Farmers aren’t going to get rich producing pigs this year, say meat market analysts.
Most American farmers should do barely better than break even, and may be living in the dark shadow of a growing meat mountain.
For Canadian producers, analysts say the situation should be much the same, but no one can predict changes in the currency exchange rate, which has torn so much value out of Canadian agricultural exports in the past two years.
Poultry stocks are building up because consumers in many overseas markets are shunning chicken as avian flu worries grow.
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“We’re struggling in the export markets,” said Jim Robb of the Colorado-based Livestock Marketing Information Center.
He said increasing low-value chicken stocks are the major threat to pork prices in 2006.
“This is capping the seasonal potential (for pork prices).”
While prices are expected to improve going into summer, Robb said they won’t increase by as much as they usually do.
The United States exports about 20 percent of its chicken production, “which is a lot,” Robb said. Most of it is lower value cuts, such as drumsticks and thighs, which compete directly with low value pork in products such as sausage.
U.S. poultry production has boomed since the summer, but overseas demand has slumped since November, Robb said, which is a bad combination. U.S. poultry stocks at the end of January were up 24 percent over the same time last year.
University of Missouri economist Ron Plain said U.S. pork prices will be about 20 percent lower than in 2005, mainly due to weaker demand.
Instead of an average price of $67 US per carcass hundredweight, the 2006 average should be about $57 per cwt. With break even at about $55, producers shouldn’t expect much profit this year.
Plain said producers are fortunate that pork production will increase only marginally, at a rate lower than usual in recent years, because most barns are already at peak capacity and it is difficult to establish new barns.
The disappearance of the “Atkins effect,” which increased demand and prices in recent years, has also hurt market prices.
“We got a nice kick in demand from the Atkins high protein, low-carb diet thing and that seems to be fading away,” Plain said.
“But it’s not a terribly gloomy picture overall.”
That’s because after surviving 2006, producers should get better prices in 2007 because Plain thinks demand will resume modest increases.
As long as demand grows, prices should be better than in 2006 because the difficulty in setting up new barns means new production won’t quickly pour into the market.
“We expect hog production in the U.S. and Canada to grow very, very slowly,” Plain said.
