Hog and pork markets - will prices rise for a sixth year?


17:41 GMT, Thursday, 27th Dec 2012, by Agrimoney.com


Lean hog futures have proven one of the most reliable for gains amongst agricultural commodities.


They look on track for a slender gain in 2012, in what would be a fifth successive calendar year of headway, totalling nearly 50%.


Not that the period has been a boon for farmers. Grain prices have been elevated for much of the time too, often rising faster than hog and pork values, and leaving producers with negative margins.


What is the industry in for in 2013? Leading commentators give their forecasts.


Darrel Good, Department of Agricultural and Consumer Economics, University of Illinois


"US pork production is expected to decline from 23.26bn pounds in 2012 to 22.94bn pounds in 2013.


"Exports are expected to remain near the 2012 level of 5.4bn pounds. Domestic pork supplies are projected at 44.9 pounds per capita in 2013, down from 45.7 pounds in 2011 and 2012.


"The average price of hogs was near $66 in 2011 and $61 per hundredweight in 2012. An average near $64 per hundredweight is expected for 2013."


Chris Hurt, extension economist Purdue University


"A return to profitability for hog producers may be on the not-to-distant horizon by the spring of 2013.


"There still are losses to sustain for the first quarter of 2013 when losses are estimated at about $15 per head. But live hog prices are expected to increase enough to reach breakeven by early May 2013 and provide for positive returns of around $10 per head in the second and third quarters.


"Lower feed prices late next summer are expected to sustain a profitable industry into the fall of 2013 and winter of 2014. If US and world crop yields are closer to normal in 2013 the pork outlook should brighten and thoughts of expansion will begin in the late summer of 2013.


"While pork producers are beginning to feel that the worst is behind them, the 2012 losses will leave an imprint in the form of reduced equity. Estimated losses for 2012 are about $17 per head.


"The era of high feed prices has been difficult for all of the animal production industries including pork producers who lost money in three of the last five years: 2008, 2009, and again in 2012. For those that did not panic, it now appears the sun will rise again and the dawn of profitability will once again return."


Morgan Stanley


"We are bullish hog prices, predicting an average price of $100 per hundredweight [100 cents per pound] in 2013, with feed-price induced declines in production, and the lowest ending stocks in over 15 years, supporting prices.


"Near-term hog/ pork supply will likely pressure prices, as weak margins continue to drive high slaughter rates into early 2013.


"Lower production should prove net bullish for prices in 2013 as we expect the pricing pressure of early-season slaughters will be more than offset by reduced hog supply in the second half of the year.


"We model full-year hog production needing to fall 9% year on year in order to adequately ration the sector's corn feed demand. Production declines should leave 2013 hog ending inventories at their lowest since 1996."


Paragon Economics and Steiner Consulting


"The US Department of Agriculture currently pegs total pork production for 2012 at around 23.195bn pounds, which is remarkably close to the 23.209bn pounds that was forecast at the beginning of the year.


"The latest estimates also peg 2013 pork production at 22.792bn pounds, about 400m pounds or 1.7% lower than 2012 levels. A smaller pig crop and lower hog weights in the first half of 2013 should contain overall pork output levels.


"As with cattle, feed availability and the ability to sustain productivity gains in the form of higher carcass weights remains a key wild card going forward."


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