The first real wave of the expansion will hit the market in the second quarter of 2001, but the full force will not be felt until late 2001 and in 2002. There are multiple reasons. The first is the large amount of debt that producers incurred during 1998 and 1999. Now that the hog enterprise is generating positive returns, it is the desire of both producers and their lenders to restore their equity position to a more comfortable level. This factor will likely continue to delay expansion.
Fear is another powerful behavioral modifier at work.
The depth of losses in 1998 and 1999 was so extreme, that many producers will forgo expansion until they are very comfortable with their financial position and with the longer-run outlook for pork production profitability. Finally, since the recent survey was conducted around June 1, the issue of new crop feed prices was still very uncertain, with a forecast of drought in the Midwest. Those drought concerns were greatly diminished by the end of June. The movement toward expansion will likely begin this fall. By September, producers will have had six months of profitable hog prices to restore financial reserves.