Tuesday, August 28, 2012

Worse than 1998, Hurt warns hog farmers

Purdue University economist Chris Hurt says hog farmers are heading into “a tsunami of red ink” that is going to be worse than 1998.

The pain is coming from more hogs and expected, sharp culling of the sow herd and record-high feed costs.

He says losses between now and the end of the year could go as high as $60 per market hog; 1998 hit a loss of $45 per head.

Hog slaughter for the last two weeks increased by six per cent, far more than the one per cent increase market watchers anticipated. This pushed prices down by $10 per hundredweight.

Hurt predicts losses will continue during the first and second quarters of 2013 - $38 per head during the first quarter, $5 per head during the second.

Over the 12-month period, that began July 1, losses will average $33 per head and total $4 billion for the U.S. hog industry, Hurt says.

He predicts the sow herd will be reduced by four to six per cent by January and even that won’t help improve prices for market hogs until next summer.

The options: euthanize piglets and/or reduce market weights. Hurt said packers could help by reducing discounts for light-weight hogs.

He said the $170-million government purchase program will reduce losses by less than $1 per head.