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"The pork industry's profit outlook has
made a 180-degree turn in the past three months, when hog prices
were expected to be much lower and feed prices much higher," said
Chris Hurt. "This is a welcome turn for hog producers."
Hurt's comments came as he reviewed the
past quarter.
"It was just three months ago that the
outlook for the pork industry was full of doom and gloom," he said.
"Not only was the hog price outlook discouraging, but prospects for
high corn and soybean meal prices had everyone on edge. Just like
the passing storms of spring, sunshine has returned to the pork
industry."
Hurt noted that the U.S. breeding herd
continues to shrink, but pork supplies continue to grow as sow
productivity is on the rise and imports of live hogs from Canada
continue to expand. In the latest "Quarterly Hogs and Pigs" report,
the USDA said the breeding herd was down again, this time by about
1.5 percent. However, the number of market pigs was up by 1 percent.
"Since June 1998, U.S. producers have
decreased the size of the breeding herd by an amazing 15 percent,
shedding more than 1 million animals, to an inventory of only 5.9
million today," he said. "In fact, the breeding herd has been down
in 19 of the past 24 quarters, as producers have only had a few
short periods of profitable returns to provide any incentives to
expand."
Fewer sows and more pigs are the result
of a return to a record number of pigs per litter and more
segregated, early weaned pigs from Canada. Pigs per litter reached
record highs in the first half of the year after several years when
it appeared the U.S. farrowing rate had reached a plateau. The rate
is at 8.9 pigs per litter this year, compared with 8.8 to 8.85 over
the previous four years.
Segregated, early weaned pigs from
Canada totaled about 2.5 million head in the first five months of
this year, an increase of 26 percent over the same period last year.
This number of young pigs is now accounting for nearly 6 percent of
the U.S. inventory, and the added imports of young pigs this year
compared with last year adds about 1.2 percent to inventory.
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this article]
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By state, the declines in the breeding
herd sound familiar, coming from the heart of the traditional
hog-corn belt: Iowa, down 1 percent; Ohio, down 3 percent; Michigan
and Nebraska, each down 5 percent; and Indiana and Missouri, each
down 6 percent. Producers say they will farrow 1 percent fewer sows
this summer and will have unchanged farrowings this fall.
"Pork supplies will continue to be
large through the rest of the summer, at about 3 percent above the
supply of last summer," said Hurt. "By fall, there should be some
moderation to about 1 percent larger supplies. The outlook for the
winter and spring of 2005 is for pork supplies to be unchanged to 1
percent higher."
Hurt noted that the supply numbers can
be thrown out anyway because it is all about pork demand right now.
"Pork demand will likely receive added
benefit from continued concerns regarding mad cow disease in the
U.S. beef herd," he said. "The much larger number of cattle being
screened may well result in more animals that are suspect, keeping
news about the disease in the headlines and also keeping foreign
governments -- particularly Japan and South Korea -- unwilling to
move quickly on a beef trade resolution. Pork demand can be enhanced
both domestically and in foreign markets."
Prices for live hogs are expected to
average in the low $50s this summer, mid-$40s in the fall and mid-
to higher $40s in the first half of 2005. For the year of 2004, live
hog prices may average about $48, the highest prices since $51.30 in
1997.
"Cost
prospects are also dropping with declining feed costs," he said.
"Estimated costs are now in the mid-$40s this summer and are
expected to drop into the low $40s this fall. This means that the
next year provides prospects of profits of an average of about $3 to
$4 per hundredweight."
[University
of Illinois news release]
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