The hog-market rally, which drove prices of lean hogs to a record high earlier this month, looks set to fade as record retail prices and renewed economic worries sap consumer demand for pork, a leading academic has said.

Global economic concerns have crystallised since the peak in prices early this month, when Chicago lean hogs topped $0.90 a pound, and live hogs reached the mid-$60s per hundredweight.

"A more cautious world now likely means some moderation in pork prices," which will feed through into hog markets, Purdue University economist Chris Hurt said.

Last year, when lean hog prices fell below $0.45 a pound for the first time since 2002, "demonstrated just how critical a recessionary economy was in weakening pork demand".

'Retail prices will soar'

Furthermore, retail prices are set to hit a record high of about $3.10 per pound, up from $2.92 a pound in April, as retailers, who have been absorbing rises in wholesale prices, exploit the summer barbecue season.

"You can bet that retail prices will soar in coming months. Consumers will back off somewhat."

The impact of softer pork demand on hog markets would be to cut the price of live animals to about $50 a hundredweight by the last quarter, reducing the 2010 average to $54 a hundredweight.

Back in the black

With grain prices weak, this would still leave producers with a healthy profit, of some $21 per head, although this would be insufficient to wipe out the losses of 2008 and 2009, one of the worst periods in the industry's history.

Chicago lean hogs have already lost significant ground from the early-month peak, with the June lot standing at $0.817 a pound at 14:00 GMT.