Cash hog prices have been a little weaker than expected recently. Chris Hurt, Purdue University agricultural economist, has scaled back his forecasted hog prices from $40 to $37.50 per hundredweight. Hurt expects prices to peak before early summer before sinking back below cost of production in the fall.
“It appears that 2003 will be year of improvement, but the breeding herd will have to be reduced even more before hog producer profitability can return,” says Hurt.
Hurt estimates the cost of production near $40 per hundredweight since last summer’s drought-related corn price increase. Costs are not expected to decline significantly until it is certain there will be a large new crop of corn and soybeans this year. That won’t happen until about mid-summer. By fall, a normal yield situation could drop costs about $2 per hundredweight to around $38, but a return to the mid $30 costs of the 1998 to 2001 period is not expected, says Hurt.
Hurt thinks 2004 could be the best year for returns during this hog cycle. The breeding herd is down by 4.5 percent, and farrowing intentions for this spring and summer are down about 3 percent, pointing the way to smaller animal numbers later this year and into 2004. The decline in the breeding herd is widespread geographically, with the exception of Minnesota where the herd is up 4 percent.
It has now been 13 months of loss for average cost producers, says Hurt. Pork supplies have not begun to decrease yet, but current inventory numbers suggest that this reduction should begin in April and continue into 2004. The breeding herd has been down now for three quarters and producers intentions are indicating 3 percent fewer sows w ill be farrowed this spring and summer.