A sudden spike in prices in early September has industry forecasters more confident that pork producers are pulling marketings forward and live hog prices with it.
From the upper teens to low $20s, hog prices surged to the upper $20s at terminal markets, reports Glenn Grimes, University of Missouri agricultural economist. Producers could expect about $2 more for 51-52% lean hogs and $1 or more additional return for quality hogs.
That puts live hog prices at about $30/cwt. at terminal markets. If marketings have truly been pulled forward, as Grimes first requested of producers during World Pork Expo, then live prices could maintain a $30 average through the third and fourth quarters of this year, he suggests.
The Missouri analyst says there are some good reasons to believe producers are marketing hogs earlier. He reports 79% of the hogs sold in August 2002 weighed an average of 1.3 lb. less than the same month last year.
Some 21% of the hogs weighed 1.7 lb. more in August 2002 than in August 2001. But Grimes explains those hogs were on marketing contracts that provided price risk protection.
The serious decline in hog prices reflects the "sea of meat" represented by oversupply in pork and other competing meats, says Grimes. Pork production in the first seven months of ’02 is up 3.2% from ’01. The U.S. breeding herd on June 1 was down 11%. The increase in marketings has come from U.S. productivity gains and from growth in Canadian trade.
Slaughter imports from Canada were down 1% for the first six months of the year and feeder pig imports were up 20%. The good news is that Canadian feeder pig imports were up only 14% in June, he notes.
To address the mountain of meat, U.S. producers are continuing to reduce the breeding herd. In three weeks during late August and early September, producers shipped about 50,000 sows to slaughter, says Grimes. He says it appears the industry is on course to reduce the breeding herd by 1% per month.
USDA Pork Purchase
National Pork Producers Council (NPPC) President Dave Roper of Kimberly, ID, applauded the U.S. Department of Agriculture (USDA) for its recent announcement of $30 million bonus purchases of pork products. The products are to be used for school lunch and humanitarian food aid programs.
Roper stressed the NPPC was not caught off guard by the precipitous drop in hog prices. "As early as June of this year, we briefed President Bush at the World Pork Expo about a potential hog market price collapse this fall, and discussed ways the government could assist producers. We’re very pleased that the President has kept his word and is working with the producer community to address this issue."
Roper went on to say during an NPPC teleconference Sept. 9 on low hog prices that the next step is to work with the Bush Administration to alleviate other market conditions associated with this crisis.
Roper says the NPPC board would be meeting in coming weeks and conferring with other industry groups and officials from Canada and Mexico.
"We are not going to rest until we can see that economic conditions are getting better for American pork producers," he adds.