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Hog prices expected to rise, but profits won’t: Chris Hurt
Story Date: 4/12/2012
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Source: Rita Jane Gabbett, MEATINGPLACE, 4/11/12
Purdue University Extension Economist Chris Hurt expects hog prices to rally over the next six weeks, but warns that high feed prices will curb profits.
In a recent report, Hurt said cash hog prices and lean hog futures were negatively impact by the media attention and consumer reactions surrounding lean finely textured beef. However, with that issue receiving less attention, he predicted hog prices should be set for a spring rally in the next six weeks.
Over the past five years, live hog prices have rallied an average of $11 per hundredweight into mid-May. “A similar increase this year is expected and should take prices that are currently in the low $60s to the low $70s over coming weeks,” Hurt wrote. “Prices are expected to average in the higher $60s for both the second and third quarters this year and then drop seasonally to near $60 in the last quarter of 2012 and first quarter of 2013. Prices for the spring and summer of 2013 are currently expected to be in the mid-$60s.”
Higher feed prices due to lost crop production in South America have reduced 2012 hog profit prospects from what they were a few months ago, Hurt warned. “The current outlook is for profits of just $4 per head for 2012. This compares with estimated profits of $14 per head last year.”
An early look toward 2013 suggests some modest continued pork production expansion with somewhat lower hog prices. Feed costs are expected to moderate to the downside with estimated total costs dropping to around $60 per live hundredweight compared with $63 in 2012.
Pork prices
While pork exports will remain an important component, domestic demand should remain strong due to population increases near 1 percent and to some consumers selecting pork as an alternative to high priced beef, Hurt predicted.
Beef availability will drop to just 55 pounds per person this year compared with 65 pounds five years ago. Consumer beef prices are expected to rise nearly 7 percent this year from last year to $5.15 per pound as an average across cuts. Pork prices, on the other hand, will rise modestly to $3.45 per pound and draw some attention away from beef purchases, according to Hurt.
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