As crops struggle to grow in waterlogged fields, hope for feed price relief is draining for U.S. pork producers.
As water stands in fields across many areas of the Corn Belt, crops are struggling to grow this year. For U.S. pork producers, a year they hoped would be full of relief is quickly draining into the possibility of more feed troubles through 2014.
"Everything in U.S. agriculture still depends on weather," says Steve Meyer, president of Paragon Economics. "We got such a late start on this corn crop. We could still raise a great corn crop. But things have got to change pretty fast if we're going to do that. We’ve probably taken some of it off already."
It’s more than just the fading outlook for a record corn crop that’s troublesome for pork producers. Farmers still have a lot of soybeans left to plant.
"In 2009, I had pork producers in Illinois and Wisconsin couldn't buy soybean meal for any price in August of that year," says Neil Dierks, CEO of National Pork Producers Council. "And the reason was, it was just availability."
Iowa pork producer Sam Carney grows his own grain. His crop is in the ground, and so far, he has enough feed for his livestock. Given the late planting, however, he’s afraid that could change.
"We're a little scared that we could run out this year," says Carney. "We're really, really nervous, but i think we'll make it. We thought, well, we'll go combine early, but we didn't get planted early like we usually do."
Producers who didn’t grow their own feed last year struggled to make a profit.
"We had big losses last year," says Dierks. "We had people losing 35 to 40 dollars per animal, when an animal is worth $200 so, we've had some tough goes."
Another year of possible $7.00 or $8.00 corn could prove too much for many producers who were able to ride out the tough storm during last year’s drought.
"I mean $5.00 or $6.00 corn, $300 soybean meal would leave our cost of production significantly lower in 2014 than they are this year, and leave us profitable I think next year," says Meyer.
"As our prices have gone up, the retail price has gone up, you become very concerned about price sensitivity for the consumer," says Randy Spronk, NPPC President. "You know, does that consumer does that consumer have enough disposable income to buy your product."
Currently, pork prices are competitively priced at the store, looking more attractive than beef or poultry.
"We've seen choice beef trading above $210 per hundred weight," says Meyer. "We've seen a big run-up in chicken breast prices in the last two months. And anytime you get prices of competitor goods going up, that helps your demand.
"I think beef prices will stay up for the rest of 2013 and into 2015. I mean, the reduced numbers we're seeing now is because of the 2011 drought in Texas and Oklahoma. The 2012 drought hasn't even come to play on this thing yet."
Meyer says the poultry industry has the capability to respond quickly with increased output. So, he sees poultry prices retreating back down in the near future.
But for now, U.S. pork producers are thankful for the increased demand, and hope this year’s crop will make a turn for the better, improving their bottom-line.
"The futures market would tell you, as we get into 2014, that there's some profit to be had," says Dierks. "Most producers I know have tightened their belt, holding their breaths, they're trying to make sure we can maintain a position where they're at. But we're going to need some relief."