American hog producers have been ringing in a happier new year than their Canadian counterparts.
But while Canadian producers might feel like James Bond sitting in the Casino Royale torture chair, some of the pain is being felt down south too.
“We’re producing too much pork to make money at these kinds of feed costs,” said University of Missouri hog market analyst Ron Plain in the last week of 2006.
“We’ve got to get hog numbers down or we’re going to start losing money next year, and it looks like we’re starting to move in that direction.”
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On Dec. 27, the United States Department of Agriculture released its quarterly hogs and pigs report, showing the number of hogs on U.S. farms at 62.149 million head, up one percent from a year ago.
The breeding herd also was up one percent at 6.088 million head, and the number of hogs being raised for slaughter was up one percent at 56.061 million head.
The numbers were within pre-report expectations.
But Plain said there are growing signs that American hog producers are beginning to cut the growth of the national sow herd, which over the course of the year could reduce pork supplies and raise prices.
That’s happening in response to corn’s ascent to $4 US per bushel.
“It looks like producers are starting to respond to very, very high feed costs by slowing the rate of expansion,” said Plain.
“We expect that to continue. We expect sow herd numbers to drop below year-before levels sometime next year.”
American producers have just sailed through the sometimes-dangerous fourth quarter with few problems. Hog prices in the fourth quarter can drop precipitously because supplies surge as pigs grow faster after the hot months of summer fade.
If prices are going to plunge, it usually happens between October and the end of December.
The U.S. hog herd had grown for the past two years as producers took advantage of profitable prices.
The situation in Canada has been radically different, with the good prices in the U.S. offset by the sudden surge of the Canadian dollar.
Many producers in Canada have either lost money or been only marginally profitable, so this past year’s rise in feed costs has badly bruised many, especially in Ontario, which is a feed-deficit area.
In the U.S., the relatively soft landing of 2006 bodes well for 2007, because producers may have a chance to reduce sow numbers in time to allow pork prices to rise to match or mitigate more expensive feed grains.
“Most everything looks decent or positive, with the exception of the cost of feed,” said Plain.
