US hog farmers urged to rebuild herds

Hog farmers need to put the brakes on an urge to begin rebuilding herd numbers to avoid a roasting at the hands of high grain prices, a leading farm academic has warned.

The restocking that hog producers have been ready to put in place since the industry emerged this year from a two-year recession was "no longer an acceptable conclusion" now that corn prices for America's 2010 crop could average US$5 a bushel, Purdue University economist Chris Hurt said.

The numbers worked without expansion thanks to the 10.2% jump to a record high of US$3.23 a pound in retail prices of pork over the last year, with economic reviving stoked demand at a time when supplies were depleted by the herd cutbacks.

A buoyant pork market should help hog prices to stay above US$55 per animal, live weight, over the next year, enough for farmers to weather corn prices of well over US$5 a bushel and still make a profit.

Hog prices may even hit US$60 a head live weight, enough to withstand US$6-a-bushel corn, in the April-to-June period, when the prospect of summer lifts demand for barbecue meats.

However, official data on Friday showing that farmers' plan to have 2.89 million sows farrow in the December-to-February period, representing a year-on-year rise in breeding intentions, could "plunge margins deep into the red in late 2011 and 2012.

The increased piglet production could feed through into a rise of up to 4% in slaughter rates by the end of next year, enough to force animal prices back to US$50 a head.

At this level, corn prices would need to fall back to US$4.10 a bushel, below the level growers received for the 2007 crop, for hog producers to break even.

Producers should delay for a year their plans for restocking, until more is known about next year's corn and soybean crops, which will determine the prospects for feed prices.