In a thought-provoking analysis, renowned economist Steve Meyer sheds light on the essential steps required for pork producers to achieve profitability in the current industry landscape. According to Meyer, addressing three crucial factors—cost reduction, supply management, and increased demand—is paramount for sustained success.
Lowering costs emerges as a pressing concern for producers, with the cost of hog production averaging around $90. While favorable weather conditions in the United States and South America may offer some respite, reducing costs to $85 per hog is insufficient to significantly impact the bottom line. As the industry grapples with this challenge, a potential solution lies in exploring innovative cost-cutting measures and operational efficiencies.
Another avenue to restore profitability hinges on managing the supply-demand dynamics. Meyer underscores that a stimulus program akin to those implemented in the United States during 2020 and 2021 boosted demand; however, such measures are unlikely this year. Although exports have seen a promising increase of 9%, this growth only marginally impacts the domestic market, falling short of generating the desired demand surge.
To achieve a substantial market recovery, producers would need to curtail production by approximately 12%. This reduction is necessary to restore equilibrium between supply and demand, thereby bolstering prices and profitability.
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Categories: New York, Livestock, Hogs