Pork supplies are on track to be higher in 2005 than in 2004, and higher than previously expected.
So what does that mean to you?
“The real issue is the strength of demand,” says Chris Hurt, Purdue University agricultural economist. The price you get paid for your hogs will depend largely on whether the tremendous demand boost pork has seen this year will hold into 2005.
Hurt points to September’s pork supplies, which were up 6 percent from 2003 as an example of the demand impact. In September, lean-carcass prices were one-third higher, and live-hog prices are nearly $15 per hundredweight higher, notes Hurt.
It’s worth reviewing the sources of demand strength. Among the reasons are pork exports that are up about 26 percent for the year, while pork imports are down nearly 8 percent. This is partially related to the isolated U.S. and Canadian bovine spongiform encephalopathy cases, that changed the face of exports in 2004. “Consumers also turned to high-protein diets in record numbers this year, which has enhanced demand,” notes Hurt. “Finally, it appears that retailers have heavily featured pork as a lower-priced alternative to record high beef prices, which are expected to average near $4.10 per retail pound this year compared to pork's $2.75.”
The hog price outlook will continue to be difficult call. While pork supplies will come close to equaling 2003’s fall levels. This year will mark a record 104-million-head hog slaughter. Supplies look like they’ll rise 3 percent this coming winter and spring. By next summer supplies could be up by 4 percent, and finish 2005 with a robust 5 percent to 8 percent increase in the final quarter, notes Hurt.
Hurt’s expectations are for live-hog prices to average in the high $40s per hundredweight this fall, near $50 in the winter, and low $50s next spring and summer—provide demand holds. “The growing breeding herd expansion this winter should begin the downward spiral of hog prices in late summer 2005,” he adds. After that, price weakness may extend from fall 2005 through 2006.
Chris Hurt, Purdue University.