Apr 18, 2014
Home | Tools| Events| Blogs| Discussions Sign UpLogin

2013 Outlook: Hog Losses Still Loom

November 12, 2012
By: Sara Brown, Farm Journal Livestock and Production Editor
hogs
  

Editor's Note: For six weeks, AgWeb.com is taking a look at experts’ projections for a variety of commodities in 2013.

It’s no surprise the 2012 drought left pork producers with short, and expensive, feed supplies. Pulled down by lower domestic and export demand, the pork sector will not see much relief until mid-2013.

"Pork producers are expected to continue to suffer very large losses in the next six months after already operating in the red for the last six months," says Chris Hurt, Purdue University ag economist. "There is little producers can do to change the overall situation for the industry since the pigs that will represent these large losses are already on-feed. The pigs that are here today represent producers’ plans earlier this year when they were hopeful for $5 corn prices."

Iowa State University calculates that market hog slaughtered in September 2012 were sold at a loss of $54.02—the biggest loss since December 1998 and the fourth worst month ever. Given that nearly 28 million hogs were slaughtered in September, the total industry financial loss was $1.5 billion. Estimated breakeven live price during September was a record $72.23/cwt. Current futures market prices imply an average per-head loss in the $30s during the fourth quarter this year.

Market weights dropped in September as producers tried to save valuable corn. "Producers are selling hogs about an average 3 lb. lighter. This will help ease pork supplies as long as corn and meal prices stay high," Hurt reports.

Exports dip, domestic demand remains flat

"A lot of the fluctuations in this market are reverberations from the Chinese buying of last year—the market is still trying to find equilibrium," explains Dan Vaught, owner of Vaught Futures Insights, PLLC. "Huge exports added up to huge increases in demand for pork in 2011. The greatly reduced 2012 Chinese buying of U.S. pork hits hard."

Even as other pork and beef cuts have set record prices at points in the year, pork loin sales have remained flat.

Pork belly demand saw a huge surge this summer—a fundamental positive for domestic pork demand. Even with a drop early in the year below the five-year average, the upswing from May to July tracked near the highs of last year.

Pork Beef Outlook Dan Vaught 35

"The seasonal peak came in August, but it wasn’t long before bacon rallied back to near-2011 levels. This is a sign of underlying increase overall in pork demand moving forward," Vaught says.

It’s unlikely that the holiday ham market will match last year’s demand, however. "The monthly ham stock number for Aug. 31’s cold storage report was 195 million pounds—that smashed the all time high of 180 million pounds. That figure had reached 214 million pounds at the end of September. The market will have a lot of trouble clearing that supply and going much higher from this point. Given the amount of support that the ham market lends to hog prices in the last months of the year, that doesn’t particularly bode well for the hog market for fourth quarter 2012," Vaught says.

READ MORE
Previous 1 2 Next

See Comments


 

MARKETS

CROPSLIVESTOCKFINANCEENERGYMETALS
Market Data provided by Barchart.com
Enter Zip Code below to view live local results:
bayer
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions