Hog producers: Don’t expect large profits

Hog producers: Don't expect large profits Given current conditions, hog producers should not expect to make large profits in the upcoming year.

Gene Murra, professor emeritus economics department, South Dakota State University, said production should be lower in 1999 than in 1998 but not enough lower to provide a much higher price for farmers.

Some forecasters are looking for 1999 production to be five percent or more below 1998.

Murra expects the production and demand situation to improve, and predicts $35-40 hogs by at least mid-year. That would mean prices close to the first half of 1998 and close to break-even.

According to Murra, the futures market for lean hogs in late February was in the $55 to $57 range for the last half of 1998. This translates to the low $40 for live hogs. Given the unusually wide basis in 1998, that probably means prices in the upper $30 for many hog producers and higher than that for producers of very lean hogs sold direct to packers.

"Several factors contributed to the downturn in prices," Murra said. "Certainly, supply had an impact.

Yearly hog slaughter was over 100 million head, 10 percent above 1997. There were many weeks when slaughter was over two million head. That taxed the slaughter capacity of many plants and prices were pushed lower."

Imports from Canada also were a contributing factor. While the number increase was not large, there were more hogs to slaughter. In some cases, hogs from Canada were needed to keep a plant operating at close to capacity. In other cases, the added supply of hogs probably pressured prices. In addition, the added supply meant more pork to sell.

The export market also has proved to be a hindrance to the pork industry. Price reporting also proved to be a problem for the pork industry. In some cases, prices paid were not provided by the buyer, and in some cases the prices reported were not for higher quality, lean hogs.

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