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Best of NAMA 2023

by Holly Spangler, Prairie Farmer magazine

Steve Meyer doesn't mince words when he compares the 1998 hog crisis to 2023.

"I've felt like Dr. Doom the last few months," said Meyer, lead economist for Partners for Production Agriculture, who's spent his career studying hog markets. "Our model says that we're gonna lose, on average, more money per head in 2023 than we did in 1998."

Meyer was measured as he advised producers at the Illinois Pork Expo last week. "Things are looking better, but not good. The question is: Will things get better enough to get you in the black?"

The good news: Input costs are lower and may get lower still, wholesale demand is stronger, consumer-level demand has recovered a little, and herd health is sharply improved.

"Restoring profitability will require lower costs and/or higher demand and/or lower pork supplies to push prices up," Meyer said.

Prairie Farmer sat down with Meyer for a closer look at how 2023 compares to 1998:

Can you remind us how bad 1998 was?

1998 was a horrible year in the pork industry. We had hog prices that got down into the single digits in late November, early December that year -- and huge losses and a massive restructuring of the business.

What created the restructuring?

Going into 1998, the structure of the business was changing: change of technology, of economies, of scale. We had a large number of generally smaller, part-time operations where there wasn't specialization. The industry was discovering that larger, more specialized units could have lower costs and be a lot more effective. So when 1998 hit, we had a massive restructuring of the business. And it was very, very, very painful.

Saying 2023 is worse than 1998 is pretty significant. Our model says that we're gonna lose, on average, more money per head in 2023 than we did in 1998. But it doesn't have the same implications.

Why not?

This is a different business. Generally, we have larger, better capitalized businesses. There's certainly economic stress on a lot of people, but we're coming off a period when we had pretty good accumulation of equity. So, producers going into this could stand some losses.

But boy, those losses in the first half of 2023 were due mainly to high, high costs. They were very, very difficult. And so that's put us in a position where 2024 needs to be better. At one time it didn't look like it was gonna be a lot better, but it's certainly been trending better as we've gone through the winter months.

To read the entire article click here.

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