American hog market analysts have noted that pork’s long period of strength might be in danger.
Ron Plain of the University of Missouri said American producers have had more than 20 months of profitable production, the best run since 1990-91. Canadian returns have also been reasonable, but the rise in the loonie over the past year has weakened prices here.
Normally, a trend of profitability triggers an increase in the breeding herd and there are indications this is happening, although at a modest rate.
While forecasts suggest hog prices will remain profitable into next August, Plain has urged the American industry to keep its growth at a minimum because, due to increased per- sow productivity, there will be an increase in pig production even if there is no increase in sow numbers.
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He also believes there won’t be enough demand to handle larger pig production without significantly lower prices.
On the domestic front, the popularity of high protein diets like South Beach and Atkins is fading, leading to reduced demand for pork and other meats.
John Lawrence of Iowa State University said in the Oct. 31 Iowa Farm Outlook Newsletter that rising energy costs are expected to cut into family budgets, reducing the number of hams, roasts and chops on supper tables.
Record U.S. pork exports, up more than 25 percent in the first half of the year, have helped offset declining domestic sales but it is uncertain whether similar offshore demand will continue next year.
Sales this year to Japan have been particularly strong. This is explained in part by pork substituting for North American beef, which has been banned in Japan because of BSE concerns.
But there has been a small breakthrough with Japan. It might accept limited beef imports from the United States and Canada early next year. Japan is also under continuing pressure to accept beef from animals younger than 30 months.
If North American beef regains market share, Japan’s pork imports might drop.
Lawrence also raised the wild card of avian flu.
Although eating poultry is not a way for humans to contract the flu, Lawrence noted that if, out of panic, export customers avoid poultry, it could result in reduced U.S. poultry exports, leading to a back up of supply of cheap chicken in the U.S. that could weigh down all meat prices.
However, the markets see it another way.
On Nov. 7 deferred month Chicago hog futures jumped higher as traders began to speculate that avian flu fears would cause consumers to switch to pork, driving demand for North American pork.
So clearly, avian flu is a wild card.
Given the uncertainty in the market, Lawrence said it is time to consider locking in prices for next year to reduce risk.
