August 10, 2009

Some analysts and traders in the US are lowering their earlier forecasts for cash hog prices from September through the end of the year in reaction to recent market developments.

Cash and futures prices for hogs have tumbled the latest two weeks with multiple new lows hit in most Chicago Mercantile Exchange lean hog contracts this week.

Cash prices have dropped about US$10 per hundredweight, or 17.5 percent, since July 24 and are now at a 21-month low. From a cycle high hit July 16, front-month August hog futures have declined 1,675 points, or nearly 26 percent.

Neil Dierks, chief executive of the National Pork Producers Council, on Friday (August 7) called the current situation for producers "very bleak." Producers have lost an average of US$21 per head since September 2007, he said.

The outlook for prices the remainder of the year indicates even deeper losses for producers.

Glenn Grimes, agricultural economist with the University of Missouri, has lowered his forecast for fourth-quarter prices to the mid US$30s on a live weight basis from around US$40 previously. He said prices for a one-month period during the quarter could slide to the low US$30s.

With break-even costs projected to be around US$50 to US$52 live for the final quarter, producer losses could widen to US$40 to US$45 per head for the quarter and perhaps be as much as US$50 at times, according to the forecasts.

Speculation of possible foreclosures by agricultural lenders or bankruptcy filings soon has increased this week after the steep declines in cash hog and futures prices.

A veteran livestock dealer in the western Corn Belt predicted Friday that hog prices "may slide into the mid US$20s [per hundredweight on a live weight basis]" in the current cycle based on the large hog supplies and lower prices required for packers to sell the pork.

The US Department of Agriculture reported Friday's early-day national weighted average carcass price at US$46.96, which converts to a live-weight price of about US$35.25.