December 4, 2006

US may need to reduce pig herd to keep current prices

Analysts say it is very likely the hog herd in North America would need to be reduced to sustain prices due to fact that even with strong live hog demand, the current cost of corn would result in break evens at best for average cost producers.

Cash hog prices remained strong through November with record slaughter.

The average net price for all non-packers over hogs following thanksgiving were almost US$45 per cwt live -- up over US$2.00 per cwt on-year.

Although demand for live hogs for the first 10 months of 2006 was similar to last year's, demand for pork at the consumer level was down 4.1 percent.

Still, for the last four weeks both gilt and sow slaughter has rose to levels that resulted in reduction of the breeding herd in the past and prices has remains strong.

Retail pork prices for the first ten months of the year dropped 0.9 percent from a year earlier. However, retail prices for August - October were up 1.9 percent in 2006 compared to 2005, despite record slaughter.

To add to the cheer, pork exports for the first nine months of the year has gone up 11.5 percent on-year.

Although pork sales to Japan, the top customer of US pork, went down 7.9 percent the first nine months of the year, more substantial increases were seen in Canada, Mexico, Russia, South Korea and China.