 "The industry has had six consecutive quarters of losses, from
the final quarter of 2007 through the first quarter of 2009,"
said Chris Hurt. "The return to profits sometime this winter is
predicated on controlling corn and soybean meal costs and
keeping the size of the breeding herd down."While producers
have some optimism of getting back in the black, they do not
want to turn any optimism into breeding herd expansion. Plus,
the year of 2009 holds continued uncertainties as the pork
industry is caught up in both feed price adjustments and a world
economic slowdown."
Hurt's comments came as he reviewed the pork industry.
Because of the problems he cited, the U.S. breeding herd has
been in a period of reduction during the last half of 2008.
"Prospects for a return to profits are based upon some
moderation in feed prices from record levels in 2008 and to
somewhat higher hog prices as pork production drops about 1-2
percent in 2009," he said.
Hog producers continued to reduce the size of the breeding
and market herd by 2 percent, according to the USDA's December
inventory report. The breeding herd has been below year-previous
levels since June 2008.
"More importantly, fall farrowings were down 6 percent, and
winter and spring intentions are reduced 2-3 percent," he said.
"The related pig crops are not down as much because the number
of pigs per litter continues to set new records.
"Pigs per litter for 2008 increased to 9.4, or by 2 percent,
the largest annual increase since 1996. As a result, the pig
crop for the past fall was only down 4 percent."
Slaughter supplies are expected to be down about 2 percent in
2009, with the largest percentage drop of 4 percent coming in
the second quarter. Total pork production is expected to be down
1-2 percent due to somewhat heavier weights in 2009, resulting
from higher hog prices and lower feed costs.
"Trade prospects are not expected to be as robust in 2009,"
Hurt noted. "Net trade -- exports minus imports -- represented
18 percent of U.S. production in 2008. That figure is expected
to decline to about 16 percent in 2009.
"Fewer exports mean that about 1 percent more pork will be
available domestically, but this will be offset by a similar
increase in population so that domestic per capita availability
will be unchanged in 2009."
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In 2008, the average live hog price for 51-52 percent carcasses was
about $48. If domestic pork availability is unchanged, does this
mean the weakened consumer demand will take pork and hog prices
lower in 2009?
"The answer is 'no,' as hog prices are expected to be somewhat
higher in 2009 as the U.S. recession is not expected to have a
measurable impact on pork demand," he said. "This is because pork is
a lower-priced meat compared to beef, and some consumers seem to be
shifting away from the higher-priced beef and toward pork."
Live hog prices are expected to average about $51 in 2009,
compared with $48 last year. Prices should rise sharply from the
first of the year into spring. Prices are expected to average about
$47 in the first quarter and then move to the low to mid-$50s in the
second and third quarters. The final quarter of the year is expected
to see live hog prices in the higher $40s.
"Costs of production in 2009 will again hold an important key to
whether the industry has profits or losses," said Hurt. "Using corn
and soybean meal futures prices on Jan. 5, and adjusting them to
expected cash prices, suggests that costs of production may decline
by $3 to $4 per live hundredweight in 2009. This assumes that 2009
corn prices are down about 60 cents per bushel and soybean meal is
about $25 per ton lower."
In 2008, estimated cost for average farrow-to-finish producers
was near $53 per live hundredweight with prices about $48, resulting
in losses of about $5 per hundredweight, or near $15 per head.
"For 2009, costs are expected to be near $50 with prices about
$51, for profits of $1 per live hundredweight, or about $3 per
head," he said.
[Text from file received
from the University
of Illinois College of Agricultural, Consumer and Environmental
Sciences]
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