Hog and pork prices are expected to launch to record highs in 2011 due to a combination of high demand, high feed costs, and a smaller herd.
“Foreign buyers are expected to elevate pork exports by 10 percent,” says Chris Hurt, a Purdue University Extension economist, in a university report. “Pork exports are expected to represent a record 21 percent of domestic production. The combination of modestly lower production and higher exports means that the available supply per person in the United States will drop by nearly 3 percent in 2011. This will be the foundation for record retail pork prices as there will be less pork available at a time when U.S. consumers economic conditions are improving.” Live hog prices in 2011 are expected to exceed $60 per live hundredweight, or more than $80 on a lean basis. “The stimulus will come from smaller per capita U.S. supplies, from much stronger demand driven by recovering U.S. and world economies, and by the inflationary policy of the U.S. Federal Reserve,” Hurt says. How high can hog prices go in 2011? “Historically $90 lean prices, or about $67 live, were the top of futures markets,” Hurt says. Some current futures prices now exceed $90 for the spring and summer delivery contracts and raise the possibility of them reaching $100, or $75 live. “Some may argue that there is no historic precedence for prices that high,” Hurt says. “But, there’s no historic base for costs of production this high as well. So, a new era of high costs probably means there will eventually be a new era of record high hog and pork prices.” Current forecasts are for hog prices to average more than $60 live for 2011. The previous record annual high was about $55.50 in 1982. By quarter, those prices are expected to average in the high-$50s in the first quarter, move toward the mid-$60s for the second and third quarters, and average in the mid-$50s in the final quarter. “Record high hog prices would seem to suggest great profit prospects for pork producers in 2011,” Hurt says. “Of course that’s not the case as feed costs aim toward a break-even year with costs estimated to be slightly over $60 as well.” Hog prices are expected to rise sharply in 2011 from the current low-$50s and move into the hig-$50s by late February and March. At this point, the industry will be back to near break-even prices, Hurt said. “Prices are expected to march toward the high-$60s in late May and June. The spring and summer quarters are expected to provide profitable production before sliding back to break-evens in the mid-$50s for the last quarter of the year.” Hurt said that the pork industry has been downsizing in response to high feed prices and will drop modestly in 2011. In December of 2007, the U.S. breeding herd stood at 6.233 million head. Today the herd is at 5.778 million head or a 7 percent reduction.