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Northwest Iowa Dairy Outlooks

A local discussion of current science and issues concerning dairying in northwest iowa

As the possibility of profitablity peeks out for this summer, producers seem to be holding back sows- a sure sign that the extra pigs will keep producers in the red ink as supply may again out pace demand.

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Rita Jane Gabbett reports for Meatingplace and noted today that the higher hog prices and slightly lower feed costs are pushing hog producers toward profitability and slowing the sow cull needed to create and sustain profits according to a Missouri economist. Historically, producers see some hope of profitability and go right to expanding breeding herds. That prolongs the oversupply and stretches the cycle. What is good for one producer’s bottom-line can keep the industry in a down cycle and always shortens the good times. That is the trademark of almost all agriculture production.

Below are the comments from the economist.

“My concern is we are going to fizzle out on sow slaughter in the second half of 2009,” said University of Missouri agricultural economist Ron Plain. He pointed to four-week data showing sow slaughter down 4.2 percent from a year ago. He noted, however, that because the sow herd has been steadily declining, that translates into a decline of just 0.7 percent as a percentage of inventory.

Paragon Economics President Steve Meyer sounded similar concerns. In the CME Group’s Daily Livestock Report he noted a sharp drop in U.S. sow slaughter in recent weeks. The 54,700 head culled in the week ended Jan. 29 was the lowest non-holiday week total since August 2007 and the lowest non-holiday non-summer vacation week since 2005. The dip in culling happened after corn and soybean meal futures fell and lean hog futures rallied, taking hog producer profit prospects to their highest level since 2007.

Plain says hog producers are still losing about $10 to $15 per head, but predicts profitability from May through August, maybe into September, if exports and domestic demand are strong. But that’s only four, maybe five months out of 12, he notes.

“We need to keep cutting…we have a lot of debt piled up and need to cut more. My first concern is that they will stop reducing and we certainly don’t need to expand the hog herd,” Plain said.

Meyer noted that while sow herds shrink, pigs per litter continue to expand, so there will still be plenty of pork. He predicted a 1.4 percent decline in slaughter for the year and that weights will be down about 1 percent, unless another cool summer boosts weights like last year.

He understands the allure of better profitability prospects, but wondered out loud if the slowdown in sow slaughter is the best thing in the long run, adding, “I guess we’ll find out.”

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