Hog prices have gained almost 20 percent in recent weeks -- more than the "normal seasonal increase" can justify. What's the cause? Good question, some are pointing to domestic demand.
Pointing to historical trends, Chris Hurt, Purdue University agricultural economist, notes in the past five years, Western Corn Belt hog prices have averaged $56.86 per hundredweight (carcass) in the first week of April, and then gained about $15 to average $71.72 by the third week in May. Of course, those years never included the huge record-setting live-hog supplies that this year presents.
Still, hog prices in the third week of March this year dipped to $49.72, but by April 28 had already hit $73.20 — a $23.50 jump well ahead of the usual mid-May price peak.
But the reason for the run up is confusing analysts. As some point out, not even strong export sales and strong domestic demand can explain why the sudden price jump.
While hog supplies typically start to decline this time of year and into summer, market hog runds during the past four weeks have exceeded year-ago levels by about 14 percent.
Pork exports have been solid, but a shortage of shipping containers have tempered those sales lately and could pose long-term challenges.
"It's got to be domestic demand," says Steven Meyer, president Paragon Economics. He points to pork's retail price advantage to beef and chicken.
"April is a mixed bag in that summer price trends may start in April or they may not," says Shane Ellis, Iowa State University ag economist. Retail pork prices held above 2007 prices, even when hog prices were at their lowest, he notes, "so demand was strong enough to absorb some of the added supply."
Of course, this positive price spurt could delay the much needed sow-herd cuts. "It looks like everything is going to be fine. I don't think that's the case at all," says Hurt. A 6 percent to 8 percent sow-herd reduction is still needed, he says. He adds that if corn were to reach, "say, $7 a bushel, producers would need to cut sow herds by 16 percent to 18 percent to keep prices ahead of costs.
Meyer predicts that the price run up won't last. "I think there will be a slam on the brakes this week as packer margins fall out of bed," he says.