Analysts say hog farmers will probably sail through the often-perilous fourth quarter without disaster this year.
“I think we’re going to survive this one,” said University of Missouri analyst Ron Plain.
“All things considered, we’ll get through this quarter without disaster, although it’s going to have some fairly low prices.”
The fourth quarter of every year, running from October to December, is a predictable danger point for the hog industry. It’s the time when cooler temperatures allow hogs in hot U.S. states to quickly develop and recover from a production slump in the summer.
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Those extra, bigger pigs can overwhelm the packing industry’s ability to kill them. That drives down prices, because packers, faced with an abundance of pigs to choose from, lower prices as much as they can.
In most years that means only a marginal reduction in the average price for a slaughter hog. But in years of significant oversupply, the price can tumble. In 1998, unhedged farmers sold their hogs at a massive loss, with many producers unable to get rid of their slaughter hogs at any price.
It doesn’t take much of an oversupply to swamp the market, but fortunately this year that doesn’t appear to be a problem. The number of pigs isn’t huge, and new slaughter capacity has appeared. The result should be profit reduction, not loss, in the United States, which sets the market trend for Canada.
“I think each month in the quarter will be profitable for our producers,” said Plain.
The recent United States Department of Agriculture Hogs and Pigs report found about a one percent increase in the size of the U.S. herd, with a breeding herd 101.8 percent larger than at the same time in 2005, and a feeder and slaughter herd of 101.3 percent.
Those numbers are nothing to worry about, said Tyler Fulton, Manitoba Pork Marketing Co-operative’s risk management specialist.
“It provided no indication that there would be any risk,” said Fulton.
“It looks very manageable. I don’t think there’s any risk of a significant price crash this fourth quarter.”
Canadian producers have often seen their profits crimped more than American producers in recent years, as the Canadian dollar has raced upward and Canadian slaughter plants have underperformed.
The two largest packers in the West, the Maple Leaf Foods Brandon slaughter plant and the Olymel plant in Red Deer, are running only one shift and as a result suffer inefficiencies. The companies have blamed worker shortage as a major problem.
Plain said that hasn’t been an issue south of the border. There’s no oil patch boom there to attract workers that the packing industry relies upon.
“There aren’t a lot of new oilfield jobs and those that there are tend to be highly skilled, high-tech jobs. They don’t compete with packing plants,” Plain said.
