Meat producers’ bitter spring may start easing now that the Russian
chicken boycott is over, but a lingering supply glut is hanging over
hog and cattle producers.
Pork prices should recover somewhat as the traditionally high price
spring season arrives, but it may not reach the expectations many
producers set last fall, analysts say.
“If they can just hang tough, things should improve,” said Manitoba
Agriculture economist Janet Honey.
“But by how much? That’s the question.”
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The Russian government announced April 15 it was lifting its ban on
chicken imports from the United States.
The ban started March 10 and is believed to be a response to heavy
import duties the United States laid on foreign steel imports. It
caused a surge of cheap chicken to pour into the U.S. market, leading
to much lower chicken prices.
Pork and beef prices, already battered by large supplies and weak
demand since mid-2001, were hurt as retailers found cheap chicken too
attractive to ignore.
“What the retailers say is, ‘why should I pay much for your pork or
beef when I can get chicken for almost nothing,’ ” said University of
Missouri meat industry analyst Ron Plain.
Heavyweight cattle and higher numbers of hogs have depressed the
market, which is now vulnerable to any sudden threats to demand, Plain
said.
This year the number of cattle marketed has dropped by one percent. But
the amount of beef marketed has increased by three percent. That’s
evidence of feeders holding onto cattle for longer, hoping prices will
improve.
Cattle prices are often weak at this time of the year, but hog prices
usually move up. Plain said that gives hog producers some reason to be
hopeful.
“The hog guys are much more likely to see prices increase than are the
cattle guys,” said Plain.
Honey said the April price slump, which dragged hog prices below many
producers’ breakeven levels, isn’t unprecedented. Six times in the last
22 years April has seen hog prices hit their annual low, but in five of
those instances prices rebounded by early summer.
“I don’t expect this to continue, at least not into June and July,”
said Honey.
When prices have recovered ,they have increased by up to $30 Cdn a cwt.
from their April low, Honey said. Because of that pattern, she has not
changed her hog price expectations for the summer.
“I’m sticking with what I forecast last December, just based on the
fundamentals.”
Both Honey and Plain are carefully watching hog supplies as the fourth
quarter of 2002 approaches. That is the traditional yearly price slump
and the main chance that a devastating 1998 scenario could recur.
Neither expects a similar slump this year, but say it is a possibility.
“We have just barely enough slaughter capacity,” said Plain.
“It is not expected to be the disaster of the magnitude we saw back in
’98 … but the cushion is awfully small.”
In the fourth quarter there should be about one percent excess
slaughter capacity. However, a number of large U.S. slaughter plants
each make up about two percent of total capacity.
If any one of those plants went down in the fourth quarter, the price
shock could be devastating as the shift from a one percent surplus
capacity to a one percent deficit bites in.
“When you get right on that edge the price range becomes huge on fairly
modest changes in hog numbers,” said Plain.
The price drop could equal $30 a cwt.
Many analysts predicted the huge front-end load of beef would weigh on
the market through the winter, but begin to lift in spring, bringing
better prices. Plain said meat producers will have to wait a bit longer
to see if the lifting of the Russian poultry ban will finally reduce
the meat pile.
