The United States is expected to produce 22 billion pounds of pork in 2007—a new record. That’s four per cent more than the previous year, and forecasters expect production to rise to 22.5 billion pounds in 2008. Hog supplies are excessive and slaughter is up more than 10 percent from last year in four of the last five weeks. 

“Pork production hit record highs in the US in 2007 and is likely to stay that way into 2008,” says Curt Lacy, livestock economist with the University of Georgia College of Agricultural and Environmental Sciences. Part of the increase is due to more imports from Canada which are up about 11 percent over the 2006 level.

The huge hog supply has weighed on prices, which at the end of November, were about $10 per hundredweight below year ago levels which has resulted in profit margins turning to losses, according to the Doane agricultural report. Fortunately, U.S. demand has remained strong. Demand for pork is expected to be good for the next several years. But they won’t necessarily be easy years for pig producers.

Strong domestic consumption isn’t the only bright spot. With worries over avian influenza and embargoes on US beef, pork exports are increasing and expected to reach record levels in 2008.
The USDA will almost certainly revise its hog inventory data which was underestimated in its September Hogs and Pigs report. Hog prices will likely remain under pressure and many, if not all producers, will lose money over the next three month at least, the Doane report predicts.

“Feed cost will play a bigger role in profitability than sales prices for many hog producers. Corn prices are expected to remain strong over the next few years as more corn goes into ethanol production,” Lacy explained.

For 45 consecutive months, US hog producers saw profits, but that came to an abrupt end when feed prices jumped and finished pig process plummeted. “It looks like it will be tough for the next 12-24 months. Even though demand and hog prices are expected to remain stable, continued high feed costs in 2008 will pressure net returns,” said Lacy.

Source: The Pigsite.com