Prices on a live basis for 51 to 52 percent lean carcasses averaged near $50 in 2005. “With larger production, slowing pork export growth, rising Canadian live hog imports, and widening U.S. marketing margins, I expect hog prices to drop to an average closer to $46 in 2006,” says Chris Hurt, agricultural economist, PurdueUniversity.

He predicts prices to average in the mid-$40 during the winter and move into the higher $40s for the spring quarter. Summer prices may be a bit discouraging this year having averaged above $50 for the past two years. For the third quarter, he expects prices to begin near $50 per live hundredweight in July, but weaken to below $45 at the close of September.

Unfortunately, analysts expect fall prices to drop further, and average in the $42 to $45 range. “With costs of production anticipated to be slightly less than $40, producers can look forward to about $6 of profit per live hundredweight for the year,” says Hurt.

If producers can maintain a third year of profits in 2006, Hurt predicts accumulated retained earnings are going to be large enough to encourage further expansion. This may make the years 2007 and 2008 more financially vulnerable.

Purdue University