According to the May issue of the USDA's Livestock, Dairy and Poultry report, positive feeding margins for hogs suggest that hog prices have increased faster than feed costs. This is a somewhat surprising contention, given that the average 2011 farm price of corn is expected to increase almost 52 percent over its average price in 2010. But, as the figure below indicates, hog prices have increased sharply since 2009 and are expected to achieve a record high in 2011. Hog prices are expected to increase more than 15 percent this year compared with 2010, after having increased almost 34 percent in 2010.


Source: USDA/ERS, http://www.ers.usda.gov/Data/MeatPriceSpreads/

Record-high 2011 hog prices are the consequence of modest-growth supplies and stronger demand. Pork production in the United States peaked in 2008 at more than 23.3 billion pounds. Also, in 2008, U.S. pork exports were record-high at 4.7 billion pounds. While 2011 production is forecast at 22.6 billion pounds, up almost 1 percent from a year ago, it remains below its peak. U.S. pork exports for 2011, however, are forecast at 4.7 billion pounds—equal to 2008, and well above 2010.

Consequently, U.S. consumers are expected to consume almost 2 percent less in 2011, on a per capita retail weight basis, compared with 2010. With the U.S. economic recovery slowly under way, retail price data suggest that U.S. consumers are willing to pay higher prices for slightly smaller ‘disappearance’ quantities of pork products. Retail pork price data show that first-quarter 2011 retail pork prices were 13.4 percent higher than a year earlier. Along the entire pork supply chain, small gains in pork production have combined with strong foreign demand and robust domestic pork demand. Modest growth in supplies and strong demand are translating into hog prices high enough to leave producers with money in their pockets to cover other production costs, even after paying sharply higher feed costs.

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