February 18, 2008

Economist says US pork producers can avoid losses
 

USDA's Livestock, Dairy and Poultry Outlook said pork producers may continue to suffer losses at least through the first quarter of 2008 due to rising feed prices, but a hog marketing expert has stated the contrary; that the futures market is providing opportunities for pork producers to avoid losses for the next year.

Hog prices are expected to average between US$38 and US$40 per hundredweight, a drop of at least 15 percent on-year, said the USDA report. Production costs are also estimated to be around US$50 per hundredweight, which would mean a loss of at least US$10 per hundredweight for the producers.

However, livestock economist Glenn Grimes said the strength in lean hog futures market has given opportunities to at least break even. He added that if a producer can succeed in breaking even, or earning in profits in bad years, then they would be able to do well.

Grimes suggested that most pork producers may have already done that, as he pointed out the February 2009 lean hog contract at the CME topped at US$83.20 per hundredweight but has since lost ground. That is most likely due to the producers selling the contract, he said.