Pork producers are watching, waiting and hoping for a spring live-hog price rally. But so far, signs of an upward trend have been slow in developing. "Help should be on the way, although the spring rally may not be as strong as many had hoped," says Chris Hurt, Purdue University ag economist.
Pork producers need a solid price-recovery in 2003. Hurt points to 2002 prices for 51 percent to 52 percent lean hogs, which averaged about $35 for the year, with estimated productioon costs at $38.60 per live hundredweight. That, of course points to losses around $9.60 per hog.
"The largest losses came in the final quarter of 2002 at nearly $21 per head," he notes. "The situation has been somewhat better in first-quarter 2003, with prices expected to average near $36." That would trim losses to around $3.50 per hundredweight.
The low prices early this year, is result of a larger-than-expected hog supply. Based on USDA's December Hogs and Pigs Report, first-quarter pork production was pegged to be only slightly higher than in 2002. But, for January and February, pork production on average has been 2.4 percent higher than in 2002.
Hurt believes market-hog slaughter will moderate somewhat in March, expecting numbers to be closers to last year's levels.
USDA's Monthly Hogs and Pigs report also provides some support that hog slaughter will lower this spring. The October, November and December pig crops– which represent spring slaughter– in total, were down more than 2 percent from those of 2002.
"Markets should be on the verge of a spring rally that could take live-hog prices from the mid-$30s in early March to the lower-$40s by the end of May," says Hurt. "If hog supplies drop as much as 2 percent for the spring quarter (as USDA reports suggest), prices could average near $43. However, a more realistic average is $40."
Summer hog marketings will come from sows farrowed this winter– of which producers said they would reduce numbers by 1 percent. If producers follow through, summer supplies will be only modestly lower than last year, and third-quarter prices would average just less than $40, predicts Hurt.