November 4, 2009

 

US hog farmers may recover from higher demand

 

 

US hog farmers, who have lost more than US$5.3 billion in the past two years, may benefit from an increase in pork demand and shrinking animal supplies, said Paragon Economics president Steve Meyer.

 

Producers can buy corn futures and sell hogs to lock in profit for six months in 2010, Meyer said. Farmers are currently losing US$20-US$25 per hog sold for slaughter, and losses may shrink until turning into earnings in March, he said.

 

Hog futures have climbed 16 percent since the end of September on speculation that the slumping dollar will spur pork exports. China, the second-largest importer of US pork last year, last week lifted a ban put in place after the AH1N1 flu outbreak in April. Russia also may buy more as disease reduces domestic herds.

 

Meyer said the weaker dollar will help exports to China, and they've got that African swine fever in Russia, so all of that is positive for demand, adding that pork supplies also are shrinking because hog weights, which increased in the summer, are dropping in line with year-earlier levels.

 

Farmers also ramped up breeding-herd liquidation in August and September, which may support prices, Meyer said. The rebound in hog prices may slow the slaughter, limiting the profit gain, he said.