December 29, 2014 / 7:58 PM / 3 years ago

U.S. hog prices to struggle after modest post-New Year's bounce

CHICAGO, Dec 29 (Reuters) - The recent slump in U.S. hog prices is expected to ease around the start of the new year, when packers resume normal operations after closures during year-end holiday observances.

But a recent government report suggests such a price recovery might be short-lived after cheaply-priced feed, and last summer’s record-high hog prices, encouraged producers to add more pigs to their herds than anticipated.

Consumer demand, too, is expected to remain high for now as lower gasoline prices have put more money in the public’s pockets to spend on goods such as meat protein, said University of Missouri economist Ron Plain.

Ample supplies of domestic pork products are expected in the year ahead, augmented by heavyweight hogs and fewer pig deaths caused by the deadly Porcine Epidemic Diarrhea virus (PEDv), said Plain. More feed will be required to reach these heftier carcass sizes, he added.

That, in turn, will likely put pressure on prices for pork chops and bacon in the meat case while reducing the cost packers such as Cargill Inc and Tyson Foods pay for hogs through 2015, Plain said.

In November, retail pork slipped to $4.06 per lb, down for a second straight month from its $4.22 September record, according to the U.S. Department of Agriculture.

Since plants periodically closed from the Nov. 27 U.S. Thanksgiving holiday to the day after Christmas, average hog prices in Iowa/Minnesota dropped from $86.00 per cwt to $75.49.

Last week, USDA’s quarterly hog report showed the U.S. hog herd as of Dec. 1 at 66 million head last fall. That was up 2 percent year-over-year and a slight bump from the pre-report average estimate of 101.5 percent.

This year’s long stretch of profits for hog farmers led to increased production, Plain said. He forecast that 4.6 percent more hogs will be processed in 2015 compared to 2014, with prices next year averaging $84 per cwt, down from $102.83 per cwt this year.

In 2015, average carcass weights should hold steady at about 212 lbs, which would be more than 7 lbs seen in 2013, and feed use to increase 4.5 percent in 2015 over 2014, he said.

Although the pork industry has a clearer picture of what to expect supply-wise in the year ahead, how long-term demand for product will play out is uncertain. The stronger dollar, too, may weaken demand for foreign buyers of U.S. pork, Plain said. (Editing by P.J. Huffstutter and Andrew Hay)

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