Source:  Lisa M. Keefe, MEATINGPLACE.COM, 11/18/09

Hog herds are being reduced, and ultimately will drop by about 3.5 percent in 2009 and another 3.1 percent in 2010, according to a report by J.P. Morgan analyst Ken Goldman, recapping his discussion with Mark Greenwood of AgStar farm credit association.

Goldman reports that Greenwood expects 112 million to 113 million hogs to be slaughtered this year, and only 109 million in 2010. Meanwhile, hog weights should drop because of poor feedstuff quality (a late corn harvest increases the chances of mold), because growers are hanging on to their older, less productive sows, and because growing conditions in 2010 likely will not be as good as in 2009, the report said.

The herd reduction won't be quick, but it will be "orderly," Goldman quotes Greenwood as saying. Lenders are pushing for reductions in lieu of more bankruptcies among growers; they are unwilling to fund even temporary losses, Greenwood said. Still, it will take some months for the reductions to be apparent in the numbers. Meanwhile, the larger operations already have cut their herd sizes significantly, Goldman reports.

Finally, Greenwood projected that producers and processors will become more integrated, either literally or virtually by dint of long-term pricing agreements. Once farmers are in a position financially to begin increasing production again, lenders are likely to lean on them to spread some of the risk to customers, Goldman writes.

For more stories, go to www.meatingplace.com.