This is going to be a break-even year for most pig producers, a U.S. hog market expert says, but that’s a lot better than last year’s big losses.
“I’m an optimist here,” said Steve Meyer of Paragon Economics.
“I still think that we’re going to have some reasonably good prices.”
Meyer expects farmers lost money in the first quarter and will lose money in the fourth quarter but will see profits in the second and third quarters. He bases his forecast on Chicago Mercantile Exchange lean hog prices of $58.50 US per hundredweight for April, $73.60 for June, $74.50 for August and $67.35 for November.
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Livestock producers have been hammered by high grain prices with no equal jump in packer prices, which has reduced margins.
Last year’s big losses for meat producers have caused a major contraction in chicken production, Meyer said, which will eventually help lead meat prices higher.
“We’re going to have record-high retail prices across the board,” said Meyer, who expects beef prices to lag other meat.
U.S. meat production is down about four percent this year, Meyer estimates, with about two-thirds of that being reduced chicken production, which is easy to shrink and has happened in a big way in the U.S.
Many operations have been at least temporarily taken out of production and some owned by bankrupt companies could be out a long time.
U.S. and Canadian hog producers have liquidated large numbers of sows, but increasing efficiency and productivity have almost made up the difference. As a result, pork production isn’t falling at anything near the rate of sow numbers.
Beef production is also holding its own despite herd reductions because many producers kept cattle on grass much longer last year and these big animals are only now hitting the market.
Meyer said meat prices will likely surge when lower breeding numbers result in a major drop in meat supplies. Farmers will likely face a lot of consumer anger when that happens, he added.
“Hog producers and chicken producers and beef producers are going to get blamed for it, even though all we’re doing is reducing supplies.”
In the 1970s, when herds and flocks shrank in the wake of high grain prices, meat prices soared and farmers became targets of consumer anger.
Meyer said hog farmers should take advantage of seasonal high hog prices and sell at locked-in prices during the first third of May. May 10 usually marks the peak of hog prices in futures contracts for the year.
“Historically, that’s when you (should) sell June hogs,” Meyer said.
The same appears to apply to fourth quarter pigs.
Fourth quarter futures prices also tend to reach highs in early August, so that’s another pricing period for late 2009 pigs.
