July 13, 2007

North American hog prices seen to trend lower

North American hog prices have likely seen their highs for the year and should see a steady decline into the winter, according to a market analyst. However, weather conditions and the outcome of the US corn crop could cause prices to see some movement apart from the general downward trend.

"The highs for the year are probably behind us," said Ron Plain, a livestock economist with the University of Missouri-Columbia. He said the seasonal trend was for prices to decline after June, with lower prices each month until December, when the market typically starts to pick back up.

Large US pork supplies, coupled with the slower pace of US pork exports this year should add to the seasonal pressure on the hog market, Plain said. He thought the US would need to see better exports if prices were to see an improvement.

Hot weather over the next couple of months could also help underpin the hog market, Plain said, noting that hot weather causes hogs to grow slower and pulls down pork production.

The eventual size of the US corn crop will also play a large role in the hog market, as corn accounts for roughly 30 percent of the cost of producing a slaughter hog, Plain said. While corn prices are higher than they were a year ago, US farmers planted almost 93 million acres of the crop. Plain was hopeful that high corn yields would keep feed prices from rising too far.

The Canadian hog market is a close follower of the US, and prices in Canada are also expected to decline over the next several months, Saskatchewan Agriculture's Brad Marceniuk said in his July market update.

However, Marceniuk also pointed out that the recent strength of the Canadian dollar means that the prices seen by local producers were never as strong to begin with as those seen by their US counterparts.