Fall Prices Could Find Support
U.S. per capita pork production this year is expected to be the lowest since 1976. So, it’s not surprising that this summer set record-high hog prices. Both the pork cutout value and carcass hog prices exceeded $1 per pound for the first time ever.
The normal price decline from the summer high to the fall low for carcass hog prices is $15 per hundredweight. If that holds true this year, carcass hog prices should hit $85 per hundredweight in December. One can argue that the decline is likely to be greater than normal, since we are starting from a record-high price. Conversely, that decline could be less than normal since meat exports are strong and the futures market is predicting near-record cattle prices this fall.
Record Corn Prices Keep COP High
USDA estimates the average farm price received for the 2010 corn crop at $5.35 per bushel. It is forecasting the average price for the 2011 corn crop to be near $6.70 per bushel. Both are records.
The result is that pork production costs keep rising. When corn was $2 a bushel, the breakeven was $40 per hundredweight. According to Iowa State University, production costs are averaging $63.18 per hundredweight live or near $83.35 per hundredweight of carcass in first-half 2011. Average costs for the second half of the year will approach $69 per hundredweight live or $91 per hundredweight of carcass.
For 2012, look for farrow-to-finish costs in the low-$90s on a carcass-weight basis. Unfortunately, the futures market predicts hog prices to average in the mid- to upper-$80s.
On Pace to Produce More Pork
The North American swine herd is cycling back toward expansion. Farrowings have been below year-earlier levels for 13 consecutive quarters and are expected to remain down through year’s end. The combined U.S. and Canadian sow herd is forecast to farrow 1 percent fewer litters during the fourth quarter than in 2010. Of course, fewer litters doesn’t always mean fewer pigs.
In the last four years, pigs per litter have increased at an average annual rate of 1.73 percent. So, even with 1 percent fewer litters, the fourth-quarter pig crop will likely be higher than last year. Expected profits argue against herd expansion, but USDA is forecasting 1.6 percent more pork in 2012.