September 29, 2006

 

32-month winning streak for US pork may come under threat in October

 

 

Increased hog slaughters and larger-than-expected pork supplies since July have pressured cash hog prices and may threaten the 32-month long streak of hog profitability, economists say.

 

Ron Plain, agricultural economist at the University of Missouri, said the increases in hog slaughter lately were due to the backlog of animals which were supposed to be marketed in August being marketed in September as hot weather slowed weight gain.

 

Circo virus also caused losses in the number of pigs to market this year, Plain said, thus resulting in the general unpredictability of slaughter rates.

 

Plain forecasts daily slaughters in October to rise up to 1.5 percent above year-ago levels.

 

He expects weekly average hog prices to hit a bottom at around US$40 on a live weight basis, or US$54 on a carcass basis, this fall.

 

However, lower pork prices may stimulate retail demand, which could help pork demand and keep the market buoyant, analysts said.

 

Furthermore, Japan, the largest customer for US pork, may have pared down its huge surplus at the beginning of the year and may make orders soon.

 

US exports to Japan were down 11 percent in value in the first half of the year and fell 18 percent on-year for July.

 

The USMEF shows exports through the first half of the year were up 16 percent from a year ago by volume and 6 percent higher in value.

 

Meanwhile, domestic pork demand appears to be stabilising and as energy prices decline further, demand should strengthen, Plain said

 

Dave Bauer, analyst with Brite Futures Inc. in Cedarburg, Wis., predicted hog prices would stabilise after declining in September, then trade from US$42 to US$45 on a live basis in October due to strong demand from processors.

 

Bauer is currently projecting prices to be profitable for producers through November 2007.