Prairie pig producers are living in next year country, hoping 2004 brings the profits they longed for in 2003.
“It’s not going to be near the year that hog producers needed to recover from the losses of the last 18 months,” said Manitoba Pork Marketing Co-operative general manager Perry Mohr in an interview.
“It’s disappointing.”
Market prices are floating at barely break-even levels right now, after a winter of losses and a weak market in spring and early summer.
Last year, most producers suffered big losses between August and December as heavy sales depressed the market.
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Analysts had expected profits to return by late winter, but continued high hog sales to packers kept a lid on prices.
University of Missouri analyst Ron Plain said another factor depressing the hog market this summer is the U.S. ban on imports of Canadian beef.
Plain said “there’s been lots of talk” about the possibility that a glut of beef in Canada could push more Canadian pork into the U.S. market, which would lower pork prices.
“Sometimes speculation is all that it takes to move a market,” said Plain.
He said the only good news hog farmers now have is the report of a large corn crop. That will make feed cheaper in the fall and through the winter. But hog prices will likely drop again this fall, as they do most years, and the pig price decline will be greater than for corn.
“We’re going to lose money in the fourth quarter of this year,” said Plain. “We have another 30 to 45 days before the red ink becomes chronic.”
A good development for the longer term was the recent announcement that a group of producers plans to build a 40,000-head-per-week hog slaughter plant in Missouri.
If built, the plant would be equivalent to the Brandon Maple Leaf slaughter plant, which is North America’s newest full-scale slaughter plant, Plain said. The new plant is expected to open in 2005, a year before the expected hog cycle price slump.
The hog industry has often been hurt by cramped slaughter capacity, and Plain said new plants are needed to clear the congestion. But he said new plant announcements are not keeping up with the depreciation of the old plants.
About 30 big plants kill 90 percent of U.S. slaughter hogs. Each has about a 50 year lifespan.
That means a new plant needs to be built every year and a half to keep up with the rate of deterioration. But only two new plants have been built in the past seven years.
“You need to build them a little more often than we are.
“We’ve gotten in the situation where we’re killing an awful lot of hogs in pretty old plants and you don’t have as much efficiency or flexibility as you’d like to have.”
Mohr said producers are disappointed with prices this summer, but are holding on for next spring. He thinks this fourth quarter might not be as bad as expected.
Continued losses and limited profits may be already shoving old barns and financially weak producers out of the market.
“There are already signs that American sow slaughter is slightly higher than it should be,” said Mohr.
“Liquidation is occurring. I have a sneaking suspicion that we may see fourth quarter prices and first quarter prices stronger than the futures are indicating.”
