Hog prices rising despite only modest decline in production

Sometimes a little means a lot. That’s been the case in U.S. pork production this year, according to a Kansas State University agricultural economist.

“Given the modest decline in pork production this year through mid-July, hog prices were surprisingly high,” said James Mintert, with K-State Research and Extension.

Strong demand for pork at home, as well as overseas, has been vital to this year’s higher hog prices, but production cutbacks have also been key, Mintert said.

January through mid-July hog slaughter was 4.2 percent smaller than it was a year ago. At the same time, hog prices were up 51 percent in the key Iowa-southern Minnesota market. Similarly, western Corn Belt prices were up 47 percent.

USDA reported the average price paid to Iowa farmers for slaughter hogs as of June 1, 2000, was $51.30 per hundredweight [cwt], and as of July 2, $52.50. The June price was up from $34.30 a year earlier.

U.S. average hog prices for June 1, 2000, and July 2, 2000, were $49.40 and $50, respectively.

The latest government data suggest hog slaughter will remain 2.5 to 3 percent smaller than a year ago most of the summer and fall, Mintert said.

“If that’s the case, (live Iowa hog) cash prices are likely to average in the upper $40s per hundredweight (cwt) this summer and then drop back to a low $40s average this fall. And there’s a good chance cash prices will remain in the low to mid-$40s during the first half of 2001,” he said.

That could keep producers’ balance sheets in the black, said Research and Extension agricultural economist Rodney Jones.

“Break-even projections for average Kansas farrow-to-finish producers to cover all costs have declined to under $40 (per cwt) on a live basis,” Jones said. “With feed costs expected to remain favorable for livestock producers, positive net returns should continue to accrue for farrow-to-finish producers for the next several months.”

Longer term, Mintert expects hog slaughter to begin to rise by spring 2001.

“The impact on hog prices will be most pronounced during fall 2001, when slaughter could start to increase significantly,” he added.

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