U.S. pork producers may have to prepare for losses to continue in 2010, according to Purdue University Extension Economist Chris Hurt. Consideration should be given to locking in prices for next year given current hog futures prices, the economist says.
Hurt predicted hog prices will average about $46 to $47 per hundredweight next year, moving from about $44 in the first quarter to near $50 in the second and third quarters and back to the mid-$40s in the final quarter, says a report on Meatingplace.com.
"Given the assumption of $50 costs, this would still leave $10 of loss per head, the third year in a row of losses," Hurt wrote in a report. He added, however, that current financial realities could mean the herd will decline, demand will improve and hog prices will be higher than the current forecast.
Futures traders believe hog prices will be higher, says Hurt. Using lean hog futures at the close on Nov. 20 and the average Eastern Corn Belt basis level over the last five years, the futures market is suggesting $50.50 for a farm level price next year, which would mean a breakeven price for 2010.
"As bleak as the outlook seems, it is ironic that the futures market provides a way to at least get through 2010," Hurt added.