Hog prices were bad in 2007 and the outlook for 2008 was ugly.
It just got uglier.
The U.S. Department of Agriculture has found more hogs on American farms than most analysts expected. Those animals will swell the numbers heading for slaughter through most of 2008.
That will mean more suffering for all North American hog producers, especially Canadian farmers who have been hammered by the Canadian dollar’s rise.
While most American farmers got through the fourth quarter of 2007 with modest or no losses, Canadian producers were commonly losing $50 per pig.
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Hog producers had hoped that the fourth quarter slump would be the bottom of the four year cycle and 2008 would see a recovery to break-even prices, but the USDA report suggests there won’t be any upward pressure on prices for months.
USDA found that there are 4.2 percent more hogs on U.S. farms than one year ago. Analysts on average had expected a 3.5 percent increase. The supply of slaughter hogs should increase five percent.
The U.S. breeding herd is one percent larger than one year ago.
That’s disappointing news for producers looking for supply to shrink so that prices have room to rise again. Usually at this point in the hog cycle, prices fall enough that producers cut sow numbers, but American farmers haven’t been losing enough money to convince them to cut back.
The only glimmer of hope in the report was the USDA’s finding that March to May farrowing intentions are only 100 percent of last year’s rate, which breaks the trend of ever-increasing production.
It’s probably a result of the present price slump, said Ron Plain of the University of Missouri.
The fortunes have reversed between the U.S. and Canadian hog industries. For abut 10 years in the late 1990s and early 2000s, Canadian hog production grew and export sales bloomed as the Canadian dollar fell in value, giving Canadian producers healthier margins than their southern counterparts.
But in 2007 that trend abruptly reversed, with Canadian production shrinking as a sharply higher dollar slashed margins and led to big losses.
U.S. export sales boomed as world prices became more attractive when translated back into U.S. dollar terms.
Canadian hog exports to the U.S. have not slid with the price. In fact, Canadian shipments increased as prairie producers grappled with weak domestic prices and packing plant restrictions and closings.
