<b>By MEGGIE I. FOSTER<br>
Assistant Editor</b> </p><p>

ROSSVILLE, Ind. — In 1998, a number of pork producers were forced out of business due to one of the most volatile hog market years in U.S. history. And now just 10 years later, producers are facing an equaling tumultuous year, according to Purdue University Ag Economist Chris Hurt.<br>

During the Central Indiana Pork Conference on Jan. 22 in Rossville, Ind., Hurt addressed an eager crowd of Hoosier pork producers hoping to find answers on how to make it through what many are claiming as “the worst financial year for pork producers since 1998.”<br>

“The No. 1 culprit is high feed costs and the second is too many hogs,” Hurt pointed out. “The current unrelenting climb of corn and soybean meal prices may drive 2008 costs to the highest annual level ever. In addition, there continues to be more slaughter hogs than accounted for in USDA inventory reports, with no signs of moderation.”<br>

Addressing the issue of “too many hogs,” Hurt said that the USDA forecast slaughter report at the beginning of the fourth quarter of 2007 was about 4.5 percent higher. He pointed to an actual slaughter increase up almost 9 percent, triggering questions in many producers minds, “Where did all the extra hogs come from.”
“This wasn’t nearly as bad as ’98,” Hurt reminded the group, “and its not nearly as severe, but its hard to figure out where all the extra pigs came from. If disease control is up, maybe we could’ve had more live pigs or maybe the USDA didn’t account for a few more sows farrowing in the spring.”<br>

“USDA increased last spring’s farrowing somewhat, but there were still nearly 3 percent unexplained slaughter hogs,” he questioned. “The great worry is that there may still be more hogs than USDA has counted in the December update.”<br>

Hurt also said that pork supplies are expected to expand by 3 to 5 percent in each of the first three quarters of the year. By the final quarter, production may be about the same as the final quarter of 2007, but that was too much, he noted. <br>

“Annual production in 2008 will rise by about 3 percent, too much to sell at profitable prices,” Hurt mentioned.<br>

Live hog prices for 2008 are forecast at $46.30, down from $47.10 in 2007. These are based on live weight prices for 51 to 52 percent lean carcasses. Prices are expected to average in the very low $40s in the first quarter of the year, rise to the high $40s for the second and third quarters and finish the last quarter with mid-$40 averages.<br>

Another factor leading to the volatile year for hog producers lies squarely within the grain market, he noted.<br>

“This is a new era for feed prices,” he stated. “One year ago, we could’ve said this is just short term. I think today, that is not as much the case. We’re going to see tight feedstocks, soybeans for the next two years. It will likely take us at least two years to work through these high grain prices. But the futures market says we’ll get through this quickly and recover prices.”<br>

Hurt said that even though live hog prices are expected to average $46.30 in 2008, the cost of production is estimated at $55.60 based on future prices for corn and soybean meal on Jan. 4, 2008 and adjusted cash purchase levels.<br>

“These estimates suggest a loss of about $9.30 per hundredweight, or nearly $25 per head on average for the year,” he explained.<br>

Producer perspectives<br>

However, not all producers are overly concerned such as Monty Moss, who owns and operates a 1200-sow breed-to-wean and farrow-to-finish operation in White County, Ind.
“I foresaw this coming,” he said.<br>

Moss said he forward contracted hog prices from Sept. to July 15 and the rest of his pigs, he sells as weaned pigs to established contracts.<br>

And as far as facing 2008’s volatile grain prices, “I’ve got enough in storage, harvesting about all the corn I need with 320 acres.”
Alan Wilhoite, of Boone County who owns and operates an 1800-sow breed-to-wean and farrow-to-finish operation said he thinks more independent producers will sell out and bigger companies will sell and change hands.<br>

“We’ve all seen the cycle, eventually, hog prices will come back,” Wilhoite added. “I think we’re just going to have to adjust to grain prices. I’ve always worked on a 10-year average. I don’t think we’ll see that happen. To a certain extent, I feel pretty lost now.”<br>

What to do now<br>

Hurt said that since feed is the largest reason why producers may see losses, they should examine ways to control feed costs by cutting marketing weights and culling low productive animals.<br>

“One of the biggest things producers can do is watch the lean hog futures, it feels good going from mid-$30s to mid-$50s. That feels good,” he said, adding that if producers can make it through 2008, they may see an upswing in 2009 hog prices.<br>

“On the export side, China needs pork, let’s settle the issues, get ractopamine-free, (ractopamine is a drug that is used as a feed additive to promote leanness in pigs raised for their meat), get the dollars and get pork cheap,” Hurt said, referencing July 2007 when Chinese officials seized U.S.-produced pork for containing ractopamine residues.<br>

Hurt also encouraged “retailers to push pork, we’ve got plenty,” motioning to the enormity of the U.S. pork supply.<br>

“I know this puts a lot of fear in the hearts and minds of producers, but I encourage you not to make emotional decisions, look for opportunities and just get through this year,” said Hurt. Hopefully, we’ll see this industry adjust enough to level out.”