United States-Pork forecasts.
UNITED STATES-PORK FORECASTS.
Despite big losses in the pork industry for an extended period, USDA’s March Hogs and Pigs Report released Friday offers some hope for an improved outlook this year. The report revealed March-May farrowing intentions at 2.962 million sows, down 2.9 percent from 2008 levels.
Farrowing intentions for the June-August period stand at 2.952 million sows, down 4 percent from year earlier levels. The pre-report estimate predicted the number would be down only 1.5 percent.
The lower-than-expected farrowing intentions bring an improved outlook to the pork sector and the possibility of profits. "If we indeed get the reductions indicated by the farrowing intention numbers, I believe we could see a recovery in the pork sector," says Jim Mintert, livestock marketing economist, Kansas State University. "It will depend on the economic recovery and no further deterioration of demand," he adds.
"It looks like producers have liquidated more breeding stock since the last report,"says Bob Brown, Independent Market Analyst, Edmond, Okla. "This configuration of farrowing intentions shows a step-down process thar, if it comes to pass, has never happened before."
Brown hopes the industry will achieve a $50-per-hundredweight live price, $68 or so on a lean-carcass basis, sometime in May and for a few months this summer. Brown sees futures prices improving to $78 for the July-September period and $68 for the October-December period.
"The point is, there won’t be consistent profitability in pork production until 2010," says Brown. He also is looking at a decline in demand for 2009, which is resulting in lower prices than they would otherwise develop. "We’re not finished liquidating yet," he predicts.
"Across the board we are looking at a livestock sector that is shrinking in response to a lack of profitability," says Mintert. He also points to reduced summer farrowing intentions, which he believes will lead to tighter pork supplies toward the end of the year.
"We’re looking at reductions in chicken, beef and dairy, as producers try to reduce supplies to prop up prices and attempt to counterbalance higher production costs." he notes. As supplies continue to shrink, Mintert predicts higher food prices for consumers.
"The light at the end of the tunnel for producers is that when the economy begins to recover and demand picks up, which may not occur until 2010 or 2011, it will take place from a very tight supply situation," he adds. "So looking to 2010 or 2011, we have the potential for a strong upside in meat prices because of the tight supply."
Mintert’s prediction for 2009 hog prices, on a national-weighted-average base price, is $71 to $72 for the second quarter and mid-to-upper $70’s for the third quarter. For the fourth quarter he predicts prices in the upper $60’s.
