Managing Inputs and Marketing: Where Do We Go From Here? Dr. Steve Meyer, Paragon Economics, Inc., from the 2009 Iowa Pork Congress, January 28 - 29, Des Moines, Iowa, USA.
Feed ingredient costs have fallen from record highs last summer but supplies remain tight and costs remain very volatile as we enter the 2008-2009 crop year. Surprisingly good hog prices were a big help to pork producers' bottom lines in 2008 but can those prices remain in the face of the economic slowdown? Steve's session will address these issues and present some ideas and tactics to help you weather another potential economic storm in 2009.
If you think about it, each dollar of expected pork revenue, as we look at 2009, has a variance around it. That is to say, not every lb of forecasted sales has the same likelihood of being realized. It is safe to say that the anticipated level of demand from domestic consumption is well known and relatively low variance. The demand which originates from the export markets is highly variable and can come from surprising places. Because of this, there is no doubt that the expected income variance is much higher for export sales than it is for domestic purchases and as you might suspect, it has a higher expected value. Those two attributes tend to go together.
Over the last two months several of the livestock operations that I work with have had a new experience—they are getting several applicants for open positions.There are some regional differences, and not every area is seeing this change, but it is a noticeable pattern and one that bears watching.
The total demand for US Pork can be conveniently broken down into two components: domestic demand plus net exports. Net exports is the excess of exports over imports of pork for the US. We seem to know that US production of pork will be falling in 2009. I say seem to know since this is based on projections by USDA (Hogs and Pigs Report). What we do not know is if the projections are correct (what is their error variance) and what will happen to productivity increases to offset this decline in farrowing intentions from last fall. We can surmise that the sows leaving the industry are the poorest performing ones (least productive) and that productivity gains from the remaining farms is likely to rise.