By DOUG SCHMITZ
Iowa Correspondent

ADAIR, Iowa — Two weeks before the USDA’s June hogs numbers came out, Sam Carney told a crowd gathered at the 22nd World Pork Expo in Des Moines that he was cautiously optimistic about the return to profitability his fellow pork producers have been experiencing since the first quarter of 2010.

Despite the lowest U.S. hog herd since 2007, no concrete signs of expansion – and plummeting exports due to fears of H1N1 in 2009 that resulted in 30 counties banning all U.S. meat – Carney, an Adair, Iowa producer and president of the National Pork Producers Council, said “things are going excellent.”

“The whole environment and industry have changed so much since we started becoming profitable,” said Carney, who raises about 4,000 hogs with his son, Randy. “Here we are a year later and all those countries are back, including China and Russia.

“Exports are up to 20 percent,” he told the group of mostly hog farmers at the Expo, which was held June 9-11 at the Iowa State Fairgrounds. “The sad news is that some producers had to exit the industry. But the positive news is that the producers that are here are making money again. That’s rewarding.”

But Carney said it wasn’t this way a year ago when U.S. producers “were about as low as they could get.” Now, he added, “we have the best of both worlds: lower feed costs and higher prices.”

Despite the industry’s slow recovery that U.S. pork producers are witnessing now, the USDA’s June 1 Quarterly Hogs and Pigs Report said U.S. hog and pig numbers as of June 1 were the lowest in three years, down 4 percent from last June to 64.4 million head, but up 1 percent from March’s tally.

Released June 25, the report said while herd contraction continued, this contraction is slowing down, despite good profits in earlier 2010, said Steve Meyer, president of Paragon Economics in Des Moines in a June 25 teleconference with farm reporters.

“Right now, based on the crop condition and on the hog numbers we see coming, I think we’re going to have profits for the next, at least, twelve, maybe 18 months,” he said.

The report also said the breeding inventory was at 5.79 million head, down 3 percent from last year, but up slightly from the previous quarter. U.S. market hog inventory was at 58.6 million head, down 4 percent from last year but up 1 percent from last quarter.

“It’s not a surprise that liquidation has slowed; it’ll probably be March of next year though before we get this breeding herd year over year growth in it and that’s kind of normal about a year after we see profits return,” Meyer said.

John Nalivka, president of Sterling Marketing in Vale, Ore., told reporters the newly-released report shouldn’t change U.S. producers’ current profit margins.

“From January to May, producers made an average profit of $20 per head compared to a loss of $12 per head in the same period in 2009,” he said. “For the January through May 2010 period this represents an industry profit of $836 million compared to a loss of $539 million in the same period a year ago.”

Victor Aideyan, senior risk management consultant for HisGrain Commodities in London, Ontario, said one reason for the low herd numbers is the slowdown in pig flow from the U.S. to Canada.
“Most of the numbers in today’s report are in line with estimates and indicate a smaller U.S. herd,” he said. “The tight supply situation at present is likely to extend through the early part of 2011. From the supply point of view, it is a positive factor for prices going forward.”

In fact, since last June, the U. S. breeding herd has lost 180,000 sows with 110,000 of those sows out of North Carolina, whose production facilities are now in question.

“There is a question of whether those facilities will or will not come back on production,” said Chris Hurt, Purdue University professor of agricultural economics.

Hurt said U.S. producers may want to hold off expansion until more is known about this year’s corn and soybean crops.

“It looks like the yield for the corn crop will be determined very early this year,” he said.

Hurt said he expects an average corn price of $3.40 per bushel in 2010 and $3.55 for 2011, with soybean meal at an average of $280 per ton for 2010 and about $260 per ton for 2011.

The report also said the March-May 2010 pig crop was at 28.2 million head, down 3 percent from 2009 and down 2 percent from 2008. 

“Sows farrowing during this period totaled 2.87 million head, down 5 percent from 2009 and down 6 percent from 2008,” the report said. “The sows farrowed during this quarter represented 50 percent of the breeding herd.” 

The average pigs saved per litter was a record high 9.81 for the March-May 2010 period, compared to 9.61 last year. 

“Pigs saved per litter by size of operation ranged from 7.70 for operations with 1-99 hogs and pigs to 9.90 for operations with more than 5,000 hogs and pigs,” the report said.

According to the report, U.S. hog producers intend to have 2.89 million sows farrow during the June-August 2010 quarter, down 2 percent from the actual farrowings during the same period in 2009 and down 6 percent from 2008.

Intended farrowings for September-November 2010 was at 2.90 million sows, down 1 percent from 2009 and down 4 percent from 2008, the report said.

Hurt said in May, live hog prices averaged about $63 per cwt., making it rare for monthly average hog prices to exceed $60, which has only occurred 13 times since 1970.