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July 2004 Issue
Profitability Returns!
by Darrell Anderson
Just when all the economic forecasters had predicted that we may never see $50 hogs again, we blew by that figure and brushed up against $60 in recent weeks. It has been particularly reassuring for me to witness the current strength in the market. I am fully aware that it is “too little too late” for many of our members and many of your customers, but for those that have persevered, it has to be an exciting time of reducing debt and rebuilding some lost equity from the 1998-99 debacle.
In fact, the current market price scenario in the livestock and grain sector is probably the strongest it has been in decades – maybe ever. If you analyze the price of pork, beef, eggs, milk, corn and soybeans, they are all at or near very profitable levels. In fact, they are so high that you are starting to see media reports of how expensive the cost of food is today. Give me a break! Have they bought any gas lately?
When folks in this country start complaining about the cost of their food, my blood pressure climbs to near-record levels. The latest information I have seen validates that
Even more amazing is the fact that less than 19 percent of consumer food expenditure is for the farm value of the product; the remainder accounts for labor, processing, packaging, transportation, marketing and advertising. According to Farm Bureau, 37 calendar days is all it takes for the average American to earn enough money to pay for their entire year’s supply of food. In case you’re wondering – it takes 107 days to pay for all your taxes!
I’m sorry to digress about consumer reaction – I really want to discuss the sudden profitability of the pork complex. First of all, the current situation reinforces just how fragile our entire market picture is today. A very slight increase in demand or decrease in supply results in significant changes in cash hog prices. The other reality is
that we are very much involved in a “world market.”
Pork exports have been incredible so far this year. According to Chris Hurt,
The other driving force in this entire meat complex is the incredible number of Americans participating in the low-carb diet craze. When I served on the NPPC board a few years ago, I encouraged them to begin promoting pork as a “center of the plate” protein source for the low-carb crowd. I was told at that time that it was just a “fad,” and they weren’t going to invest promotion dollars on a passing fad. Well, the fad has turned into a trend, and now NPB is devoting some serious dollars toward this all-important consumer audience, and it is reaping some impressive rewards.
The bottom line: now is a good time to be involved in the swine industry. Not only does the current situation leave some black ink on the close-out sheets, but the prospects for the rest of this year and well into next year look promising.
There have already been reports of producers wanting to get back in the industry, and interest for purebred breeding stock should be strong this summer. As more and more commercial producers desire to utilize within-herd multiplication schemes, the opportunities for promoting the value of purebred boars and gilts should be endless.
With the return of profitability to swine production, I have noticed a rekindling of the passion in the hearts of many of our members.
I’ve been reminded that your passion is the single-most important factor in championing your cause.
Enjoy the black ink and help spread the good news about the benefits of utilizing purebred swine – whether it is in a 1,200-sow commercial unit or a five-sow showpig herd.
