November 29, 2007

US pig producers to face continuing price losses

Economist Chris Hurt of Purdue University predicted a long battle for US pig producers as price losses continue through early 2009.

The projections will apply this fall and winter, while spring and summer can look forward to moderate losses.

The escalating production costs and oversupply may push breeding herd cutbacks in the first-half of 2008, Hurt said.

However, US industry analysts do not believe that producers will cut back production even in the wake of losses, given their strong financial position going into the price declines and large fixed costs.

Hurt said that if anyone is going to cut back, it would be the independent family corn/hog farmers who produce about 15 to 20 percent of US hogs. He estimates they will receive US$1.85 to US$2.12 per bushel of corn marketed through hogs this fall and winter.

A spike in domestic pork demand to offset oversupply is not likely to occur. Yet, hog producers could start looking on China as a huge market potential. The Chinese demand could add dollars quickly and reduce 2008 losses, according to Hurst.