beef prices and growing demand from health-conscious consumers for his grass-fed beef. But the prospect of cloudless skies keeps him cautious.

“Rackley’s worries over a lack of rain are typical of many U.S. beef cattle producers trying to restock after a years long drought, which peaked in 2011, decimated ranches built up over generations and shrank the nation’s herd to its smallest in more than 60 years.

“Now a combination of record-high cattle prices and cheap grain has prompted ranchers to start adding back cattle earlier than expected. But the rebuilding will still be long and slow.”

The Reuters article added that, “The cattle population was larger than in 2013 and 2014, but still the third smallest since 1952, said University of Missouri livestock economist Ron Plain.

“‘Herd rebuilding is on the way, but putting a calf into the herd today will take at least a year and a half before you get anything out of it,’ said Jack Salzsieder, owner of Iowa-based brokerage firm JRS Consulting, referring to the time required to bring a calf to maturity to be processed.”

Keith Good

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