Hog prices are on pace for record highs in 2011 amid tight animal inventories and robust exports, but pork producers face volatile grain and animal prices that likely will keep expansion plans in check, USDA livestock analyst Shayle Shagam said.
Slaughter-ready hogs in the major Midwest markets this year will probably average $58 to $61 per hundred pounds, up from $55.06 last year, Shagam said during a Feb. 25 address at the USDA’s annual Agricultural Outlook Forum in Arlington, Va. This year’s average may top the current annual record of $58.78 set in 1982, Shagam said.
“Increased exports will tighten domestic supplies despite increased production,” Shagam said. But the likelihood of wide swings in grain and animal prices in coming months will “factor heavily” into producer decisions, he said. “Uncertainty from both the input and demand sides may limit expansion plans in 2011,” Shagam said.
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U.S. pork producers will continue to benefit from a resurgent export market as the global economy gains strength and the dollar remains relatively weak, Shagam said. An outbreak of foot-and-mouth disease in South Korea’s livestock herd, which forced the slaughter of about one-third of the country’s cattle and hogs, will further fuel exports.
In 2011, pork exports will rise an estimated 11 percent, to 4.68 billion pounds, following a 3-percent increase in 2010, Shagam said. The projected total would top the current record set in 2008.
The nation’s pig numbers shrank the past three years as feed costs rose and the recession and an H1N1 virus outbreak combined to crimp pork demand, prompting producers to trim herds. As of Dec. 1, the U.S. hog inventories totaled 64.3 million head, down 0.9 percent from a year earlier, according to a USDA report.
The breeding herd, an indicator of future pork supplies, was down 1.2 percent as of Dec. 1, after sinking to record lows earlier in the year.
An upswing in pork industry profits during the first half of 2010 faded late last year as corn prices soared, raising producers’ feed costs. Continued grain price escalation presents a growing headache for producers this year, Shagam said.
“Much of the grain volatility which was experienced in 2010 will likely continue in 2011,” Shagam said. “Feed prices are expected to climb as corn supplies ahead of next year’s crop are expected to be very tight.”
On U.S. cash markets, corn is expected to average $5.05 to $5.75 a bushel for the 12 months beginning last September, compared with $3.55 the previous year, according to the USDA. Soybean meal is expected to average $340 to $380 per ton this year, up from $311 last year.
Corn futures reached 31-month highs earlier this week after rallying 52 percent last year on expanding ethanol demand rose and a smaller-than-expected U.S. harvest.
In trading Feb. 25, May corn futures rose 25 ½ cents to $7.22 a bushel. On Feb. 22, corn touched $7.24 ¼, the highest price since July 2008, based on front-month futures.