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"Now the outlook is for modest losses
this fall and winter, with some very small profits next spring and
summer," said Chris Hurt. "The negative market factors include the
increased flow of hogs and pork from Canada, due to the restriction
of beef imports, and higher corn and soybean meal prices than had
been anticipated a few months ago."
Hurt's comments came as he reviewed the
current state of the hog market. Hog numbers and pork supplies will
be somewhat higher than had previously been anticipated, according
to the September "Hogs and Pigs" inventory report from the USDA.
While the breeding herd is 3 percent
smaller than last year's herd, there are indications that farrowings
will not be down as much. The summer pig crop was down by only 2
percent, while fall farrowing intentions are down only 1 percent,
and winter intentions are unchanged.
"The breeding herd has been in a
reduction phase after financial losses in the last half of 2002,"
said Hurt. "Normally, one would expect the herd to stay below
year-earlier levels for about six to eight months."
The market herd as of Sept. 1 was down
2 percent, but the number of pigs available for marketing this fall
and winter will be about 1 percent lower. Marketing weights will
likely be somewhat higher, so total pork production this fall and
winter may be unchanged to down modestly. For the spring and summer
of 2004, supplies are expected to begin to climb by about 1 percent.
"More pork is not what hog producers
want to see, as prices may be below cost of production for portions
of this fall and winter," said Hurt.
The breeding herd was lower in most
major production states. In percentage terms, Indiana had the
largest breeding herd decline at 9 percent, Iowa's herd was down 7
percent, Missouri was down 6 percent, Ohio down 3 percent, and
Illinois's breeding herd dropped by 2 percent.
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this article]
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Major states with unchanged or
increasing numbers included North Carolina as unchanged, Minnesota
with a 2 percent increase and Nebraska with a 4 percent increase.
"This summer's hog prices have been
influenced by a large increase in hogs and pork coming from Canada,
as the North American beef and pork markets adjust to restricted
beef flows from Canada due to BSE there," said Hurt. "Hog imports
from Canada include both young pigs that are fed out in the United
States and slaughter hogs.
"Last year, the total live imports were
5.9 percent of total U.S. slaughter. That number will be closer to
6.5 percent this year. However, total live imports this summer were
over 8 percent of U.S. slaughter. USDA reports that processed pork
imports have been up as well. In June and July, pork imports from
Canada were higher by 14 percent over the same months in 2002 and
are up 16 percent for the year."
Hurt said the flow of Canadian hogs and
pork should diminish in coming months. The USDA has approved
importation of muscle beef cuts from cattle under 30 months of age
and has a permit process in place to allow more beef to enter the
United States.
"In addition, the value of the Canadian
dollar has increased by 14 percent in 2003, which will make
shipments from Canada to the United States less favorable over
time," said Hurt.
He said fall hog prices are expected to
average in the $36-to-$40 range on live-weight basis. Winter prices
are expected to be about $1 higher. Spring and summer 2004 prices
are expected to average in the $39-to-$44 range.
"Cost of
production is estimated at $39 to $41 per live hundredweight over
the next year," he said. "Operating returns are expected to show a
$1 to $2 loss in the fall and winter but a similar level of profits
next spring and summer."
[University
of Illinois news release]
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