Although the breeding herd is not dropping fast enough to bring pork production back to profitability, falling corn prices and prospects for lower soybean meal prices this fall are providing rays of hope for pork producers in the future, one economist says.

"The USDA reported on June 1 that the breeding herd was down about 3%, with producers' farrowing intentions down 2% this summer and 2% this fall. But pork supplies will not change much even with the smaller breeding herd," Purdue University ag economist Chris Hurt says in a university report.

"Although smaller litters would seem to signal similar reductions in pork supply, there will be more pigs per litter and somewhat higher marketing weights as corn prices are expected to be lower," he adds.

Continue article

ADVERTISEMENT

As producers reduce sow numbers, they tend to cull the least productive sows, meaning the most productive sows remain and the number of pigs per litter increases more rapidly, he says.

"For example, in the first half of 2009, the number of pigs per litter increased by 2.5%, compared with an average annual rate of just 0.8% over the past decade," he said.

"Weights will likely be higher in the coming 12 months as feed prices drop, reflecting the larger anticipated size of corn and soybean production. Pork production is expected to drop only about 1 percent over the coming 12 months. This small supply reduction will not boost prices back to profitability in 2009," the economist notes.

The loss of demand due to H1N1 has likely been the single most significant factor in causing the failure of a spring pork price rally, Hurt says.

"It is most likely the loss of exports rather than loss of domestic demand that has caused the price weakness. The May trade data will be released on July 10 and will give the first picture of how much damage there was to export volumes. Unfortunately, about 5% of U.S. pork production may have been diverted from the foreign market to domestic consumers," he says.

According to Hurt, H1N1 may have longer-lasting effects. Flu will be in the news again this fall as medical experts around the world caution against the second wave of H1N1, and the second fall wave of the 1918 Spanish flu had the highest human fatality rates.

"Even though H1N1 in humans is not related to pork consumption, simply having flu in the news probably means there will be some continued loss of pork export demand," he said.