April 2004
Where have these strong hog prices come from? In the first quarter of the year, pork production has been up two percent yet prices are up by a remarkable 25 percent. The obvious conclusion is that demand is substantially better this year. The most logical explanation would rest with outstanding export shipments as a result of the sharply restricted beef exports due to BSE and reduced broiler exports due to bird flu since February.
Given the anticipation for record large pork supplies this year, hog prices may be riding a crest that cannot be maintained. Production for this year is now estimated at 20.3 billion pounds, an increase of about one percent over last's year's record. Slaughter supplies will be above year-previous levels this spring and summer. Higher slaughter supplies will be driven by the three percent larger supply of pigs that were less than 120 pounds on March 1 according to the Hogs and Pigs report just released by USDA.
The second factor driving higher slaughter numbers is the growing number of pigs from Canada . In the first 11 weeks of the year through March 13, there have been about 1.9 million hogs imported from Canada counting both young pigs, and slaughter animals. This is a 50 percent increase from last year during the same weeks and these numbers are now representing nearly ten percent of U.S. slaughter.
There remains some chance that pork supplies will drop modestly late in 2004 and early 2005. U.S. producers indicate they intend to farrow one percent fewer sows this spring which represent fall supplies, and two percent fewer in the summer representing early 2005 supplies. However, if Canadian supplies remain at current levels, these reductions may not show up as reduced pork production.
The farrowing reductions will be the largest in states that have cut the size of their breeding herds. These include: Missouri (-8%); Indiana (-6%); Nebraska (-5%); and Iowa and Illinois each (-2%). Kansas has expanded their herd over the past year by 6 percent and Oklahoma by three percent. For the entire country, the breeding herd is down two percent. However, Canadian producers have about three percent more sows and are demonstrating a strong desire to move many of these pigs to the U.S.
Price estimates for the coming 12 month period are complicated by the uncertainty over trade issues including the opening of the Mexican and Canadian borders to beef trade as well as live animal movement, and also by the question of when broiler exports will be renewed. This uncertainty means that price estimates are made with reduced confidence. Second quarter prices are expected to average in the $45 to $49 range for 51% to 52% lean carcasses on a liveweight basis. The high prices for the year could occur in the April or May time period while broiler and beef exports are still restricted. Summer quarter prices are forecast in the $43 to $47 range with the fall quarter in the $36 to $40 area. By the first quarter of 2005, prices are expected to be in the $40 to $44 range. If so, over the next 12 months hog prices are expected to average $41 to $45.
Chris Hurt
April 12, 2004
Purdue University
|
