"Hog prices are expected to exceed costs in the second and third
quarter this year before returning to modest losses in the
fourth quarter and in the first quarter of 2010," said Chris
Hurt. "Some further reduction in the size of the U.S. and
Canadian breeding herds is expected into 2010, and this, along
with recovery in the world economy, may provide a slightly more
positive tone for hog prices in 2010.
improving world economy would also increase grain and soybean
utilization and likely strengthen feed prices as well."
Hurt's comments came as he reviewed the state of the pork
industry, which has seen some recent good news, but some bad
news as well.
"When it all shakes out, both 2009 and 2010 may be about
break-even years," he said. "But break-even covers all costs,
including full capital replacement and family labor costs.
"After a year and a half of losses, average cost hog
producers should finally make money this spring and summer."
The best of the news is that hog prices should soon begin a
strong increase related to the normal seasonal pattern, he
noted. Hog prices have tended to move higher from mid-April into
"In the last five years, as an example, live hog prices have
increased an average of about $10 per hundredweight from the
second week of April to mid-May," he said. "Participants in
futures markets expect a similar increase this year. On April 6,
the May lean hog futures price is $9.60 per live hundredweight
higher than the April futures price."
Hurt said this expected rally would take live hog prices from
the current low $40s into the low $50s over the next four weeks
"These higher prices tend to be maintained through August and
would be expected to be in a range from about $50 to the
mid-$50s, depending on the week," he said. "Second-quarter
prices are expected to average $51, with costs around $49. This
small quarterly profit would be the first after six consecutive
quarters of losses dating back to the fourth quarter of 2007."
There are a few other positives as well. The size of the U.S.
breeding herd and upcoming farrowings are somewhat smaller than
had been expected. The March inventory from USDA indicated the
breeding herd is now down 3 percent and that farrowings will be
down 3 percent in the spring and 4 percent in the summer.
Also adding to a smaller U.S. slaughter supply this year will
be 2.3 million fewer hogs coming from Canada, as the breeding
herd there has dropped sharply under heavy financial losses.
[to top of second column]
"Offsetting these positive attributes are the prospects for higher
feed prices and weak pork export demand," Hurt said. "The trend
toward higher corn and meal prices came from smaller-than-expected
planted acres and March 1 stocks," he said. "Since the release of
those reports on March 31, higher corn and soybean meal prices have
added to costs of hog production by $1.25 to $1.50 per live
"Those costs are estimated in the very high $40s for 2009 and
about $50 for 2010."
Reduced pork exports from the United States are the other major
factor keeping the industry from registering better profits, he
"Pork exports are expected to be down 14 percent this year from
last year, when China was an enormous buyer," he said. "This means
there will be almost 700 million pounds less pork shipped out of the
country, and that will have to be absorbed by domestic consumers."
In summarizing the positive and negative factors, there will be
about 2 percent less domestic pork produced in 2009, but the per
capita supplies will be nearly unchanged from last year due to
"This means that 2009 average hog prices probably will not be
much different than last year's level, around $48 live weight," he
said. "The difference in profitability, then, is due to expected
lower feed costs this year, with total estimated costs at $48.50,
versus $54 in 2008."
Feed prices remain a concern this year.
"Tighter-than-expected corn and soybean inventories mean that
harmful growing weather this spring and summer would force higher
prices and rationing of short supplies," he said. "However, it is
not likely that corn and meal prices would have the upward potential
experienced in the spring of 2008.
"The world is much different today with a stronger U.S. dollar, a
less robust U.S. ethanol industry and reduced world incomes."
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental