Despite continuous growth of the number of US pigs in the third quarter of 2007, the US might be facing the end of 42 months of profitability, market experts warn.
Increased feed prices are a major cause of a possible decline in growth. “We’re looking at hog prices and feed costs coming together and taking away the profitability that was there,” said Jim Robb, director of the Livestock Marketing Information Centre.
“On a cash to cash basis, we expect to be in the red in the fourth quarter and that will continue at least through the first quarter of next year.
“Then attention turns to how grain markets go in the second quarter of next year whether we can return to profitability in the hog complex or whether we continue to struggle and then start to see some significant impact in terms of breeding herd numbers maybe creeping in around that time frame.”
Mixture of elements
Chris Hurt, agricultural economics professor at Purdue, added that a mixture of elements is building up to a less-than-profitable year in 2008. He said that glory days, which started back in 2004, are slowing to an end, as a result of higher feed prices, energy costs and even building costs.
In addition, he mentioned an oversupply of hogs in the market channel. Packers simply could not be able to take the extra animals.
The extra hogs come from Canada for processing, up to approximately 9% of total slaughter in the US. Higher productivity also results in more pork.
Hurt said he expects to see some herds trimmed to make up for the lower prices. That drop in production would drive up prices.
The US inventory of all hogs on September 1 was 64.6 million animals, up 3% from a year ago and the same from the last quarter.
Breeding inventory was at 6.14 million head, a rise of 1% compared to last year. Market hog inventory was at 58.5 million head, up 3% from last year.
â€¢ Livestock Marketing Information Center
â€¢ Purdue University
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