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AdvertisementReduction in hog breeding herd needed to increase prices
The weak economy has also affected many sectors of the agriculture industry, with the pork industry being no exception. University of Missouri-Columbia agriculture economist Glenn Grimes said the major problem pork producers are faced with is cost--cost of feed and inputs as compared to market price. Grimes told pork producers during the World Pork Expo, held recently in Des Moines, that key driving forces for the pork markets include oil prices, biofuels policy and the economy. "High oil prices led to high gasoline prices, high ethanol prices, high corn prices and red ink for the livestock industry," said Grimes. "A weak economy is doing the same in reverse." He said it is important for pork producers to look at all of their inputs and make decisions. He advises and thinks there will be a decrease in the sow herd to help build up the price again. "Since 1930, the U.S. has reduced sow inventory by 42 percent and increased annual pork production by 245 percent," he added. "Efficiencies and production (pigs per litter) has increased dramatically--from 6 pigs per litter in 1930 to more than 9 pigs per litter in 2005." Litters per sow per year have increased dramatically in just the past 30 years--from 1.7 litters per sow per year in 1980 to 2 or more in 2009. While sow production has increased, carcass weights have increased, as well. In 1980, the average carcass weight was 170 pounds and since then, carcass weight has increased to 200 pounds. Carcass weights have increased from the previous year, as well. International trade continues to be the bright spot for the pork industry--something Grimes said U.S. pork producers should be proud of. The U.S. is third in pork production behind China and the EU, but is still number one in pork exports. "Most of the growth in the U.S. pork industry in the past 10 years can be attributed to the export market," said Grimes. "2008 was the 17th consecutive record year for U.S. pork exports." A shift between countries importing U.S. pork has been seen recently, as well. During 2008, China and Hong Kong increased their total imports from the U.S. by 139.79 percent. Those two countries have backed off on importing during 2009, yet Mexico and Australia have increased their imports. Hog imports from Canada have decreased on both the feeder pigs and slaughter hogs during 2009, which Grimes attributes to country-of-origin labeling and the value of the dollar. A decrease in herd size of 10 percent would lead to an excess slaughter capacity availability and may lead to the concern of closure of a slaughter plant or two. Current inventory numbers are likely to show the breeding herd down 2 percent. Grimes, however, hopes the numbers will be closer to a 3 percent decrease. The retail price of pork has seen a decrease in 2009, with the recent H1N1 flu outbreak putting major pressure on those prices, even though pork is free from the human-strain of the virus. Chicago Mercantile Exchange numbers show that pork producers may have lost nearly $500 million on futures contracts because of the impact of calling H1N1 flu, swine flu. Grimes expects the Iowa-Minnesota hog carcass prices for 2009 to be in the $59 to $61 range per hundredweight, down from the average of $63 in 2008. On a live market price, he expects a $45 to $47 range per hundredweight as compared to $48 in 2008. "With high producer costs, there are very few producers making money. They need to be using the futures markets in order to see a profit and there is a very low percentage of producers seeing profits," he added. Grimes stressed the need for more pork producers to get into the black ink. "We need to reduce the breeding herd at least 5 percent and as much as 10 percent in order to see an increase in prices and profitability," he said. "We should see this in the next 12 months." Jennifer Bremer can be reached at 515-833-2120 or by e-mail at jbremer@hpj.com Advertisement
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