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Agrimarketing : June 2009
42 Focus on Pork:32 Feature Story 6/12/09 1:12 PM Page 42 FOCUS ON: THE PORK PRODUCERMARKET STATEOFTHEPORKINDUSTRY TEN LARGEST HOG PRODUCING STATES %of U.S. 1. Iowa 2. North Carolina 3.Minnesota 4. Illinois 5. Indiana 6. Nebraska 7.Missouri 8. Oklahoma 9. Ohio 10. South Dakota 31 14 11 6 5 5 4 3 3 2 Editor’s note: To provide agri-marketers with the current state and outlook for pork producers,we invited representatives of several prominent magazines that serve the industry to provide their comments. CURRENT SITUATION by Bret Kealy, Publisher National Hog Farmer www.nationalhogfarmer.com It’s about supply…and awhole lot more. But it’s not rocket science Marketing to pork producers in the next 12months could be as difficult as allocating your 401K investments during these times of uncertainty. There aremany reasonswhy pork producers have registered losses the past 18months, but one of the biggest is an oversupply of pork. With higher input costs (feed, transportation, etc.) alignedwith lower pork prices, profits have been elusive, even for the most savvymanagers. Othermarket disruptions, such as themisconceptions about the H1N1 influenza virus, themisinformation pedaled by theHumane Society of the U.S. and the lingering effects of theweak dollar, have taken a heavy toll. Economic fundamentals point to a need for a correction in themarket. If the pork industry is to return to profitability, supplymust be reduced, input costsmust remain 42 Agri Marketing s June 2009 U.S. HOG PRODUCTION (million head) 120 115 110 105 100 95 TEN LARGEST HOG PRODUCING COUNTRIES Number Head (in millions) 1. China 2. EU - 27 3. United States 4. Brazil 5. Russia 6. Canada 7. Japan 8.Mexico 9. South Korea 10. Ukraine 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Data courtesy of Doane Advisory Services,www.doane.com steady or decline, perhaps an unlikely scenario, and the price of market hogsmust improve. Fromamarketing perspective, it is fair to assume that the number of pork producerswill decline.Although this is an ongoing trend, the current economic climatemakes it very difficult to predictwhether this trendwill accelerate in the comingmonths. It is also important to remember that prior to this stretch of unprofitablemonths, pork producers enjoyed several consecutive quarters of profitability. That means: 1) Good managerswere financially prepared toweather this economic stormand, 2) Producerswho expanded their operations during the “good times” have state-of-theart facilities and a financial incentive to stay in. Agri-marketerswho are in the Kealy swine business for the long haul must bewilling to dig in and allocate the resources needed to maintain or growtheirmarket share,while their less aggressive counterparts bide their time, hoping for the good times to return. Marketersmust ask themselves: “Howimportant is the pork industry to our core business?” If you are in themarket for the long run, nowis the time to invest in the industry’s future and grasp the opportunity to cover R&D investments. Much like allocating your 401K investments, the question is not when to invest, but ratherwhere to invest. Sitting on the sidelineswill likely lead tomissed opportunities. Investing in themarkets identified as strategic growth areaswill yield dividends down the road. Again, this is not rocket science. Progressive pork producers are looking for strategic partners thatwill help themreturn to profitability. If you standwith themin the tough times, chances are theywill bewith youwhen the good times return. OUTLOOK byMarlysMiller, Editor PORK www.porkmag.com Last year at this time, U.S. pork producerswere staring at high input prices, ethanol-fueled uncertainty, record pork production and a flowof red ink. On the plus sidewas a redhot exportmarket that ate upmore than 20%of the year’s pork production and actually held prices from dropping another $23 or so per hog. The outlookwas rocky, but an abundant harvest alongwithmore stable corn and energy prices offered (more on page 44) 482.0 154.0 66.0 34.4 21.2 11.7 9.7 9.7 8.1 6.0
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