Pork Outlook Summary

-Pork producers returned to profitability in 2000 with feed cost low, demand good, and a modest price enhancing 2% decline in production.

-Productivity increases have been spectacular in the industry. Litters per breeding animal up .65% per year, pigs per litter up 1.23% per year, pigs sold per sow up 1.7% per year, and average market weights up .5% per year. Over the past 20 years, US hog farms have produced 3% more pork per breeding animal per year!

-In 2000, pork producers brought to market the third largest production on record out of the smallest breeding herd on record!

-2001 will likely bring a return to production growth in the industry as the industry seems to be poised to put more hogs on the market by at least mid year 2001.

- Without growth in slaughter/processing, capacity may become a problem again in late 2001 as was the case in 1998.

-Prices are expected to remain profitable through the middle of 2001 before diving into the red by the fall. However, the profits made during 2000 will not replace the estimated $4.4 billion lost by the industry from November of 1997 to February of 2000.
 

Production

By mid-year 2000, the nations breeding herd stood at 4% less than year earlier levels but the market hog numbers were only off 1999's numbers by 2%, a testament to the productivity of the pork industry. Further more, producers were indicating that by the fall they would be farrowing more sows. All indications are that they will follow through with these plans. The hog/corn ratio during July was the highest since 1987 and sow slaughter the second lowest in the last 20 years. So, by the second quarter of 2001, pork production as compared to a year earlier will be on the upswing. This means that pork production will have declined for only seven quarters (mid 1999 to the first quarter of 2001) after producers experienced their worst losses on record, $4.4 Billion from November 1997 to February 2000.

2000's hog slaughter will be about 2.7% less than in 1999, but marketing weights were averaging about 2 lbs. more per head slaughtered leaving production down only about 2% for the year. By the third quarter of 2000, slaughter reductions were virtually offset by increasing weights. For instance, August average slaughter weights were up by 5 lbs. per head.

If fall farrowing increase as indicated and market weights continue to climb, production for 2001 will come in at close to 2% more than in 2000, and would become the second largest production on record. By the spring of 2001 production is projected to be up 1.9%, followed by a 2.8% increase in Summer and a 3.4% increase in the Winter of 2001. The first quarter's production will likely be only 1% less than the first quarter of 2000.
 

Demand

Consumer demand for pork has been growing and particularly so for certain pork products. For instance, bacon prices reached record levels during the first of 2000 with the average price of a pound of bacon up more than 17% from 1999. Belly prices actually exceeded loin prices for parts of early 2000. Retail pork prices were up 7% the first half of 2000 while the average live hog price was up more than $13/cwt. Approximately two-thirds of the increase in the live hog price was due to higher retail pork prices with most of the remainder coming from tighter packer margins. While pork demand has apparently been on the upswing the last few years, stronger demand will not offset the negative price effects of production increases. Unfortunately, pork demand did not appear nearly as strong during the last of 2000 as during the first half. Pork bellies fell during August and packer margins always widen during the fall as slaughter volume increases seasonally.

Pork exports were flat in 2000 as compared to 1999 while imports grew by 20%. Still, exports exceeded imports by 250 million pounds. Unexpectedly large imports of live hogs from Canada have also added to the net supply of US pork. Cheap corn and a slow start-up of a major Canadian packing plant has been the culprit. In 2001, pork exports are expected to grow some with lower prices while imports will level off. Altogether, the export/import balance will likely be a netural factor in the hog price situation.
 

Prices and Returns

Live hog prices averaged about $43/cwt. during all of 2000, about $12/cwt. more than 1999. Prices started the year in the $30's, but moved quickly into the mid $40/cwt. range by Spring. Weekly average prices spent about 13 weeks above the $50/cwt. barrier beginning in mid-April to the end of July. Two years ago, some in the industry were suggesting that we would never see $50/cwt. again. By the end of the year, prices are expected back in the $30's. Still, 2000 was a generally profitable year as feed cost remained low.

Unfortunately, the chance of seeing $50/cwt. live hog prices in 2001 are slim. Prices are expected to about equal 2000's first quarter price of $39/cwt. As year-to-year production increases beginning in the spring, prices are likely to fall $3-5/cwt. under 2000's prices. Late spring and summer prices will be mainly in the low $40's, with the summer peaks only in the mid to upper $40/cwt. range. By the end of the year, prices will have retreated into the low $30's. If production increases strain pork processing capacity, as in 1998, prices could dip into the low $20's. Producers need to be aware of the chance for such a situation and plan accordingly in their 2001 marketing plans.
 

Pork Outlook Summary
 

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