The Times West Virginian

Life

September 27, 2012

VIDEO: Bacon, pork shortage expected for next year

CHICAGO — Hog farmers are slaughtering animals at the fastest pace since 2009 as a surge in feed costs spurs the biggest losses in 14 years, signaling smaller herds next year and a rebound in pork prices.

The 73.3 million hogs processed in eight months through August were the most in three years, U.S. Department of Agriculture data show. Pork supply will drop to the lowest per- capita since 1975 next year, the USDA estimates. Hog futures that fell more than any other commodity since June 30 may surge 39 percent in 12 months to as high as $1.055 a pound, based on the median of 12 analyst forecasts compiled by Bloomberg.

Crop damage from the worst U.S. drought since 1956 sent corn-feed prices surging to a record last month and may mean losses of about $44 a head for hog farmers in the fourth quarter, the most since 1998, Purdue University estimates. Two producers in Canada filed bankruptcy petitions this month. While the acceleration in slaughtering is boosting supply now, buyers including CKE Inc., the owner of Hardee's and Carl's Jr. fast- food chains, expect higher prices in 2013 as herds shrink and U.S. exports rise.

"We're going to see more consolidation in the industry," said Mark Greenwood, who oversees $1.4 billion of loans and leases to the hog business as a vice president at AgStar Financial Services Inc. in Mankato, Minn. "It's only going to get worse on the higher feed prices."

Futures on the Chicago Mercantile Exchange fell 20 percent since June 30, the biggest drop among 24 commodities tracked by the Standard & Poor's GSCI Spot Index, which rose 11 percent. The MSCI All-Country World Index of equities gained 7.7 percent this quarter and Treasuries returned 0.2 percent, a Bank of America Corp. index shows.

A pig eats 10 bushels of corn to reach a slaughter weight of about 270 pounds, the University of Missouri at Columbia estimates. Corn futures rose 47 percent since mid- June after the USDA predicted the drought will cut domestic output by 13 percent. Prices reached a record $8.49 a bushel in Chicago on Aug. 10.

Producers may receive about $56 per hundredweight for hogs in the fourth quarter, and the cost of production is estimated at about $72.29 per hundredweight, said Chris Hurt, an agricultural economist at Purdue University in West Lafayette, Ind. That means farmers may earn about $151.20 for a 270- pound hog that cost about $195.18 to produce.

Hog farmers will see "huge amounts of red ink" in the fourth quarter, said Jim Robb, the director of the Livestock Marketing Information Center, which is funded by the industry, universities and government. Fewer sows will be kept for breeding, cutting output and tightening pork supply, he said. That will raise both wholesale and retail prices to records by the second half of 2013, Robb said.

Prices for now are retreating, with wholesale pork costs tracked by the USDA tumbling as much as 25 percent since June 25 to the lowest in almost two years on Sept. 19. Hog slaughtering climbed 2.8 percent in first eight months of the year, the most since 2009, when farmers sought to shrink herds amid weaker demand following the global recession and the outbreak of the H1N1 virus, known as swine flu.

The 12 percent drop in corn prices from a record last month, and the prospect of bigger harvests next year, may encourage some hog farmers to slow their herd reduction. Slaughter rates in the five weeks through Sept. 1 rose less than 5 percent from a year earlier. That may leave enough sows to accelerate production once feed costs have come down enough, Rachel J. Johnson, a USDA economist, wrote in a Sept. 18 report.

Meatpackers processed an estimated 79.735 million hogs in this year through Sept. 22, 2 percent more than a year earlier, government data show. Animals sold at slaughterhouses fell to 63.58 cents a pound on Sept. 14, the lowest since Nov. 26, 2010. Prices retreated 8.5 percent this year.

Lean-hog futures for July delivery are trading at 97.725 cents a pound, compared with 75.875 cents for this December, a sign traders are already anticipating fewer supplies next year. Per-capita pork supplies will shrink to 45.2 pounds next year, the lowest since 1975, the USDA estimates.

Hog producers are retaining fewer gilts, or young females that haven't had a litter yet, reducing the number available to replace older sows, said Rich Nelson, the chief strategist at Allendale Inc. in McHenry, Illinois, who has tracked the market for about 15 years.

Even with higher prices, pork will remain cheaper than beef, said John Nalivka, the president of Sterling Marketing Inc., an agricultural economic research and advisory company in Vale, Ore. Wholesale pork fell 8 percent to 78.34 cents a pound this year, as beef declined 1 percent to $1.9269 a pound, USDA data show.

"If you got sticker shock on pork, you'll have a heart attack when you look at beef," C. Larry Pope, the chief executive officer of Smithfield Foods Inc., the world's biggest pork processor, said on a conference call with analysts Sept. 4.

Bob Evans Farms Inc., the Columbus, Ohio-based restaurant chain, has seen a drop in sow costs as herds are liquidated, and expects prices to stay low until the culling stops, CFO Paul DeSantis said on a conference call with analysts Aug. 15. Once that is over, "prices tend to increase very rapidly," he said.

Big Sky Farms, the second-largest hog producer in Canada, went into receivership this month partly because of rising feed costs, said Neil Ketilson, the general manager of the Saskatchewan Pork Development Board. The company produces more than 1 million pigs a year, according to its website. Puratone Corp. sought protection from creditors on Sept. 12. The Niverville, Manitoba-based company markets more than 500,000 hogs per year, according to its website.

Brad Hennen, a hog producer in southwest Minnesota, is reducing the size of his business because costlier feed and declining prices for weaned pigs. While he generally markets as many as 15,000 pigs annually, he expects to sell no more than 6,000 this year.

"It could easily get worse than that," said Hennen, who has been raising hogs since 1987 and is based about 3.5 miles northeast of Ghent, Minn. "What can I do now to minimize my losses and still have a business for when the cash starts flowing again?"

               

       

1
Text Only
Life
  • An alternative diagnosis to ADHD: Schoolchildren need more time to move

    The Centers for Disease Control and Prevention tells us that in recent years, there has been a jump in the percentage of young people diagnosed with attention deficit and hyperactivity disorder, commonly known as ADHD: 7.8 percent in 2003 to 9.5 percent in 2007 to 11 percent in 2011.

    July 18, 2014

  • Why it's basically impossible to delete those naked selfies you text

    If you're selling an old Android smartphone on an online auction site, you could be giving away rather more than you intend to, according to a recent investigation by anti-malware company Avast.

    July 18, 2014

  • wheat1.jpg Backlash has begun against gluten-free dieters

    The swelling ranks of Americans adopting gluten-free diets have given rise to another hot trend: people calling the whole thing a bunch of baloney.

    July 8, 2014 1 Photo

  • Can plants hear? Study finds that vibrations prompt some to boost their defenses

    They have no specialized structure to perceive sound as we do, but a new study has found that plants can discern the sound of predators through tiny vibrations of their leaves - and beef up their defenses in response.

    July 8, 2014

  • "A Hard Day's Night" getting better all the time

    The Beatles' classic film, "A Hard Day's Night," is getting a fab makeover for its 50th anniversary.

    July 6, 2014

  • The science of shyness

    Shy people have quite a bit to contend with - not least the word itself. 
    It has a number of different meanings, none of which are flattering. To "shy away" from something implies avoidance; to "shy" can also mean to move suddenly in fright; to "be shy of" something can mean to come up short, or be insufficient.

    June 27, 2014

  • breaking-up.jpg Thinking about breaking up? Flip a coin

    In their latest book, 'Think Like a Freak," Steven Levitt and Stephen Dubner suggest that, contrary to what many people have told you in life, you should quit. That is, when things get tough, you shouldn't always tough them out and stick with it. Instead, you should quit and do so sooner rather than later.

    June 25, 2014 1 Photo

  • baby-generic.jpg For millennials, out-of-wedlock childbirth is the norm

    This month brings us yet another reminder that, for young Americans, having children outside of marriage is very much "the new normal," as The New York Times once put it.

    June 24, 2014 1 Photo

  • Each glass of bubbly has at least a million reasons to drink it anytime

    So don't wait for a special occasion. Make one: a lousy day, a minor victory at the office, a tough commute home. That chilling bottle of bubbly might be just what's needed.

    June 24, 2014

  • Screen shot 2014-04-25 at 4.52.16 PM.png Don't download these: 3 totally unnecessary apps

    There are apps to help you manage your time, your money and your health. If you have problems waking up or going to sleep, there's an app for that. But there are a few apps that absolutely no one needs.

    April 28, 2014 1 Photo

House Ads
Featured Ads