Hog-market analysts continue to point to strong hog prices through year's end. Even though diet trends and high exports pushed last year's U.S. live-hog prices 35 percent beyond 2003 levels, prices will likely hold those highs, says Ron Plain, University of Missouri ag economist.
"Last year was the most profitable for the typical hog farmer since 1990," Plain says. "For the year, prices averaged $51.50 per live hundredweight."
Plain points out that 2004 U.S. hog slaughter was up by more than 2.5 million head
compared to 2003. "Given the record slaughter of 103.5 million head, prices were 52 percent higher than expected."
Domestic pork demand was responsible for more than 75 percent of the higher-than-expected price, he notes. "We didn't see the Atkins diet coming, but it had tremendous positive impact on pork demand and overall meat demand in the United States."
About one-fifth of the price increase was attributed to increased pork exports. "The weakening U.S. dollar made buying U.S. pork more attractive," Plain explains. October through December 2004 marked the three biggest export months ever, and 2004 was the 13th consecutive year that exports increased. Exports equalled nearly 10 percent of total U.S. pork production.
Many U.S. beef export markets remained closed in 2004 due to the 2003 bovine spongiform encephalopathy case. However, Plain doesn't believe that BSE played a large role in increasing 2004 pork exports.
"This is promising, because it means pork won't be badly hit when export markets do reopen to U.S. beef," he says.
The most significant impact on export markets may come from a 14 percent anti-dumping tariff that's being imposed on Canadian live hogs coming south. The U.S. International Trade Commission is expected to make a final ruling in March. "If it remains in place, it's likely to reduce the flow of Canadian live hogs, especially slaughter hogs, to the United States," says Plain, "but it will increase the flow of Canadian pork, which isn't subject to the tariff."
Of course a weak U.S. dollar makes shipping pork here less attractive than in recent years.
U.S. hog slaughter is predicted to increase only slightly in 2005. The Canadians plan to grow their breeding herd a bit again this year, which will increase the North American pork offering. Click here to read Canadian Breeding Herd on the Upswing Again.
Plain's price forecasts place negotiated base price for live hogs at $49 to $52 per hundredweight in 2005.
"Although the Atkins diet is past its peak, it appears to be holding flat– not really fading," he says. "Steady domestic demand and continued strong export markets should lead to similar market prices for hogs as last year, and lower feed costs should improve profitability."