Hog COP Nears 2008 Territory
Feed costs have risen rapidly in the last six months, pushing pork production costs to near-record levels. John Lawrence, agricultural economist, Iowa State University, estimated the January breakeven price for barrows and gilts at $58.75 per hundredweight, based on live weight. That translates to $78 per hundredweight, carcass. In the end, that made January the fifth-highest production-cost month ever after July through October 2008. 

With corn futures above $7 per bushel, the breakeven price for hogs is poised to push above $60 per hundredweight, live weight, this year.  How much breakevens may move beyond $60 will hinge on how big of a corn crop is harvested this fall. By Sept. 1, the carryover of last year’s corn crop is expected to drop to the lowest since 1996.

 

Exports Temper Domestic Supplies

The hog inventory still cycles.  The U.S. swine breeding herd was down 1.2 percent in December, and the Canadian sow herd was down 1.1 percent at the start of 2011.  The number of litters that the United States and Canada will produce during the first half of 2011 is forecast to be down 1.2 percent compared to a year ago.  That will likely be offset by more pigs per litter, such that the January/June pig crop should be close to the level in 2010.

 

 Heavier slaughter weights should mean pork production in the second half of 2011 will be up 1 percent or so compared to last year.  The population is larger and exports are expected to grow. Hence, the U.S. per-capita pork supply is expected to be 2 percent lower than in 2010. 

 

Record Pork Prices Could Push Higher

The declining U.S. swine herd is pushing up pork prices. The last eight months have scored the highest retail pork prices ever. Seasonally, both hog and pork prices usually rise as we approach summer.  History favors June as the high-price month for hogs and September for the peak in retail pork prices. 

A tight domestic meat supply and strong export demand make it likely that grocery store pork prices this summer could reach an all-time high. The key question is whether the economy is strong enough to keep people buying meat at record prices.  With unemployment at 9 percent, many may move to pasta and beans for their protein.