Plummeting hog prices being predicted by some provincial livestock market analysts couldn’t come at a worse time for Manitoba’s swine industry.
But Janet Honey, who watches the markets for Manitoba Agriculture, said new investors and producers who have been around for a long time should have a long-term vision.
“Over the last two years they have been making fairly good profits in the industry so even if there are losses this year they should be able to weather the storm.”
Hog prices will drop in 1998 because there are more hogs around and pork demand doesn’t seem as strong, said Honey.
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“The U.S. increased their hog numbers in 1997 so you have more hogs coming to market.”
Honey told producers during a market outlook seminar at Ag Days in Brandon Jan. 13-15 that Index 100 hog prices should average $155-$165 per 100 kilograms during 1998. That’s down 10-15 percent compared to last year’s average of $183 per ckg.
“And I could be an optimist with that,” she said in a later interview.
Prices in Manitoba are driven by two main factors, Honey said: the price of hogs in the United States and the Canadian-U.S. exchange rate.
The dollar is expected to rise to 72 or 74 cents (U.S.), she said, and a higher-valued dollar would result in lower Canadian hog prices.
“We had relatively good prices last year because of our low dollar relative to the U.S.,” she said.
“If it goes back up to 80 cents that’s a big difference, and it would definitely mean a drop in prices by about 14 percent.”
Honey said demand is expected to pick up in the U.S. if pork prices fall. But there is a large supply of other meats, including chicken and beef, “and it will be interesting to see where pork shakes up in that mix.”
In overseas markets, Honey said she’s not overly concerned about the buying power of southeast Asia.
“I don’t see it as being as much of a problem as a lot of analysts think, basically because they have to eat and pork is one of their meats of choice,” she said.
Also, the Canadian dollar isn’t as high relative to the yen as the U.S. dollar.
“So we have a three or four percent advantage price wise and they’re better off buying pork here than the U.S.”
But pork is a cyclical market. Prices were up in 1996-97 so they have to come down. How far they drop depends on the U.S. herd, she said. If falling prices force small-scale producers out of business or reduce herds, that will mean less pork on the market and prices could recover.
A drop in overall market weights in the U.S. could also see prices even out.
