Consumer demand, cold storage supplies and increasing market hog weights all influence future profitability. Another very vital concern "is that more breeding-herd expansion is likely to be revealed in USDA's June Hogs and Pigs reported to be released June 24," says Chris Hurt, Purdue University Extension marketing specialist.
The strongest expansion evidence surfaces in sow slaughter since December– it dropped by 8 percent relative from the same time period in 2004. The March pig-crop report revealed no breeding herd growth, but the prospect of a 1 percent to 2 percent increase appears possible for June’s report.
Producers had suggested they would farrow 1 percent fewer sows this summer, but the June report show those numbers will be higher, says Hurt.
From a domestic production standpoint, market hog supplies may be expected in the second half of the year. As for live-hog imports from Canada– market hogs are down 20 percent and piglet movement is down about 12 percent.
"Given the Canadian dollar’s strength, the pig flow coming from Canada is expected to remain below year-ago levels," says Hurt. This is a supply fundamental that supports live-hog prices. "For now, pork demand components remain favorable as well. Little progress is expected in opening the Canadian border to live-cattle imports that might lower U.S. retail beef prices.” Also the prospect of resuming U.S. beef exports to Asian countries remains uncertain.
Consumers are continuing their decent meat-purchasing trends– although demand is moving at a slightly slower pace than last year. Finally, pork-marketing margins have been running tight, notes Hurt.
He believes that strong hog prices will hold on for a while yet. He looks for live-hog prices to average in the mid-$50s during the second quarter, dropping to the low $50s by the third-quarter and ending the year in the mid- to high $40s.