US Swine Economics Report - Regular report by Ron Plain on the US Swine industry. Pork demand continues strong.

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Ron Plain

Daily commercial pork production during March was 1.32% higher than in March 2003. It looks like April pork production will be up 4.2% on a daily basis compared to 12 months earlier. Yet, prices are much higher than a year ago.

Retail pork prices averaged $2.696/lb in March, up 7.8 cents per pound from a year ago. The average price of hogs in Iowa-Minnesota was up $16.63/cwt of carcass this March compared to last. It looks like April carcass prices will be over $15/cwt above year-ago levels.

Part of this improvement in hog prices is due to tighter marketing margins than last year. Packers slaughtered and cut up hogs for 4.4 cents per pound less in March 2004 and processors, distributors and retailers were receiving 8.9 cents per pound less than in March 2003. In addition, the by-product value was 1.7 cents per pound higher this March than last. More pork, higher retail prices and tighter marketing margins - truly a rare combination.

One reason for these positive developments is an improving trade situation. U.S. pork imports are down and pork exports are up sharply.

Another reason for higher hog prices is the price of competing meats. March retail beef prices were 40.3 cents per pound higher than in March 2003. Retail prices of chicken and turkey are also higher than last year.

The remaining price strength is coming from U.S. consumers. Our pork demand index for the first quarter of 2004 is up nearly 5%.

How much longer this demand strength will last is tough to forecast. The futures market is predicting summer hog prices close to the level of 2001, despite the fact that summer pork production is expected to be 7% higher than in 2001. Cattle futures are also bullish on the expectation (hope?) that Japan will be buying U.S. beef well before the end of the year.

Since feed prices have moved up just as fast as hog prices, there is little reason for hog producers to expand production. However, broiler production does appear to be growing fast and it is just a matter of time until Canadian cattle again move south and the beef shortage ends.