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Prices brighter, but hog producers still cautious

Faced with higher grain prices and falling hog prices, U.S. pork producers cut short a planned expansion in 2002, and even though hog prices are forecast to rise in 2003, “it's unlikely that returns will be sufficient to trigger any inventory expansion before 2004,” a USDA livestock analyst says.

“Producers have indicated they expect to farrow 2 percent fewer sows in the first half of 2003,” Shayle Shagham, with the USDA's World Agricultural Outlook Board, said at the annual Agricultural Outlook Forum at Washington, D.C.

For all of 2003, production is forecast to be 19.46 billion pounds, about 1 percent below last year.

Hog prices averaged $34.92 per hundredweight in 2002, which was below break-even for much of the sector. Little relief is expected in the first quarter, with prices forecast to average $34-$36, about $5 below first quarter 2002.

But as supplies tighten, prices were forecast to increase to $38-$42 in the spring and summer quarters, with additional price support likely from reduced supplies of other meat, particularly beef.

“However, even in the face of high wholesale beef prices over the past several months, pork prices have increased very little,” Shagham says.

“Retail prices in the first quarter are expected to be below last year, reflecting relatively large supplies of pork, and then strengthen later in the year. In the fourth quarter, both live hog and retail prices are expected to decline from their seasonal peaks, but remain above 2002.

“For the year, live hog prices will average $37-$39 per hundredweight and retail prices will average in the upper $2.60 per pound range.”

Pork exports rose about 4 percent in 2002 to an estimated 1.62 billion pounds carcass weight, with shipments to Japan and Korea expanding, while trade with Mexico and Russia weakened.

Despite lower U.S. production, some export growth is expected in 2003 as incomes rise in a number of key countries, stimulating demand.

“Prospects for exports to Mexico are somewhat clouded as a result of their anti-dumping investigation against U.S. pork,” Shagham notes. “Although the investigational phase is still under way, preliminary findings may be announced by mid-July.

“Assessment of duties could have a depressing impact on pork exports.”

Pork imported by the United States in 2002 rose about 15 percent, as shipments from Canada reflected their increased production. Higher pork prices in 2003 will help attract larger imports, Shagham says, although the rate of growth “likely will be tempered by slower growth in Canadian production as a result of the higher grain prices caused by drought in 2001/02.”

Overall, imports are expected to increase 2 percent this year, to about 1.08 billion pounds.

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