Bloomberg reports U.S. hog producers are turning a profit for the first time since 2007, but their profits are paying off debt rather than expanding their operation.

Producers saw profits shrink and disappear, suffering more than $6 billion in losses as feed costs soared in 2007, making it more expensive to raise hogs, followed by the swine flu where demand dropped. In 2009, they cut their herds to the smallest on record. As demand recovers, producers are seeing hog prices rise 82 percent after a seven-year low last August.

The improved hog prices resulted in almost $650 million in profits for producers over the past three months. After debts are paid, producers may look at buying existing herds instead of producing more sows to increase herd sizes.

Sam Carney, president of the National Pork Producers Council, says herd sizes will likely not improve substantially until as late as 2013.

Farmers “lost money for 28 months or 30 months, and if you make it back as fast as you lost it, that’s at least two and a half years” before herds expand, Carney said today in Des Moines. “I haven’t talked to anybody who’s expanding, and I haven’t seen a banker that’s willing to let anybody do that.”

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Source: www.BusinessWeek.com