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Exports Boost ‘The Other White Meat’, But Feed Costs Cap Profits

by 5m Editor
18 December 2007, at 2:32pm

GEORGIA - This year (2007), farmers will have produced more pork than they ever have. Pork production hit record highs in the US in 2007, in line with the US total red meat market, and production is likely to stay that way into 2008, says Curt Lacy, livestock economist with the UGA College of Agricultural and Environmental Sciences.

US production may be rising, but profits are being challenged
The United States will have produced 22 billion pounds of pork in 2007. That’s four per cent more than the previous year, and forecasters says that volume production is set to rise to 22.5 billion pounds of pork for 2008.

Georgia’s pork industry tumbled in the 1980s and ‘90s, but recovered this millenium to become and industry worth US$90 million annually.

“A lot of the hog industry is in the Athens, Lexington and Watkinsville area. There are several pockets around the state. A lot of producers will farrow (birth) their pigs here and send them to another state for finishing,” said Mr Lacy

But Pork-loving Americans aren’t the only driving force behind this increased meat production. With worries over avian influenza and embargoes on US beef, pork exports are increasing and expected to reach more than 2.2 billion pounds in 2008.

“The combination of these two animal health events has made pork a very attractive substitute to international customers,” Lacy said. Although US beef is making a comeback in Asia, pork’s rising popularity overseas is expected to continue as countries affected by bird flu are likely to substitute pork for poultry." said Mr Lacy.

Challenged

And that’s the good news, although there are challenges as rising prices for corn and soybean meal could make Georgia farrow-finish pork producers less competitive as break-even points will escalate next year if the trend continues.

Demand for pork is expected to be good for the next several years. But they won’t necessarily be easy years for pig producers.

“Feed cost will play a bigger role in profitability than sales prices for many hog producers. Corn prices are expected to remain strong over the next few years as more corn goes into ethanol production,” Mr Lacy explained.
For 45 consecutive months, US hog producers saw profits, but that came to an abrupt end when feed prices jumped and finished pig process plummeted.

Reports from Iowa State University show that this year farrow-finish producers averaged returns of US$9.18 per head marketed through October. This was about 50 per cent of the $17.99 per head profits posted in 2006.

“It looks like it will be tough for the next 12-24 months. Even though demand and hog prices are expected to remain stable, continued high feed costs in 2008 will pressure net returns,” said Lacy.

5m Editor