The profit outlook for pork producers for 2019 looks to be breakeven; but, as in other sectors of agriculture, uncertainty abounds. At Pork Forum last week, Steve Myers, economist with Kerns and Associates, said most average producers will break even in 2019.
“Your better producers could see a profit of $7 range. Not a bad year but not a great year.” He added that, for producers who have lost money the past few years, there could be some financial stress in 2019.
Myers hedged his forecast by saying what happens with China could change everything. “China is losing millions of hogs to ASF, the situation is much worse than it is being reported. At some point this is going to leave them short of protein and they are going to have to do something.” With tariffs in place, however, this will be difficult.
Thus, Myers said what happens with tariffs will have a big impact on demand for pork. “We think the second half of the year looks better than the futures market is indicating, but things with China have to get resolved.” Half of the world’s pigs are in China, and it is estimated they have lost 6 million head of breeding swine.
“ASF is the most feared disease in agriculture. It’s not highly contagious but highly transmissible. It has a high mortality rate (90 percent or more) and there’s no vaccine. Even though there is no human health risk, pigs are at high risk and so is the pork industry,” Myers said.
Something else that could change everything is if African Swine Fever gets into the U.S. “Overnight, we would have 23% too much pork, and prices would fall by about 80%,” he stated.
Myer’s advice: “Use options and protect your downside while leaving things open on the upside.” He recommended having a serious conversation with your marketing advisor, “Doing nothing is a very dangerous option.”