September 4, 2007

Sharp fall seen in US pork margins as feed prices rise

Higher feed prices in the US have caused a 70-percent drop in pork margins, according to agricultural economists.

Margins have dropped from US$7 per hundredweight to US$2 per hundredweight over the past year as higher corn prices took a toll on profits.

Despite the lower margins, pork producers are affected to a lesser extent than beef and chicken producers, according to Chris Hurt, extension economist at Purdue University writing to cattlenetwork.com.

Pork producers were able to use the cushion of profitable margins from the year before to expand the breeding herd while beef and poultry producers had to scale back production due to the corn price hike, he explained.

Hog producers have thus successfully absorbed higher feed prices in the form of reduced margins, Hunt said.

Even though production is up, prices are up as well as demand continues to remain high.

However, exports are down for the first time in 15 years and stocks are accumulating.

Pork producers, who have seen the longest run of profitable quarters in the past few years would likely hit near-break-even margins in the next 12 months.