March 2, 2009

Weaker exports and softer domestic demand are creating significant headwinds for hog prices in 2009, according to the US Department of Agriculture.

National hog prices are seen averaging US$46 to US$49 per hundredweight on a 51 percent to 52 percent lean, live equivalent basis, the USDA said in an outlook released Friday at its annual Agricultural Outlook Forum. The 2008 average was US$47.84.

To combat record-high feed prices and mostly negative 2008 returns, hog producers cut back breeding herds and farrowings in 2008. But continued increases in pigs born per litter are offsetting efforts to cut production and the pig crop in 2009 is forecast as "only fractionally lower than 2008," the USDA said.

Pork exports are expected to decline in 14 percent to 4 billion pounds in 2009 following double-digit growth in four of the last five years, USDA analysts said, citing "weaker economic growth worldwide, a stronger US dollar and a recovery of production in China."

Imports from Canada are also expected to decline, as the country's breeding herd is pared down to its lowest level this decade at 1.4 million head as of Jan. 1.

Based on a slaughter estimate of 114.4 million head, the USDA forecast 2009 commercial pork production at 23 billion pounds, down from a record 23.3 billion pounds in 2008.

Carcass weights are expected to increase "slightly" year-over-year on decreased feed costs.

Despite the dip in production, "weaker exports are expected to add to domestic supplies at the same time demand is expected to be softer as a result of economic weakness."

Retail prices in 2009 are seen in the upper US$2.90s per pound, up slightly from 2008, the USDA said.