Losses Near Record Levels

April 18, 2008 — 

Hog producers could see losses approaching $60 per head by the fall according to agricultural economists Steve Meyer and Len Steiner, authors of the Chicago Mercantile Exchange's Daily Livestock Report. Losses in March, estimated at $39.49/head, were the third-worst on record eclipsed only by November and December losses in 1998.

In spite of higher retail prices (pork prices increased 1% over last year to $2.936 according to a recently released report from the USDA's Economic Research Service) and forecasted increases in cash prices, carcass weight costs are projected to climb to $80 to $85/cwt over the next several months.

The rise in retail price is reportedly the result of stronger domestic demand rather than decreasing supply given that production levels were increased during the first quarter of 2008. However, rising production costs are resulting in declines in production numbers in the U.S. and Canada according to all reports.

A smaller U.S.-Canadian breeding herd will not result in significantly lower hog supplies until late this year or early 2009 according to Meyer and Steiner. They project a reduction potentially as high as 12 - 15% by mid-2009 which should result in elevations in hog, carcass and retail prices. Some analysts, however, estimate that a 20% reduction may be necessary to restore profitability to the industry.

Source:
The Daily Livestock Report