Cash flow statements are finally reflecting a positive return for struggling hog farmers.
“Producers have lost a lot of money in the last two years in the hog business, but right now it looks like 2010 will turn out to be slightly profitable, with some very good profits in the summer months,” reports Ron Plain, a University of Missouri agricultural economist.
“We’re back into profitable ranges for hog prices, right around $50 per hundredweight, or a little bit better, and with carcass prices in the $70s. These are the highest hog prices since the fall of 2008,” he says.
These prices come as welcome news for an industry that spent much of 2008 and 2009 culling herds to survive when low prices virtually locked in losses. Herd size reductions, coupled with improved product demand, have propelled hog prices back into the black.
“The number of hogs coming to market in the first quarter was down 3%, but in recent weeks we’ve been close to the level of a year ago,” Plain says. “The USDA’s March hog and pig report was encouraging, with numbers coming in smaller than expected, with breeding herds down 3.9% and forecasted spring farrowings down 4% from a year ago.”
Those developments caused hog prices to remain above $50 per hundredweight for live hogs and carcass prices to settle in the low $70s. Corn prices staying in the mid-$3 range, the lowest stable level in two years, has kept cost of production about 52 cents per pound of live hog.
Plan expects exports to bolster this rebound and contribute to prospects for higher prices.
“We were down on exports last year for the first time in 19 years, but 2009 pork exports were still the second-highest ever. We’re looking for U.S. pork exports to be up 5-10% from last year’s level,” he says. “That is helped by the fact that Russia has increased the number of U.S. slaughter plants that are approved for shipments there, and China has lifted the ban on U.S. pork put in place last year during the swine flu scare.”
The result of better hog prices could be slightly higher pork prices for consumers.
“Higher live-animal prices are going to translate into higher prices of meat in the grocery store,” Plain states. “I’m concerned that consumers might slow down their meat consumption when that happens. If so, we may see some push-back from the packers in buying hogs. Domestic meat demand should be fine if the economy grows a little bit faster and unemployment drops.”