Strong pork prices and steady demand support optimism across the North American hog sector. However, high construction costs for new barns will likely limit expansion and keep pork production steady for the foreseeable future.
Florian Possberg, partner with Polar Pork Farms near Humboldt, Saskatchewan, says the industry currently enjoys profitable conditions but does not expect major expansion.
“I think meat demand is good,” Possberg said. “Because of the high cost of building new barns and expanding herds, there just isn’t a lot of expansion going on in both Canada and the United States.”
Stable production in Canada and the United States supports strong market hog prices. At the same time, disease pressure in parts of North America reduces pig supply and lifts prices for early weaned pigs.
“We’ve seen record prices for small pigs for a bit,” Possberg said. “Disease challenges in some regions created a shortage of piglets.”
Those disease challenges include porcine reproductive and respiratory syndrome (PRRS) and porcine epidemic diarrhea (PED). Possberg says those outbreaks tend to cycle through the industry and eventually stabilize.
Across the broader meat sector, beef production continues to tighten as cattle herd numbers decline in North America.
“Beef prices were high last year and they’re even higher this year,” Possberg said.
Higher beef prices also supports pork demand. Pork remains one of the most affordable proteins available to consumers.
“The cost of pork at the retail counter is almost one quarter of what it is for beef,” Possberg said. “That helps our sales.”
Despite strong hog prices, the industry does not expect major increases in production. Construction costs for new barns remain extremely high.
“We don’t have profit levels that are going to see a lot of new hog barns going up,” Possberg said.
That reality also applies to other livestock sectors.
“There’s not going to be a lot of new protein meats coming onto the marketplace to bring meat prices down,” he said.
Feed remains the highest cost for hog producers. Possberg says feed accounts for about two-thirds of the cost of producing a hog.
Grain prices have remained relatively moderate over the past two years due to strong crop production across Canada and the United States. However, weather or fertilizer costs could quickly change that situation.
“If crop production drops or fertilizer prices rise, feed costs could spike again,” Possberg said.
Energy costs also influence food prices. Fuel powers farm equipment, livestock transportation, and food distribution.
“When oil prices rise, transportation costs increase, and that affects food prices,” Possberg said.
Trade uncertainty also remains a concern. Canada and the United States continue discussions about renewing their trade agreement.
“There’s uncertainty around the trade agreement,” Possberg said. “That’s something the industry watches closely.”
Despite those risks, Possberg believes the pork sector remains in a solid position.
“Right now we’re in stable times, and we can make a profit,” he said.
At the same time, he acknowledges that higher meat prices affect consumers.
“We don’t like to see food inflation affect the average family,” Possberg said. “But farmers don’t control those prices. We just want to make sure families are well fed.” •
— By Harry Siemens