“The hog industry is indeed in need of some financial relief, but the latest USDA June Quarterly Hogs and Pigs Report is not the report that producers can hang their hat on,” notes Moe Agostino, Senior Risk Analyst at Farms.com
“Record productivity gains have more than offset any reductions in supply thus far in 2009 due to the circovirus vaccine introduced in 2007,” notes Agostino. “Add lower demand due to a global economic crisis since late 2008, and now the introduction of the H1N1 virus topped with higher feed costs, and we have a perfect storm brewing in the in the hog industry.”
Ron Plain, Professor of Agricultural Economics at University of Missouri, agrees: “The hog industry is having a very tough time. Most calculations indicate producers have lost money.”
Agostino believes that if pork demand remains weak, the hog industry will need to reduce the U.S. breeding herd by as much as 5-10% to get back to profitability.
Unfortunately, this must be a “reduction in total disappearance,” according to Bob Brown, an independent market analyst from Edmond OK. A change in ownership won’t put an entire unit out of business and therefore won’t be effective. He predicts there will have to be “enough pain for a whole unit to be taken out of business.”
This may take longer than producers would care to imagine as sow slaughter numbers for 2009 are down compared to 2008. The big spike in hog prices may have been postponed until 2011.
Editor’s Note: Leah Bigham is a communications major from Fresno State University. She is working in the Farms.com office this summer.