Hog market may be breakeven for 2009, 2010
Hog producers must continue to cut the the fourth quarter and in the first quarter soybean utilization and likely strengthen including full capital replacement and
herd size somewhat to elevate hog prices of 2010,” Hurt said. “Some further reduc- feed prices as well.” family labor costs. After a year and a half
to parity with costs of production in 2010 tion in the size of the U.S. and Canadian Hurt’s comments came as he reviewed of losses, average cost hog producers
despite improving price prospects, said breeding herds is expected into 2010, and the state of the pork industry, which has should finally make money this spring
Chris Hurt, Purdue University Extension this, along with recovery in the world seen some recent good news, but some bad and summer.”
marketing specialist. economy, may provide a slightly more pos- news as well. The best of the news is that hog prices
“Hog prices are expected to exceed itive tone for hog prices in 2010. “When it all shakes out, both 2009 and should soon begin a strong increase related
costs in the second and third quarter this “Unfortunately, an improving world 2010 may be about breakeven years,” he to the normal seasonal pattern, he said.
year before returning to modest losses in economy would also increase grain and said. “But breakeven covers all costs, Hog prices have tended to move higher
from mid April into the spring.
“In the last five years, as an example,
live hog prices have increased an average
of about $10 per cwt. from the second
week of April to mid May,” he said.
“Participants in futures markets expect a
similar increase this year. On April 6, the
May lean hog futures price is $9.60 per live
cwt. higher than the April futures price.”
Hurt said this expected rally would
take live hog prices from the current low
$40s into the low $50s over the next four
weeks or so.
“These higher prices tend to be main-
tained through August and would be
expected to be in a range from about $50 to
the mid-$50s, depending on the week,” he
said. “Second quarter prices are expected
to average $51 with costs around $49. This
small quarterly profit would be the first
after six consecutive quarters of losses dat-
ing back to the fourth quarter of 2007.”
There are a few other positives as well.
The size of the U.S. breeding herd and
upcoming farrowings are somewhat small-
er than had been expected. The March
inventory from USDA indicated the breed-
ing herd is now down 3% and that farrow-
ings will be down 3% in the spring and 4%
in the summer.
Also adding to a smaller U.S. slaughter
Our roots ar re in agriculture. Since 1924, our in-depth e. Since e 1924, our in-depth
supply this year will be 2.3 million fewer
knowledge of agribusiness and our conservative knowledge of agribusiness and our conservative our conservative
hogs coming from Canada as the breeding
herd there has dropped sharply under
methodology has established us as one of the industry’s methodologgy has established us as one of the industry’s as one of the industry’s y’s y s
heavy financial losses.
leading commodity-risk managers.leading com mmodity-risk manage rs.
“Offsetting these positive attributes are
the prospects for higher feed prices and
weak pork export demand,” Hurt said.
Today, our coday, our consultants combine sophisticated pr consultants combine s sophisticated pr oprietary opriettary
“The trend toward higher corn and meal
market researeseearch, innovative origination tools, and a ch, innovative origi ination tools, and a
prices came from smaller-than-expected
planted acres and March 1 stocks,” he said.
thorough understanding of risk-management techniques ough un nderstanding of risk-management techniques management techniqu ues “Since the release of those reports on
to deliver extraorto deliver ex xtraordinary results.
March 31, higher corn and soybean meal
prices have added to costs of hog produc-
tion by $1.25 to $1.50 per live cwt.
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“Those costs are estimated in the very
high $40s for 2009 and about $50 for 2010.”
major commmajor commodity gr modity gr oup, we have an unmatched ve an unmatched
Reduced pork exports from the United
capability tcapability to manage your risks – and help your business o manage your risks – – and help your business ess
States are the other major factor keeping
the industry from registering better profits.
grow. Call ow. Call us today and we’ll tell you mor us today and we’ll tel ll you mor e.
“Pork exports are expected to be down
14% this year from last year when China
was an enormous buyer,” he said. “This
means there will be almost 700 million
pounds less pork shipped out of the coun-
try, and that will have to be absorbed by
domestic consumers.”
In summarizing the positive and
®
negative factors, there will be about 2%
less domestic pork produced in 2009,
but the per capita supplies will be near-
ly unchanged from last year due to
reduced exports.
“This means that 2009 average hog
prices probably will not be much different
19901 N. Dixie Hwy. Bowling Gr19901 N. Dixie Hwy. Bowling G Green, Ohio 43402 800.238.4146 800.238.4146
than last year’s level around $48
www.fcstone.comwww.fccstone.com liveweight,” he said. “The difference in
profitability, then, is due to expected lower
feed costs this year with total estimated
costs at $48.50 versus $54 in 2008.”
12 Markets • Ohio’s Country Journal • May 2009
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