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December 8, 2005 Market Advisor: Hog Prices Decline Seasonally
Market hog prices have declined about $10 per hundredweight (cwt) from seasonal highs, with late November prices averaging close to $40 cwt on a live-weight basis. Compared with last year at this time, hog prices are 20 percent to 25 percent lower. However, producers should be reminded that prices last fall were abnormally high in November. Hog prices usually are seasonally high in early summer and then decline to lows in November, when slaughter levels peak This year's seasonal decline has been closer to normal. Last year, hog prices increased contra-seasonally in November and were near highs for the year at $55 cwt. Fourth-quarter pork production in 2004 was down 1.2 percent from the previous year and pork exports were very strong. Pork trim exports to Russia and Eastern Europe, plus ham exports to Mexico and other countries, were especially strong. Both wholesale ham prices and fresh 72 percent lean wholesale pork trimmings were about $20 cwt higher than current levels. This year, fourth-quarter pork production likely will average close to 2 percent higher than last year. For the year, 2005 pork production will be up about 1 percent. The latest quarterly USDA hogs and pigs report, released on Sept. 30, indicated a hog breeding herd inventory of 5.97 million head, which is less than 1 percent higher than the previous year. The reluctance of producers to expand numbers is somewhat surprising because hog production has been profitable for most of the last two years. A number of reasons may be causing limited expansion in the breeding herd. Historically, cyclical price changes have been more supply driven. However, profitability in hog production in the last two years has been due largely to increases in domestic and export demand for pork and low feed prices due to large corn crops. Pork production actually increased close to 3 percent in 2004. Therefore, there was likely little room for expansion in existing farrowing facilities. New construction of hog production buildings is more difficult than in the past because of restrictive zoning and permitting requirements. Building costs also have escalated, most recently because of the destructive hurricane season. Producers also may be investing in technology to increase efficiency, rather than in buildings. The USDA report showed that litter sizes continued to increase to a record 9.07 pigs per litter. Furthermore, slaughter weights continue to increase and are averaging 2 pounds per hog more than last year. What is ahead for 2006? Pork production likely will increase close to 2 percent. Domestic demand for pork will be affected by increasing production of competing meats, such as chicken and beef. Consumer interest in high-protein diets also may be moderating. Export demand also could be affected, if Southeast Asian countries decide to once again accept U.S. beef products. Hog prices likely will follow normal seasonal patterns, and lower prices than this past year can be expected throughout the year. The next quarterly USDA hogs and pigs report will be released Dec. 28. It should give a good indication of expected production for 2006. ### Source:
Tim Petry, (701) 231-7469, tpetry@ndsuext.nodak.edu |
Market Advisor: |
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North Dakota State University |
