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How High Will Pork Prices Go?

How High Will Pork Prices Go?

High feed costs and increased exports lead to rising pork prices.

Pork prices are on the rise as international exports increase and high feed costs are passed on to consumers, said a Purdue Extension agricultural economist.

Retail prices this year are averaging a record $3.35 per pound, up 14% from $2.93 per pound in early 2010.

Increases in exports to South Korea, Japan, Russia and China have led to stronger demand for U.S. pork, said Christ Hurt.  Meat designated for export comprised 22 percent of all U.S. pork in production this spring, and he said that is leaving less for U.S. consumers.

"While it now appears pork production will rise about 1 percent this year, the large sales to foreign customers mean tight supplies here at home," Hurt said.

In recent weeks, corn prices have fallen after reaching a record high of more than $8 per bushel in some locations. Margins between hog revenues and feed costs are now positive, which is welcome news for the pork industry.

"Everyone in the pork marketing channel is sharing as packer gross margins are up 10 percent, retail margins are up 14 percent, and producers received 16 percent higher prices," Hurt said. "High feed prices over the past four years are finally getting transmitted to consumers."

The national breeding herd has shrunk by 5% in the last three years due to a variety of factors including volatile feed costs and world recession in 2008 and 2009 leading to financial losses.

But after years of uncertainty and decline in the industry, Hurt said the number of market hogs increased this year because sows are now averaging a record 10 pigs per litter.

Despite an outlook for some profits with recent decreases in corn prices, Hurt said the national swine herd is unlikely to expand this summer.

"Pork producers know that corn and soybean yields are not yet assured; the feed outlook could still change sharply depending on final yields in the U.S. and the northern hemisphere," Hurt said. "For this reason, there will be almost no movement to expand herds unless cash corn prices are under $6 a bushel this fall."

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