Purdue News

January 29, 1999 Drop in hog supply bolsters price recovery WEST LAFAYETTE, Ind. -- It looks like estimates from the U.S. Department of Agriculture were right on the money. The USDA's December report, released during the depths of the hog-price crisis, predicted a January decline in the hog slaughter. Lower slaughter numbers would translate into higher prices for producers. According to Chris Hurt, agricultural economist for the Purdue University Cooperative Extension Service, all signs are that the decline has materialized, with preliminary estimates of January's hog slaughter reported at 4 percent above year-ago levels. This is a considerable drop from December, which had outpaced the December 1997 slaughter rate by 9 percent. "Supplies of hogs have tracked very close to the inventory numbers suggested by the USDA inventory report," Hurt said. "The rate of hog slaughter is expected to continue declining, coming in at 2 percent above last year's rate in February and actually going down by about 1 percent in March, and in April, and May." Hurt said the accuracy of the USDA inventories was called into question in November and December because slaughter supplies were much larger than had been estimated in the September report. "That inventory suggested domestic supplies would be up by only 1 percent to 2 percent in November and December, but the actual slaughter was up by 14 percent in November and 9 percent in December, totally overwhelming pork processing capacity," he said. Hurt said the ability to gauge the accuracy of the December USDA report also was hampered by adverse winter weather during the first two weeks of January. The nasty weather disrupted shipments of hogs to market. "Slaughter supplies did drop in the first two weeks of January, but everyone wanted to wait until the end of January to observe slaughter supplies with more normal weather." Hurt said. "January slaughter data still is incomplete, but preliminary numbers indicate that slaughter was up about 4 percent, consistent with the data provided in the government inventory." Hurt pointed out that these numbers are very significant to pork producers. "Enough time has elapsed to call the December Hogs and Pigs Report an accurate reading of the actual inventory that existed around Dec. 1. This increases confidence in the numbers that will come to market during the year, and USDA said that slaughter will diminish over time, and therefore, prices will be moving up," Hurt said. With a 2 percent increase over year-ago slaughter numbers expected in February, Hurt said he anticipated prices to improve to a $26-to-$30 range per hundredweight by the end of the month, after beginning February in the $24-to-$27 range. "The same increase is again expected for March, when slaughter supplies are expected to drop by 1 percent, with prices moving to near $30," Hurt said. "April prices are expected to push into the lower- to mid-$30s, with the industry finally back to break-even prices in the mid-$30s in May." With winter farrowings down 1 percent, Hurt said summer supplies will be nearly unchanged, with prices in the upper $30s. Spring farrowings were expected to drop by 7 percent, moving fall prices into the low $40s. If sow liquidation continues throughout 1999, Hurt said, 2000 may be a profitable year for producers. Source: Chris Hurt, (765) 494-4273; e-mail, hurt@agecon.purdue.edu Writer: Amy H. Raley, (765) 494-6682; e-mail, ahr@aes.purdue.edu Purdue News Service: (765) 494-2096; e-mail, purduenews@purdue.edu To the Purdue News and Photos Page