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Lower Live Hog Values Expected to Curtail Thoughts of Expansion

By Bruce Cochrane

The chair of the Saskatchewan Pork Development Board expects a dramatic slide in the value of live hogs since November to curtail any plans to increase North American pork production in 2015.

In late November June futures on the Chicago Mercantile Exchange were trading at around a dollar per pound but, as the result of lower than expected losses from Porcine Epidemic Diarrhea, the value of June futures has fallen to 77 cents per pound in early February.

Sask Pork chair Florian Possberg recalls a year ago we were looking at very severe losses that caused a shortage of pork in North America at a time when beef and poultry supplies were also low but this year we've seen fewer losses than expected from PED pushing slaughter numbers up by about six percent while poultry production has also increased.

Clip-Florian Possberg-Saskatchewan Pork Development Board:
We did have an exceptional year in 2014 and we had high levels of profitability for those that escaped the disease problems.

Some of those producers had thoughts of expanding operations, not so much in Canada but certainly in the U.S.
With the lower prices some production probably is currently operating at a loss.

Hopefully it will rebound as we get into the summer months but cash is king and if you're not making enough money certainly some of expansion projects that were anticipated likely will be put on hold and in some cases shelved.

Possberg says most producers anticipated the first half at least of 2015 would still be quite profitable.
He says the reality of significantly lower prices than anticipated has changed the mind set of producers from one of comfort and in some cases aggression in terms of replacing things and doing maintenance to one of holding on and preparing for a down turn.

Source: Farmscape


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