July 1, 2011

 

US processors sustain hog herd amid financial worries

 

 

US pork producers are keeping up the size of the breeding herd in the face of a very uncertain financial outlook.

 

This cautious position is expected given the wide swings in both hog and feed prices evident this spring. In addition, little change should be expected in the hog herd until the feed supply situation is better known this fall, said Chris Hurt, a Purdue University agricultural economist.

 

"The USDA's June Hogs and Pigs report indicated that producers maintained the size of the breeding herd over the past year," he said. "North Carolina continued to lead the states reducing their breeding herds. The national breeding herd has declined 5% in the past three years, and North Carolina alone accounts for about half of that total."

 

The smaller sow herd remains very productive, however, as the number of pigs per litter reached 10 pigs for the first time ever this spring. This resulted in the number of market hogs being up by nearly 1% over levels of a year earlier.

 

According to Hurt, consumers will have to pay record high prices for US pork this year as high feed prices over the past four years are finally being transmitted to consumers.

 

"Retail prices through May this year have averaged a record US$3.35 per pound, which is up 14% from US$2.93 a pound during the same period in 2010. Everyone in the pork marketing channel is sharing as packer gross margins are up 10%, retail gross margins are up 14%, and producers have received 16% higher prices," he said.

 

Heavily contributing to US pork demand is a record level of pork exports. Numbers through April show a 19% increase over the same period in 2010.

 

"For the first four months of the year, exports represented an amazing 22% of all the pork being produced in the US. The big export increases this year are heading to Asia, led by South Korea, Japan, Russia and China. USDA projects that exports for the entire year will be up 15%," he said.

 

There just isn't much pork left for US consumers as supplies per person will be down about 3% in 2011.

 

Pork production in the first half of 2012 should be up less than 1% as farrowing intentions are down 3% for this summer and down 1% for this fall. Somewhat higher production will come from more pigs per litter and from higher market weights.

 

Hog prices set daily records at US$78 per live hundredweight in late June. Moderation is expected from these extremes, with third-quarter prices averaging in the mid-$60s.

 

Prices are expected to be in the very low US$60s this winter before moving back to the mid-$60s for the spring and summer of 2012. For 2011, live prices are expected to average a record US$63.50 compared to US$55 last year.

 

Declines in corn prices of as much as US$1.50 per bushel after the June 9 highs have dramatically changed the anticipated costs structure for pork producers.