October 15, 2007

US pork might see regression in 2008

The US pork industry might be hitting the red figures in 2008 despite successive profitability for 42 months, market experts warn.

The decline is due to increased feed prices which take away the profitability, according to Jim Robb, director of the Livestock Marketing Information Centre.

On a cash to cash basis, the industry is seen to be in the red in the fourth quarter which will continue at least through the first quarter of next year, said Robb.

The attention turns to how grain markets go in the second quarter of next year whether the industry can return to profitability in the hog complex or whether it will continue to struggle and start to see some significant impact thereafter in terms of breeding herd numbers that will come around during the period, said Robb.

Chris Hurt, agricultural economics professor at Purdue, added that a mixture of elements is building up to a less-than-profitable year in 2008. He said that glory days, which started back in 2004, are slowing to an end, as a result of higher feed prices, energy costs and even building costs.

In addition, he mentioned an oversupply of hogs in the market channel. Packers simply could not be able to take the extra animals.

The extra hogs come from Canada for processing, up to approximately 9 percent of total slaughter in the US. Higher productivity also results in more pork.

Hurt said he expects to see some herds trimmed to make up for the lower prices. That drop in production would drive up prices.

The US inventory of all hogs on September 1 was 64.6 million animals, up 3 percent from a year ago and the same from the last quarter.

Breeding inventory was at 6.14 million head, a rise of 1 percent compared to last year. Market hog inventory was at 58.5 million head, up 3 percent from last year.