All of this may translate into higher prices and lower feed costs in 2009.

“Pork production is expected to drop by 2-3% in 2009,” says Hurt. “This may help hog prices average a few dollars per hundredweight higher than the $48 live price in 2008.”

Slightly higher hog prices will be good news to producers, but lower feed prices may be more welcome news.

For 2008, estimated cost of production was near $53, but recent lower futures prices suggest production costs could dip to $46-48 for 2009. Cash corn prices are projected to average $3.50/bu. in the coming year, vs. about $4.60/bu. in 2008. Soybean meal has declined to about $260/ton (at Decatur, IL, recently), compared to about $330/ton for this year.

“Farrow-to-finish pork producers operated under losses for much of 2008, losing about $14/hog,” Hurt says. “For 2009, the current price relationship could return the industry to about $5/cwt. of profits as prices move from the mid-to-upper $40s in the first quarter to the lower-to-mid $50s in the second and third quarters and finish the year in the very high $40s.”

But many uncertainties lie ahead, including the extent of the recession’s impact on domestic consumption and trade.

“In addition, feed prices, while more moderate now, will remain a key to a profitable 2009,” Hurt says. “Opportunities to both hedge lower feed prices and profitable lean hog futures prices for 2009 are now available.

“All producers will welcome these improved prospects, and high-risk producers will especially want to consider taking some of these positive margins,” he suggests.