By DOUG SCHMITZ
Iowa Correspondent

WEST LAFAYETTE, Ind. — While herd numbers for U.S. pork producers have significantly decreased, pork prices, on the other hand, have increased, according to industry experts analyzing the USDA’s latest quarterly hog figures.

“If consumers want pork in 2010, they will have to pay up,” said Chris Hurt, Purdue University Extension agricultural economist. “While pork production will be down about 3 percent, the amount of pork per person available in the U.S. will drop more sharply, declining by about 5 percent.

“This is because the USDA expects pork exports to expand by 8 percent, which takes product out of the domestic market,” Hurt added. “In addition to much less pork, rising U.S. incomes mean there will be more competition for those limited pork supplies.”
Analysts said the recent release of the USDA’s March 1, 2010 Quarterly Hogs & Pigs Report likely caused the March 29 rally at the Chicago Mercantile Exchange, which showed a 3 percent decline in hog herds in the U.S. and Iowa – with hogs for June and July delivery closing above $81 per cwt., up from about $50 last September.

Steve Meyer of Paragon Economics in Des Moines, Iowa, said the March 1, 2010 inventory was the third largest March 1 inventory on record, trailing only those of 2008 and 2009 – a clear indicator of the productivity gains made by U.S. producers over the past few years.

“After two years in which about any light at the end of the tunnel turned out to be an oncoming freight train, pork producers have every right to be encouraged” by the report, he said.
According to the report, the U.S. inventory of all hogs and pigs was 64 million head, down 3 percent from March 1, 2009 and down 2 percent from Dec. 1, 2009.

The report said U.S. breeding inventory was at 5.76 million head, down 4 percent from last year and down 2 percent from the previous quarter.

“The decline in the breeding herd inventory was larger than trade estimates, especially since many cull sow buyers had indicated a slow down in cull sow sales beginning in late February when the value of cull sows rose above $50/cwt.,” said Mike Brumm of Brumm Swine Consultancy, Inc. in North Mankato, Minn.

Fewer hogs

In addition, U.S. market hog inventory, at 58.2 million head, was down 3 percent from last year and down 2 percent from last quarter, the report added.

Brumm said the report caught many market commentators and observers by surprise – especially since traders showed widespread concern that U.S. producers would increase their herds again when prices started increasing since the first of the year.
Despite a 7 percent dip in hog slaughter during January and February, prices dropped by $4 the third week of March before the report’s release.

Moreover, the report said the pig crop for December 2009-February 2010 was at 27.9 million head, down 2 percent from 2009 and down 2 percent from 2008.

“Sows farrowing during this period totaled 2.90 million head, down 4 percent from 2009 and down 6 percent from 2008,” the report said. “The sows farrowed during this quarter represented 50 percent of the breeding herd.”

The average pigs saved per litter was a record high 9.61 for the December 2009-February 2010 period, compared to 9.48 last year.
“Pigs saved per litter by size of operation ranged from 7.40 for operations with 1 to 99 hogs and pigs to 9.70 for operations with more than 5,000 hogs and pigs,” the report said.

As the nation’s leading pork producer, Iowa’s hog number reached 18.9 million, as of March 1, down 2 percent from last December and 3 percent from December 2008. The breeding herd for Iowa was down 3 percent to 30,000 head.

Over the March-May 2010 quarter, the report said U.S. hog producers intend to have 2.90 million sows farrow, down 4 percent from the actual farrowings during the same period in 2009, and down 5 percent from 2008.

As for the June-August 2010 period, intended farrowings was estimated at 2.89 million sows, down 2 percent from 2009 and down 6 percent from 2008.

Hurt said profits for U.S. hog producers are expected to peak this spring and summer at about $25 to $30 per head, moderate seasonally to around $10 per head in the late fall and winter, and then average around $18 a head for all of 2010.

At this early point, prospects also appear to be very favorable for 2011, Hurt added.

“Given this rosy outlook, should producers begin expansion?” he said. “Most will say, ‘No!’ I cannot remember a time when there have been so many possible negative events from outside the pork industry that should make producers cautious.”

But higher hog prices, Hurt said, means pork will have less competition from beef, as domestic availability is expected to be down 2 percent as well.

“This should give rise to sharply higher retail prices of pork,” he said, “especially this summer and fall.”