Hog prices continue to fall as the industry deals with large pork supplies and increased tariffs.
Over the past eight weeks, the national average carcass price has dropped by over $26, according to an analysis from the Livestock Marketing Information Center.
“The adage of ‘lower prices cure lower prices’ might not fit today’s price adjustment in the same historical time frames for the simple reason that lower prices are needed to maintain the use in tonnage in such a heavy supply environment,” the center says in its analysis. “In short, hog prices are identifying the market clearing price in an effort not to build cold storage levels up to unmanageable levels and keep foreign buyers interested as they face higher tariff rates.
“By moving along the demand curve, lower prices should encourage more usage, offsetting tariff rate impacts.”
According to the USDA, increased pork production continues to be likely for the next six to nine months. The breeding herd was up 3 percent in the latest report, with fall farrowing intentions up 2 percent.
The LMIC estimates pork production to climb by 5 percent in the fourth quarter, with gains of 1.6 percent and 2.4 percent in the first and second quarters of 2019, respectively.
“By our estimates, prices will need to remain below $60 per hundredweight at least over the winter,” the LMIC says.
Feeder pig prices have also dropped. According to the center, the price peaked at $60 per head in February but dropped below $22 in mid-August — the lowest price since September 2012.
“Cash trade has fallen off sharply, with weighted average prices below $20 per hog since mid-July,” the center says. “Prices have been routinely reported in the single digits in the last couple of weeks. Feeder pigs weighing 40 pounds are worse off. The most recent week, cash prices were under $20 per head.”
According to Iowa State University’s feeder- to-finish returns, 40 lb. pigs bought in March and sold in July lost $24 per head.
“Even though feed inputs and feeder pig prices are looking attractive, the industry remains uncertain about what the marketing environment will be in the next six months, and by our calculations, the price environment for market hogs is unlikely to improve,” the LMIC says in its report.