As Kent Bang from AgStar stated in a recent blog, we live in a dynamic time for the pork industry. Producers have strong equity, there are several new slaughter plants under construction and the world wants our product. The only snag in this scenario at the moment is the sudden increase in feed grain prices due to the weather in South America and the market’s fear of a drier summer due to La Nina.
This optimism isn’t only in the US. We’ve all been reading about the spurt in pork prices in China following the massive sell-off of their breeding herd last year. Similar to other countries, those with low costs of production and well run production systems are expanding in China. While we get excited about a 5-10,000 sow expansion in the US, expansion in China can often come in multiples of 50-100,000 sows.
Expansion is beginning to show up in Canada. After many years of limited to no investment in new facilities, there are some new sow units on the drawing boards and several grow-finish sites are being talked about in the prairie provinces. At the same time, the number of weaned pigs shipped to US producers and US sites with ownership retained by Canadian owners is increasing.
To date, we’ve been blessed with a relatively weak dollar which has kept our exports strong. International trade agreements have also helped us greatly in keeping the cost of our product competitive in foreign ports.
Will we kill this golden goose by over expansion? Probably. We’ve always managed to drives prices to below cost of production after we’ve had profitable times. Why should this time be any different?
I’ll be at World Pork Expo on Wednesday and Thursday. I would love to chat with you about this and other topics if we should meet.
Over production is a killer for the thousands of contract growers in the US pork industry. We suffer the most and the longest during times of over production and low prices. We never share in the profits of the industry during the good times. We are the life blood of the industry and this must change or we have no future!