Second-quarter hog prices (51-52 percent lean, live equivalent) are expected to average $54-$55 per hundredweight (cwt), almost 28 percent higher than a year ago, with second-quarter production expected to exceed last year’s by more than 3 percent. Second-quarter retail pork prices are expected to run about 4 percent higher than a year ago, suggesting that consumers are willing to pay higher prices for greater quantities of pork products. The Quarterly Hogs and Pigs report, which should provide an indication of producers’ responses to recent prices, will be released on June 25.

Hog Prices Sharply Higher

Retail Pork Price Percent change from previous month

The live equivalent price of 51-52 percent lean hogs in May averaged $58.45 per cwt, almost 34 percent higher than May 2003. Hog prices will remain ‘high’ as long as domestic and foreign consumer demand for pork products remains strong and production steady. Second-quarter hog prices are expected to be between $54 and $55 per cwt, and between $47 and $48 per cwt for the year. Sustained consumer demand for pork will hold hog prices at between $45 and $49 per cwt in 2005.

Pork production in the second quarter is expected to be 4.9 billion pounds, more than 3 percent higher than a year ago, but less than previously forecast. May hog slaughter was lower than expected, dropping slightly from the 1.9-millionhead pace seen weekly so far this year. Weekly slaughter numbers in June will likely be closer to what the industry handled prior to May. Given strong consumer demand—both domestic and foreign—it appears that processors are attempting to maximize throughput in order to achieve lower per-unit costs that accompany the scale economies of large weekly slaughter.

Weekly Hog Slaughter Percent change from last year

Based on production and trade expectations, per capita pork consumption this year is expected to be 51.7 pounds, or fractionally lower than last year. So far in 2004, consumers appear willing to pay higher prices for roughly the same quantity of pork consumed last year. Retail prices should average in the mid-$2.70s per pound this year, or about 3 percent higher than in 2003. Sustained consumer demand into 2005 should yield an average retail pork price in the low-$2.80s, or about 3 percent higher than this year, pointing to a slightly higher farm-to-retail spread in 2005.

The industry awaits USDA’s June 25th release of the Hogs and Pigs report for a fresh perspective on how producers’ breeding decisions and intentions, in particular, may be responding to hog prices that, so far this year are higher than they have been since 1997.

Links

For more information view the full Livestock, Dairy and Poultry Outlook - June 2004 (pdf)

Source: Livestock, Dairy and Poultry Outlook - U.S. Department of Agriculture, Economic Research Service - June 2004