December 14, 2006

Canada's Saskatchewan hog producers to see flat profits next year

Higher feed costs are pushing pork producers into the red and profits are likely to remain flat in the first quarter next year, increasing only in the second quarter, Saskatchewan Agriculture and Food said.

Hog prices have rebounded and are holding relatively flat, about 132 dollars per 100 kilograms range, and prices are expected to remain flat during the first quarter of 2007 before increasing in the second.

Saskatchewan Agriculture and Food livestock economist Brad Marceniuk says several factors are influencing the markets.

The fact that weekly US hog slaughter increases are showing signs of slowing down and the weakening of the Canadian dollar from its previous highs are positive news for Canadian hog producers and pork exporters.

However, US pork stocks in cold storage have started to rise while demand for pork for the first ten months of 2006 is down. To make things worse, feed prices are also up. 

Estimates put increased costs at 12 to 15 dollars per hog.

This has pushed production costs for index 100 hogs into the 140's. With current hog prices in the mid 120's to upper 120's, producers are losing money on every hog they sell, Marceniuk said.

Prices are expected to be relatively flat into the first quarter of 2007, with Saskatchewan index 100 hogs averaging about 125 to 130 dollars per 100 kilogrammes, before increasing into the second quarter and averaging in the range of 140 to 145 dollars per 100 kilogrammes.