No longer handicapped by the weight of a 10.63 percent duty, Canadian hog sellers will get the full benefit of high American pork prices.
But the best times in the market may be past, said Manitoba Pork Marketing Co-operative analyst Tyler
Fulton.
“There are three factors that suggest the market won’t be as good coming up,” said Fulton.
“I’m looking at the summer with cautious optimism, but the further out you go, the more risky it gets and the less options there are for turning a profit through the fall months.”
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Unexpected and, to some, inexplicably high consumer demand has given pork prices a great run over the past year. Hog sellers have enjoyed the best profits in years.
But Fulton said some of the steam in the market escaped just before Easter, suggesting demand is dropping closer to supply.
As always in the weeks before Easter, packers bid aggressively for hogs, expecting the Easter Sunday meal demand to eat up every ham they could put into the market.
“Normally you can’t have enough hams on hand,” said Fulton.
But just before Easter a United States Department of Agriculture meat stocks report showed much higher stocks of pork in cold storage than a year before, and that scared prices down.
“The shine came off the pork market because it looked like demand wasn’t up as much as we thought it was,” said Fulton.
Early figures on Japanese and Mexican consumption of North American pork are also disappointing, Fulton said. Last autumn Japanese and Mexican buying allowed hog prices to hold up through the usual slump period, but that demand doesn’t seem to be increasing.
At the same time, North American hog farmers continue to increase productivity, resulting in pig numbers catching up with buyer demand.
Every autumn, more hogs come to market because herd productivity increases after the hot summer months and slaughter days are lost to holidays. Fulton said the tighter supply-demand situation may cut into producer profit margins.
“We could be running into problems as we enter the fall months.”
The hog market has barely moved in reaction to the U.S. International Trade Commission ruling rejecting duties on imported Canadian pigs.
University of Missouri analyst Ron Plain said that makes sense, because fundamental supply and demand have not changed.
“It’s not going to change the number of hogs or the amount of meat in North America,” said Plain.
Fulton said North American producers are fortunate that the recent boom in pig prices has not led to a big increase in hog barn construction.
Because of problems with environmental approvals and the hog industry’s relatively unattractive appearance to bankers, most farmers and companies that wanted to expand production have done so by buying existing facilities rather than building new.
That should mean that while prices could slip in late 2005 and be weaker in 2006, there’s little chance of a supply-caused slump.
