Lean hog futures have proven one of the most reliable for gains
amongst agricultural commodities.
They look on track for a slender gain in 2012, in what would
be a fifth successive calendar year of headway, totalling nearly 50%.
Not that the period has been a boon for farmers. Grain
prices have been elevated for much of the time too, often rising faster than
hog and pork values, and leaving producers with negative margins.
What is the industry in for in 2013? Leading commentators
give their forecasts.
Department of Agricultural and Consumer Economics, University of Illinois
"US pork production is expected to decline from 23.26bn
pounds in 2012 to 22.94bn pounds in 2013.
"Exports are expected to remain near the 2012 level of 5.4bn
pounds. Domestic pork supplies are projected at 44.9 pounds per capita in 2013,
down from 45.7 pounds in 2011 and 2012.
"The average price of hogs was near $66 in 2011 and $61 per
hundredweight in 2012. An average near $64 per hundredweight is expected for
Chris Hurt, extension
economist Purdue University
"A return to profitability for hog producers may be on the
not-to-distant horizon by the spring of 2013.
"There still are losses to sustain for the first quarter of
2013 when losses are estimated at about $15 per head. But live hog prices are
expected to increase enough to reach breakeven by early May 2013 and provide
for positive returns of around $10 per head in the second and third quarters.
"Lower feed prices late next summer are expected to sustain
a profitable industry into the fall of 2013 and winter of 2014. If US and world
crop yields are closer to normal in 2013 the pork outlook should brighten and
thoughts of expansion will begin in the late summer of 2013.
"While pork producers are beginning to feel that the worst
is behind them, the 2012 losses will leave an imprint in the form of reduced
equity. Estimated losses for 2012 are about $17 per head.
"The era of high feed prices has been difficult for all of
the animal production industries including pork producers who lost money in
three of the last five years: 2008, 2009, and again in 2012. For those that did
not panic, it now appears the sun will rise again and the dawn of profitability
will once again return."
"We are bullish hog prices, predicting an average price of
$100 per hundredweight [100 cents per pound] in 2013, with feed-price induced declines in production,
and the lowest ending stocks in over 15 years, supporting prices.
Morgan Stanley lean hog price forecasts
2013: 100 cents a pound
Forecast for season-average price, Chicago front futures contract
"Near-term hog/ pork supply will likely pressure prices, as
weak margins continue to drive high slaughter rates into early 2013.
"Lower production should prove net bullish for prices in
2013 as we expect the pricing pressure of early-season slaughters will be more
than offset by reduced hog supply in the second half of the year.
"We model full-year hog production needing to fall 9% year
on year in order to adequately ration the sector's corn feed demand. Production
declines should leave 2013 hog ending inventories at their lowest since 1996."
Paragon Economics and
"The US Department of Agriculture currently pegs total pork
production for 2012 at around 23.195bn pounds, which is remarkably close to the
23.209bn pounds that was forecast at the beginning of the year.
"The latest estimates also peg 2013 pork production at
22.792bn pounds, about 400m pounds or 1.7% lower than 2012 levels. A smaller
pig crop and lower hog weights in the first half of 2013 should contain overall
pork output levels.
"As with cattle, feed availability and the ability to
sustain productivity gains in the form of higher carcass weights remains a key
wild card going forward."