Last Friday’s USDA Hogs and Pigs report revealed only modest declines in hog production. As a result, Purdue University Extension Economist Chris Hurt is putting more faith in increasing pork demand, according to a report by Meatingplace.com.

In a hog industry outlook report, Hurt made the case for why pork demand — domestic and export— may improve in the coming months. For starters, he cites lower retail pork prices, which began to slide in July and by August averaged 8 cents per pound less than a year ago.

Hurt expects low prices to continue through the fall and winter. At the same time, he expects pork supplies to decline by 2 percent in 2009 and by 1 percent to 2 percent in 2010.

"Lower pork supplies with lower retail prices will strengthen hog prices and result in a higher portion of the retail pork expenditures flowing back to producers," he wrote.

An improving economy also should help buoy pork demand, even if slowly. "While the recovery in the U.S. economy will be slow with unemployment staying high, positive growth numbers will tend to help meat consumers free up spending somewhat," Hurt predicts. 

Export demand should also improve as the global economy recovers while the U.S. dollar remains weak. USDA forecasts that pork exports will be up 9 percent over the next nine months compared to the same period a year ago.

With reduced domestic production and greater exports, per capita pork availability in the U.S. will be down about 3 percent to 4 percent in the coming nine months. This, along with lower U.S. retail pork prices, improving incomes, and improving consumer attitudes will provide the basis for strengthening hog prices, according to hurt.

Hurt expects hog prices to average in the high $30s on a liveweight basis for the final quarter of 2009, rise to the low $40s this winter and then move into the mid-$40s for 2010 second quarter averages. Next summer's prices are expected to rise into the high $40s on average with the low $50s for weekly highs.

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Source: Meatingplace.com