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Response to Market Pressure May Aid Price

by 5m Editor
11 March 2008, at 8:37am

MINNESOTA — Hog farmers in the upper Midwest received a lifeline this month. When, after six months of $20-$30/pig losses, the US sow herd showed its first signs of shrinking and prospects that the market may improve.

Smithfield Foods, the nation’s largest hog producer, announced plans to reduce its sow herd by four to five percent.

“Although a five percent reduction in Smithfield’s sow herd numbers won’t solve the hog price/feed price problem alone, a similar movement by the entire industry could,” said Mark Whitney, University of Minnesota Extension swine specialist.

Hog producers are getting squeezed between high corn and soybean meal prices plus low hog prices. Corn prices are expected to hover around $4/bushel or higher. Farmers need about a 50-cents/pound live weight price to break even at current feedstuff prices. Prices in March were slightly below break even.

There is hope on the horizon, Whitney said. Futures contracts have remained higher than cash prices.

Whitney thinks analysts and traders are anticipating a reduction in the sow herd and reduced hog numbers by the winter of 2008-2009. Indications are that the next year will be difficult from a cash flow and profitability standpoint.

"Those producers that improve efficiency and withstand the storm should expect to receive higher hog prices in the future, which in some ways is already being played out in the futures market,” he added.

For more of Whitney’s hog production comments, visit www.AgBuzz.com.

5m Editor