Pork price outlook mixed for 1999
Pork price outlook mixed for 1999
More pork will be available the first part of 1999 and consumers will see a slow decline in retail prices. Although farmers will be selling more animals the first half of this year, it will take many months for producers to start recovering from disastrous market conditions.
"We'll see more pork the first half of this year as the current nationwide inventory, which is up two percent, goes to market. The breeding herd also is down slightly, indicating that the disastrous market prices are having an impact on production. Since the number of farrowings (pig births) is down, production will decline later in the year," said Lee Meyer, Extension livestock marketing specialist with the University of Kentucky College of Agriculture.
"Demand continues to remain strong so retailers haven't been pressured to decrease pork prices," Meyer added. "Low wholesale prices have encouraged grocers to run specials on pork cuts, creating bargains for shoppers and moving more pork.
"With market prices at such low levels, we might expect even lower retail prices. But the price farmers receive is a small part of the retail price. Farmers normally average about 40 percent of the retail value, but this has fallen to 20 percent the past few months."
Although producer prices have increased in recent weeks, they are still only in the upper teens, according to Meyer. These prices will improve noticeably in the next few months, but won't reach profitable levels. As the supply starts to pull back at mid-year, market prices to farmers will rise to levels expected to cover most production costs.
Retail pork prices likely will come down the next couple of months and then level out. Generally, it takes five to seven months before producer market prices affect retail prices.
Kentucky farmers have struggled with markets and the lack of profits. The number of hogs in Kentucky has declined by nine percent, according to Meyer.
The smaller Kentucky hog operations have been hit hard. A 19-percent decrease in the number of farms with hogs indicates that people are getting out of the hog business. However, these have been smaller operations. The number of farms with 2,000 or more hogs is up about 10 percent.
"Producers have little choice but to sell their animals in the coming weeks because pigs will be bigger than processors want and feed efficiency will decline," he said. "Farmers likely will receive less than they have invested. They are receiving about $40 per animal, but the cost to finish an animal is more than $60, not counting the value of management, buildings and land."
Meyer said a combination of factors contributed to extremely low market prices.
"Prices were good so producers held back hogs for breeding stock. This supported market prices and generated even higher price levels. As a result of the positive outlook, businesses expanded production. The supply going to market began to exceed demand and prices started to drop," he explained.
The expansion in pork production has been driven by an increase in industrial type operations, particularly the large, contract-type operations in the West. Herd size has increased by 10 percent to more than 40 percent in such states as Utah, Wyoming and Colorado, which are not traditional hog-producing states.