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Signs of Hog Industry Recovery by Next Summer

by 5m Editor
5 October 2009, at 9:31am

US - The "first signs of the financial dawn" are starting to creep over the horizon in the US hog industry.

It won't happen overnight, but change for the better is on the way to the business, says AgricultureOnline. Namely, supplies are starting to dwindle further and demand - which could have "more positive implications for hog prices than reduced supply" - is looking stronger.

Overall, that means if hog farmers can dig in and make it through the next half year, next spring's thaw might be followed by a resurrection of profits for an industry that's really been hurting for a while now.

"The components of the dawning are coming from both supply and demand factors. Production in 2009 dropped only 2 per cent with prospects of only a 1-2 per cent drop in 2010. While these reductions are small, they are at least headed in the right direction," says Purdue University Extension economist Chris Hurt. "Improving demand will likely have more positive implications for hog prices than reduced supply."

That's because forthcoming signs will likely point to the official end of the recession soon. Though the effects of the downturn won't altogether dry up and blow away to reveal a suddenly robust economy, GDP numbers for the third quarter of 2009 are anticipated to be "positive," Professor Hurt says. This will eventually translate to a return to higher demand that took a hit when unemployment started climbing and consumer confidence started slumping.

Put that together with lower pork prices for consumers, and Hurt says consumer demand will likely gain steam further into the fall season. In addition, the export outlook is more bullish, making the world market more rife for an increase in US pork sales.

"Exports are expected to strengthen as well. World economic recovery is expected to have more upside potential than the US recovery," Professor Hurt says. "Current USDA forecasts are for pork exports to be up 9 per cent over the next 9 months compared to the same period a year earlier."

Months ago, the call went out to trim the US sow herd, and eventually, farmers took note. Now, efforts to cull the herd should start to see dividends in the marketplace, Professor Hurt says. Per-capita pork availability will gradually decline in the next 9 months and as that happens, more of the increase in prices consumers pay will make it back to the farmer.

"Lower pork supplies with lower retail prices will strengthen hog prices and result in a higher portion of the retail pork expenditures flowing back to producers," Professor Hurt adds. "Hog prices are expected to average in the high $30s on a liveweight basis for the final quarter of 2009. Prices are expected to rise to the low $40s this winter and then move into the mid-$40s for second quarter averages. Next summer's prices are expected to rise into the high $40s for an average and the low $50s for weekly highs."