What is in this article?:
- Pork industry facing more large losses
- How big are the losses?
- There is little pork producers can do to change the overall situation for the industry since the pigs that will represent these large losses are already on-feed. The pigs that are here today represent producers' plans earlier this year when they were hopeful for $5 corn prices.
Pork producers are expected to continue to suffer very large losses in the next six months after already operating in the red for the last six months. These large losses have been brought on by the extreme feed prices due to the drought. There is little producers can do to change the overall situation for the industry since the pigs that will represent these large losses are already on-feed. The pigs that are here today represent producers' plans earlier this year when they were hopeful for $5 corn prices.
In the spring of 2012, producers were optimistic that cheap corn was going to arrive by the fall and were expanding the breeding herd. That optimism faded quickly after mid-June when the reality of drought became apparent. The drought turned optimism into fear and producers then shifted to a liquidation mode during late July and August. By early September they had reduced the size of the breeding herd by 74,000 (1.3 percent) compared to the USDA June inventory estimate. In September, weekly sow slaughter estimates indicated a slowing of the liquidation, with sow slaughter only slightly larger than a year ago. Some follow through on sow liquidation appears to be likely as farrowing intentions are down nearly three percent for the fall and two percent for this coming winter.
September hog slaughter was up about four percent and was surprisingly large. USDA's September 1 market herd inventory estimates suggest that this high rate should drop to only one percent more hogs in October and then move to one percent fewer hogs for November through February. Next spring's market hog supply will also be down about two percent, with fall farrowings down three percent and the number of pigs per litter up one percent. Supplies next summer would be down about one percent if producers follow through on intentions to reduce winter farrowing by two percent and with one percent more pigs per litter. Market weights began to drop in September as producers tried to save valuable corn. Currently producers are selling hogs about three pounds lighter. Lighter weights are likely to continue and will help ease pork supplies as long as corn and meal prices stay high.
Large losses still loom over the industry for the next six months. Live hog prices are expected to be in the mid-to-higher $50s for the final quarter of the year and then improve to the low-to-mid $60s in the first quarter of 2013. Unfortunately, costs are still far higher due to continued high corn and soybean meal prices. Estimated costs this fall and winter are about $73 per live hundredweight and losses are expected to be about $45 per head this fall and $30 in the winter. Unfortunately, the industry has been suffering losses of an average of $18 per head for the past six months representing the second and third quarters of this year.