By EMMA HOPKINS

Indiana Correspondent

DANVILLE, Ind. — At the annual Indiana Pork Conference, an update on trade and other economic factors were explained and analyzed by EMI Analytics Vice President Steve Meyer.

He described macroeconomic conditions of the national pork industry as “Good, not great, but better.” He said the last three years have seen record production.

“October was the best month the industry has had in a year-and-a-half,” Meyer explained. “We’ve had 3 percent growth and this will be the seventh year in a row that we will add $2 million to the payrolls in the U.S.”

One difficulty with the macroeconomic view, he said, is that despite the amount the industry adds to gross domestic product, it has not yet led to higher wages. However, he said unexpectedly terrific demand, in his opinion, pushed hog prices in the fall.

A big surprise this year in pork economics related to meat consumption. Despite threats to the industry such as consumers eating less meat because of various concerns, the numbers show an increase.

“If you’ve been at this meeting for the past three years and have heard me say the per capita meat consumption is down and it won’t ever be where it used to be, well, I guess I’ll have crow for lunch,” he admitted. “Because meat consumption is probably going back up again. This is proving that if we sell it at the right price, consumers will eat it.”

Meyer said corn production has been up, making corn prices below the cost of production.

“The trade has been trying to kill this crop since day one, and it has not succeeded,” he noted. “Looks like this is going to be a very good crop – the third-largest on record. There’s almost 2.5 billion bushels of carryout for next year.”

Barring major crop failure, Meyer said feed prices will not be a problem in the near future. A characteristic of this last quarter has also been high weights despite a number of incentives to move hogs.

“Weight’s been trending up for some time. So, the last couple of weeks’ increases have me a little worried. We have backed up a few hogs that need to be moved. I think we’ll see some higher kill totals as we go through December and pull these weights back down a bit.”

He said one of the biggest drivers to demand was a growing market for pork bellies, pushing the price of hogs to $90 at times. He said the belly market has always been volatile.

“I remember when bellies used to be the nuclear waste of the pork industry; we weren’t sure where we were going to bury them,” Meyer joked. “Now, you don’t want to do that to those bellies. Inventories are the highest they’ve ever been in October.

“In my opinion that doesn’t mean a lot, because we’ve got belly prices back down at a level where they’re attracting attention both from freezers, so I don’t think we’re going to get belly inventory prices too large – they’re probably going to remain relatively tight due to the popularity of bacon.”

The futures market, he said, is beyond where it is thought cash hogs will be. “We can’t come up with a situation other than very robust demand that would put cash prices at this level,” Meyer explained. “We already thought futures markets were optimistic. You’ve got $40 margins on some of these hogs. These are opportunities.”

He told the audience not to look a gift pig in the mouth.

Among threats for the coming year to the pork market, the biggest is trade disruption. One possibility is foreign animal disease, such as foot-and-mouth disease, classic swine fever or African swine fever reaching the United States.

The biggest possibility, however, is trade disruption due to policy. The U.S. already lost a market to Europe when the Trump administration shut down the Trans-Pacific Partnership trade negotiations with Japan.

“I don’t necessarily disagree with the Trump administration saying they would rather do bilateral trade negotiations, but if you’re going to do the bilaterals, then you need to get off your tail and do it,” Meyer said. “We’ve seen very little progress so far, and that’s my concern.”

Finally, he explained that should the North American Free Trade Agreement renegotiation deal not be resolved positively, the pork industry could take a huge hit, leaving only one growth market for exports: China. Depending on how trade negotiations go in the coming months, 2019 could see the pork industry in bad shape.

“There is a lot of risk going into 2019 just from a quantity standpoint, but I would have said the same thing earlier this year, and we got through it pretty well,” he noted.