CORRECTED-U.S. pork demand climbs as big pig herd pressures prices

Mon Aug 17, 2015 10:32am EDT
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(Corrects name of futures exchange in 3rd paragraph to Chicago Mercantile Exchange from Chicago Board of Trade)

By Karl Plume and Theopolis Waters

CHICAGO Aug 17 (Reuters) - Two years after a devastating swine virus killed nearly 10 percent of U.S. hogs, farmers who built up herds to compensate are faced with a sober realization: they've produced too much bacon.

The aggressive ramp-up in hog production after the Porcine Epidemic Diarrhea virus (PEDv) outbreak in 2013, which brought record profits for those whose pigs survived, has now created the greatest U.S. hog price collapse since the late 1990s. That was when overproduction sent prices plunging 75 percent to 50-year lows.

Benchmark lean hog futures prices on the Chicago Mercantile Exchange have dropped 42 percent from their July 2014 record high of $133 per hundredweight (cwt).

And as herds continue to grow, and the strong dollar and competition from Europe and Canada blunts export demand, hog farmers are probably facing even lower prices in the months ahead, with December-delivery futures trading about 20 percent below current prices. The hog glut spells more trouble for a U.S. farm economy already struggling with the lowest grain prices in five years.

La Mars, Iowa-based Tentinger Farms, which sells hogs to Tyson Foods, expanded its herd by about 20 percent to cash in on high hog prices and cheap feed costs, but record returns have eroded.

"Things are not real rosy out here. We're spending a lot of money and touching a lot of bases, handling and feeding more pigs, and not really making any money," owner Bill Tentinger said.   Continued...