Pork profits continue fueled by seasonal price surge.
Even high production costs due to higher-priced feed haven't stopped 2007 hog prices from returning a profit.
“In the first quarter of the year, live prices averaged $46.20/cwt., slightly under costs of production,” says Chris Hurt, a Purdue University Extension agricultural economist. “Since the end of March, hog prices have seen a strong seasonal surge, actually putting some green in bank accounts of hog producers.”
Hog prices dipped to $42/cwt. in late March, but have rallied as high as $54 in the past few weeks of May. Current costs of production are pegged at $47-49/cwt. for farrow-to-finish production, he says.
Hog prices have tracked somewhat higher than anticipated due to moderate supply growth and continued positive pork trade news. “For the first four months of this year, U.S. packing plants turned out 2.5% more pork, and live hog prices were almost 10% higher,” he says.
Pork exports climbed about 3%, but more importantly, pork imports were down about 8%, resulting in a “net” 10% increase in pork trade, he explains.
Pork supplies rose slightly domestically, but when adjusted for population growth in the United States, available pork per person actually declined. A smaller supply per person should mean higher pork prices, Hurt says.
“The second factor stimulating hog prices was a narrow retail price margin. Generally speaking, when packer or retail margins are smaller, the producer tends to get more of the consumer pork dollars, and that has been the case so far this year,” he observes.
Consumers have paid $.03/retail pound more for pork, and retail margins have been $.05/retail pound less, translating into higher hog prices for producers. “In fact, prices so far this year have averaged $46.60/cwt., compared to $42.70 during the same period last year. That's almost $4 more and a welcome outcome in this period of higher costs,” Hurt notes.