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Hog Market Lags Behind Other Commodities

posted on December 5, 2003

The steel tariff decision is important because there's growing evidence that foundering WTO negotiations soon could take a back seat to politics in the United States and Europe. That's not necessarily good news for U.S. farm interests because few industries are as trade-sensitive as agriculture.

Indeed, farm trade is a complex arena full of equal numbers of winners and losers. The U.S. apple industry came out a winner this week when the WTO ruled Japanese import restrictions are illegal. But feed grains and oilseeds may have taken a hit when China predicted it would dramatically slow trade activity in 2004.

There are domestic pressures as well, which for a variety of reasons seem to have buffeted some commodities this year more than others.


Hog Market Lags Behind Other Commodities

Pick any farm commodity and chances are it hit a contract high on a major exchange sometime during 2003. Any commodity, that is, except pork.

In a week when wheat futures prices broke the $4.00 mark in Chicago, Kansas City and Minneapolis, the lean hog contract continued to stagnate. Live hog prices, too, have been historically weak, averaging only $38.56 a hundredweight since 1998. That's the lowest average for any six-year period since the post-inflation era of the early 1970s.

Pork industry analysts cite a variety of reasons for the sluggish market, including the industrialization of the hog industry. Consolidation has collapsed profits to the thinnest of margins, meaning only those producers handling large numbers of hogs can generate earnings.

Experts also point to inelastic production levels, saying many producers refuse to cut herd sizes even when a loss of profit seems likely.

Indeed, the data bear that out. The number of sows owned by Smithfield Foods, the nation's largest pork producer, was virtually unchanged from 2002 to 2003. The same holds true at Premium Standard Farms, Seaboard Farms and other hog industry giants.

A final blow to domestic hog prices has come in the form of increased Canadian imports. It now appears the U.S, will import a half-million more market hogs from Canada this year than had been expected.

A Purdue University economist, citing tight world supplies of feed grains and oilseeds, predicted no immediate price relief for hog producers, as costs for feeding the livestock are expected to rise.


Tags: agriculture animals livestock markets news pigs pork