It’s A Good Time to Be a Swine Farmer (And Not Just Because It’s National Pork Month)
Pork prices are on the rise and American hog farmers have reason to predict higher profits.
It’s National Pork Month, and the timing couldn’t be more fortuitous. Across the United States (U.S.), the demand for pork is rising, with elevated hog prices that are expected to last through 2019 and well into 2020. In fact, according to the USDA, analysts predict a ten percent increase in 2019 and an additional seven percent increase the following year. This is great news for pork producers, and even more reason to celebrate our nation’s hog farmers this October.
The portion of the Farm Bill that directly affects agriculture funds valuable support in a nationwide effort to feed and fuel the nation and world, from conservation incentives and assistance for beginning farmers to legalization of hemp as a high-value crop opportunity. Continue reading to learn more about its impact on the agriculture industry.
The Impact of a Strong Economy on the U.S. Pork Industry
There are several contributing factors that have led to this positive forecast for the pork industry—one of the largest being the growth and strength of the American economy. With a historically low unemployment rate of 3.7 percent as of July, consumers are feeling more financially secure. With that financial security comes a shift in spending behaviors, namely stepping out of a scarcity mindset and indulging a bit more. Ordering extra bacon on a cheeseburger, hosting a backyard barbecue with top-of-the-line ribs, putting bacon in the shopping cart at the supermarket—these “splurges” are a byproduct of a strong U.S. economy. As a result, demand is increasing, and pork prices are on the rise.
African Swine Fever in China Fuels Pork Demand in the U.S.
While things are looking good here in the U.S, there are growing concerns overseas. In China, an outbreak of African swine fever has caused the culling of at least 1.02 million pigs. Without an effective vaccine, the incurable disease which is sometimes referred to as “pig Ebola”, spreads easily and is difficult to isolate. As a result, all hogs that have been affected (or even potentially exposed) are euthanized in order to protect healthy swine.
What Will Happen to the Chinese Pork Industry
Chinese hog farmers have been facing the effects of this disease since August 2018. Predictions indicate that China may lose as many as 200 million pigs by the end of this year. According to J.P. Morgan analyst Thomas Palmer, “African swine fever in China could result in an extended period of elevated pork pricing in the U.S.,” with a minimum of 20 months to replenish the loss with a replacement herd. The result? “Elevated demand for non-domestic pork will continue into 2020, at the least.”
The Price of Corn
There’s no denying that the laws of supply and demand are affecting current and projected hog prices. However, another component to take into account is the increased price of corn. With corn prices on the rise, it costs more for swine farmers to feed their herds. The diet for finishing early-weaned pigs relies on a mixture of corn, grain, soybean meal, and supplements. When the prices of any of those ingredients go up, profit margins get smaller. As a result, pork prices must increase in order to maintain viability.
Seizing Opportunity and Meeting Demand
With a thriving pork industry here in the U.S., now is the best time for hog farmers to take advantage of AgAmerica’s custom land loan programs and low interest rates. Whether you’re needing a little assistance to adapt to increased feeding prices or whether you want to grow your operation to capitalize on the current demand, AgAmerica can help. With alternative lending solutions that cater to farmers and ranchers, together we can create a customized package that helps you reach your goals. Learn more by speaking with one of our lending experts today.
