With the pork industry walking a tightrope between high hog prices and high feed prices, consumers begin seeing the consequences—record high prices for pork.

“Producers will be receiving record-high prices for their hogs, but also paying record high prices for feed,” said Chris Hurt, a Purdue University Extension economist.  “The outlook is in balance right now as hog prices are expected to be high enough to cover feed prices. However, the consequence of losing that balance could have extreme financial consequences on producers if consumers balk at high pork prices or weather threatens 2011 crops.”

Why are corn and hog prices moving in the same direction?  Hurt said one reason is that meat supplies have been sharply reduced over the past four years.

“Hog producers had a major erosion of equity and have little ability to continue production if feed and hog prices get out of balance,” Hurt said. “If feed prices increase, there is a perception that pork production will almost immediately drop thus increasing hog prices.”

Another reason Hurt cited is that United States and world food prices are all moving higher.

“We are in a period of generally rising prices, and that means inflation will tend to increase prices of all food products,” he said. “Different products will move up at different rates depending on their individual supply and demand situation, but inflation raises ‘all ships.’ Almost all commodity prices are currently increasing as a result of strong demand relative to supplies, but perhaps additionally stimulated by accommodative monetary policy by the U.S. Federal Reserve.”

There are reasons for pork producers to be worried that the delicate balance between high hog prices and high feed prices could be upset, Hurt explained.

“There is a concern that consumers will back away from pork consumption as grocery store prices shoot up this spring and summer. In order to pay $7 or more for corn, live hog prices at times will have to move toward $75 per live hundredweight this spring and summer, up from the current price in the low-$60s.  Will consumers bear this financial burden?“