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PURDUE ECONOMIST: PORK PRODUCTION MAY TURN PROFITABLE THIS SPRING
BrownfieldAgNews reports:

Pork producers were facing a drought-driven crisis late last summer. Some analysts were predicting losses of as much as $50 to $60 per head in the final quarter of this year.

But, according to Purdue University economist Chris Hurt, those pork producers who did not panic are facing much smaller losses than was feared at the height of the crisis. And, Hurt says, a return to profitability may be on the not-to-distant horizon by the spring of 2013.

"There still are losses to sustain for the rest of this year and the first quarter of 2013 when losses are estimated at about $15 per head," Hurt says.

"But live hog prices are expected to increase enough to reach breakeven by early May 2013 and provide for positive returns of around $10 per head in the second and third quarters. Lower feed prices late next summer are expected to sustain a profitable industry into the fall of 2013 and winter of 2014."

Hurt says if U.S. and world crop yields are closer to normal in 2013, the pork outlook will brighten even more-which could spur thoughts of expansion by late summer of 2013.

"Some producers may want to 'jump the gun' and get expansion started in the spring of 2013," he says. "However, one glance at the current Drought Monitor tells us that normal yields in the U.S. for 2013 are far from assured. This uncertainty should keep most producers from expansion fever until the crops are more nearly assured in late July and August."

Hurt estimates losses for 2012 will run about $17 per head. While not as disastrous as some had predicted, he says it will still leave an imprint in the form of reduced equity.

Hurt says pork producers who entered the drought in weak financial condition have had to rely on cash infusions from lenders. To their credit, Hurt says, lenders have generally supplied that capital and recognized that his downturn would be intense, but short-lived.


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