Subscribe to receive top agriculture news
Be informed daily with these free e-newsletters
August 6, 2021
The U.S. pork industry has grown remarkably over the last two decades. From 2001 to 2020, the number of hogs processed in the U.S. increased from just under 98 million head to 131.5 million head, or 34%. U.S. pork production grew even faster, rising 48% as hogs were increasingly processed at heavier weights.
For many years the U.S. hog industry was characterized by a hog production-price cycle where production and price changes were inversely correlated over several years. Producers, responding to widespread profitability, would increase production until the supply increase was large enough to reduce profitability through lower hog prices. Profits would decline until prices fell below some producers’ production costs, leading them to reduce production or exit the industry.
Changes in profitability were sometimes complicated by shifting production costs, especially feed costs. The industry’s tendency to overshoot during both expansion and contraction phases led to the hog cycle. Although “hog cycle” implies a cycle of specific duration, in truth the hog cycle’s length varied.
From 1950 through the mid-1990s, it ranged from three to seven years. In contrast, during the first two decades of the 21st century, it appears to have lengthened, with cycles lasting from as few as four years to as many as 10 years, with only modest production downturns. Interestingly, U.S. pork production experienced year-to-year increases in all but four of the last 20 years. The U.S. industry’s rapid growth in the 21st century begs the question: What happened to the hog cycle?
In aggregate, the cycle still responds to strong profitability by increasing production and responds to losses by reducing production capacity. What has changed, however, are two key factors.
First, improved technology through better genetics, production systems, nutrition and management has generated unprecedented hog productivity growth, reducing production costs. Second, consumers around the world have increased consumption of pork as incomes have grown. The U.S. industry’s competitive production costs have helped it become a leading pork exporter.
One way to measure the change in the U.S. pork industry’s productivity growth is simply to divide annual U.S. pork production by the average number of sows in the herd each year. This measure indicates that from 2001 to 2020, pork production rose from just under 3,100 pounds per sow to nearly 4,500 pounds per sow in the U.S. herd, or 45%. So, today’s U.S. breeding herd of 6.3 million head is virtually unchanged from two decades earlier, making it possible for pork production to rise substantially without expanding the breeding herd.
Pork export growth, fueled by consumers in importing nations, helped allow the industry to expand production rapidly over the last two decades without depressing profitability. U.S. pork exports in 2020 totaled 7.3 billion pounds, nearly five times the total exported in 2001. The rise in pork exports effectively absorbed more than 60% of the U.S. pork production increase that occurred from 2001 to 2020.
The hog cycle of old was predicated on both modest year-to-year demand growth and productivity improvements. However, now the pork industry is characterized by dramatic increases in productivity and the U.S. emergence as a pork exporter powerhouse. That combination has altered the hog cycle, leading to longer expansion phases and shorter industry downturns than during the last half of the 20th century.
Mintert is a Purdue University Extension ag economist and director of the Purdue Center for Commercial Agriculture.
You May Also Like
Current Conditions for
Enter a zip code to see the weather conditions for a different location.
EPA policy and proposals: Draft Herbicide Strategy will impact all U.S. farmersFeb 21, 2024
How to transition farm machinery and equipmentFeb 22, 2024
EPA approves summer E15 sales in 8 midwestern statesFeb 23, 2024