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Drought Economics Forcing More Pork to Market

Drought Economics Forcing More Pork to Market
Hog producers are losing more money than when hogs were worth nothing back 1998, meaning lots more pork on the market.

As beef struggles to hold consumer demand with retail prices necessarily at historic highs, it will also have to contend with an onslaught of pork, at least in the near term.

“A tsunami of red ink is about to wash across the pork industry, which is facing losses unseen even in the fall of 1998 when hog prices approached zero value,” says Chris Hurt, an Extension agricultural economist at Purdue University. “Stressors include more hogs than expected in the market, rapid sow liquidation and record feed prices.”

Hurt explains the market anticipated a 1% increase in slaughter, but in recent weeks, hog slaughter has jumped by 6%. The unexpected influx of hogs to the market has decreased prices more than $10/cwt. since late July.

According to Hurt, hog producers could lose about $30/head this summer and nearly $60/head during the final quarter of the year as continued liquidation of herds drives down market hog prices and drought drives up feed prices. The previous record quarterly losses were $45/head in the final quarter of 1998.

The first wave of herd reduction in hog breeding herds began in early August. It has intensified since then.

Slaughter data indicate nearly 30,000 sows went to market in August. That's about 0.6% of the national sow herd. Hurt adds that rate will continue to increase if corn prices stay at current levels or move higher. He says the breeding herd could decline 4%-6% between now and January, but sow liquidation should slow sharply after the winter.

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