Uncertain times for US hog producers

Hog prices have bounded higher in recent months, an unusual development for this time of year, narrowing losses for cash-strapped producers in the US.

However, it will be several more months before the US hog sector, which has been in the red for nearly two years, sees regular profits and even longer before it fully recovers. Stronger local and international pork sales have lifted prices, along with a slight decline in production.

"The rally that started in August has been stronger than most of us had anticipated," said John Lawrence, agriculture economist at Iowa State University. "I think it was unexpected that the December (futures) had gotten this close to break even."

The Chicago Mercantile Exchange December hog futures expired earlier this week at 64.575 cents per lb, up 0.575 cent for the day, and peaked that day at a six-month high of 64.600 cents.

That price may stop losses for a few producers, but Lawrence estimates most will need about 70 cents per lb in December on average to break even.

Widespread profits on hogs are months away, with producers still feeding their livestock US$4 per bushel corn while the sluggish global economy hits meat sales.

Smithfield Foods Inc. CEO Larry Pope expects profits on hogs in 2010 but will take several years before those profits return to normalised levels.