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High Feed Costs Prevent Expansion Of U.S. Hog Herd

High feed costs are keeping U.S. hog producers from expanding their herds, but low mortality rates will ensure there is sufficient pork for domestic use and for exports, analysts said June 24, following release of a government report.

The U.S. Department of Agriculture’s quarterly hogs and pigs report showed that there was a slight increase in the herd size from a year ago, due to more piglets surviving to maturity.

“Despite making money on the hogs, producers were respectful of historically high corn prices and did not expand,” said Don Roose, analyst with Iowa-based U.S. Commodities.

Jim Clarkson, analyst at Chicago-based A&A Trading, said, “The profitability is not there. I don’t hear of any expansion.”

The USDA report showed 10.03 million baby pigs survived, up 2.3 per cent from a year ago, to put the total hog herd on June 1 at 65 million head, or 100.6 per cent of a year earlier.

“This tells us that the industry is making strides in efficiency with respect to a 10-pigs-per-litter result, which is the first time that’s happened,” said Dan Vaught, owner of Vaught Futures Insights.

The breeding herd in the report was 5.803 million head, or 100.3 per cent of a year ago, and the market hog supply was 59.197 million, or 100.6 per cent of a year ago. Those were up slightly from trade estimates.

“We’re still going to have adequate pork supplies around for domestic and export use,” said Roose.

HIGH FEED COSTS

Hog prices of $65 to $70 per cwt were common during the quarter and were higher than a year ago to earn producers profits of $12 per head or more, analysts said.

However, worries about high feed costs and a shaky economy had producers tending the hogs they had rather than adding more.

“The $30 per head profits that they were banking on largely did not materialize, because of high corn prices and disappointing grilling demand,” Allendale Inc. analyst Rich Nelson said.

Pork exports were the key driver in this year’s higher hog and pork markets. But, domestic meat sales struggled, hurt by a cool, wet spring that curbed outdoor grilling and by a shaky economy that included nine per cent unemployment .

The slowdown in domestic sales was blamed for 22 per cent more pork sitting in storage in May than a year ago.

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