More Pork on the Horizon
CHICAGO (AP) _ Meat eaters who enter the new year with a resolution against pigging out probably will have to overcome the temptation posed by lower pork prices.
Across the land, hog farmers are thought to have expanded their output further during the fall, and an Agriculture Department report due Wednesday should give a clearer picture of current production and prospects for the coming months.
The consensus is that there is more pork on the production line.
″This report is going to confirm that the expansion of the hog herd has continued through the fall period despite economic uncertainties″ stemming from the stock market crash in October, said Chuck Levitt, a livestock analyst in Chicago with Shearson Lehman Brothers.
Hog futures prices have come down about 7 cents a pound, or 15 percent, since the highs of August and the contracts for nearby delivery lack the normal seasonal premium for this time of the year.
″Some people in the trade might see an increase in the hog population of 13 percent″ in the coming report, said Philip Stanley, an analyst in Chicago with Thomson McKinnon Securities Inc. And the number of hogs kept for breeding could also be up by 12 percent or 13 percent over the year-ago figure, he said.
Exceptionally high profits, starting in mid-1986, have been fueling the expansion. Low corn prices made it cheap to feed hogs and this generated one of the few bright spots in the agriculture economy.
Some of this incentive has been disappearing, however, as pork prices have come down while feed has gone up.
Nonetheless, the cost of producing hogs ″is still above the break-even point for most producers,″ said Levitt. ″And that’s the key point.″
The narrowing profit margin may have generated second thoughts about expansion among some small producers, particularly after the stock market crash, Levitt said.
″But as long as producers continue above the break-even point, the lower prices are not going to have that much effect on changing their minds about expansion,″ he said.
Levitt foresees a 10 percent increase in the hog population as of Dec. 1, which would translate to 56.3 million head.
Of this amount, he expects 7.5 million to have been kept for breeding, an increase of 12 percent from a year ago. That would leave 48.8 million head for the slaughter market, up by 10 percent.
″So we’re definitly looking at a double digit increase of pork to be confirmed by the report,″ said Levitt.
End Adv Weekend Editions Jan. 2-3