March 3, 2011

 

Soaring feed costs to drive up US retail pork prices up to 15%

 

 

Soaring feed costs are expected to drive up US retail pork prices by at least 10-15% this year, according to hog industry analysts Tuesday (Mar 3).

 

And the price hikes won't be limited to just your favourite pork products, Manitoba Pork Council general manger Andrew Dickson said in an interview. Dickson said beef and poultry producers are also having to pay a lot more for things like corn, wheat and barley.

 

"So all meat is going to go up. Chicken is going up and beef might go up even more."

 

A US hog industry expert said that US corn future prices have more than doubled since June of last year to nearly US$7 per bushel. And there is speculation they could go even higher.

 

Rick Anderson, executive vice-president of Memphis-based Informa Economics Inc., said although slaughter hog prices have increased significantly to reflect higher feed costs, US retailers have only passed on a portion of the higher costs out of fear that consumers will stop buying if prices go too high.

 

But it's reached the point now where they have no choice but to raise prices. "They don't want to sell pork at a loss," Anderson said.

 

And if corn prices climb to US$8 or US$9 per bushel, US consumers could be looking at a further 5-7% price hike in 2012, he said.

Dickson said it's a similar scenario in Canada, even though hog producers here feed more barley and wheat to their animals and grain prices haven't risen as dramatically as corn prices.

 

But they're still high by historical standards, he said, and its pushed up local slaughter hog prices to between US$155 to US$165 per pig from about US$125 in late 2008. And by late summer it will likely be in the US$170 to US$180 range.

 

He said Canadian retail prices for pork have been climbing since last summer - he couldn't say by how much – and are expected to rise by a further 10-15% over the next six months before levelling off.

 

He said while there will be pressure by producers and processors to push prices even higher, there's probably a limit to how much more consumers will pay.

 

Anderson said to ensure fair profit margins for producers, US retail prices should probably rise by 20-30% over the next year. But he doubts retailers or consumers have the stomach for that kind of a price hike. So 10-15% is a more likely scenario.

 

Dickson said the main driving force behind soaring corn prices is the growing volumes of corn being used to produce ethanol in the US. He said four out of every 10 rows of corn grown are now dedicated to ethanol production.

 

He said at some point consumers are going to have to get involved in the ongoing debate about how much corn should be diverted out of the food system and into ethanol production.