As coronavirus hog backlog shrinks, farmers should see higher prices
Hog farmers struggled with a coronavirus-caused backlog of market-ready hogs that peaked at 3.5 million head at the end of May, forcing them to cull some and slow weight gain on others. The backlog remains large, but Purdue economist Jayson Lusk says farmers may see “possibly elevated hog prices” by the end of the year as the hog supply shrinks.
“It will take some time to work through the COVID-19 disruptions,” Lusk wrote in the quarterly Purdue Agricultural Economics Report. “Decisions to delay breeding or liquidate sows during the worst of the COVID-19 shutdowns [at packing plants] will likely help further reduce the backlog in the months ahead. These same decisions will likely imply a smaller market-hog supply, and thus possibly elevated hog prices, around the end of 2020.”
While Lusk said hog prices will improve in the near future, the National Pork Producers Council said farmers need help now and urged passage of a new coronavirus aid bill. “We’ve lost hog farmers of all sizes due to the COVID pandemic and need additional relief to preserve a highly competitive pork production system in the United States,” said NPPC president Howard Roth.
The council said a coronavirus package should include compensation for culled hogs or hogs donated to charity, a new round of payments to producers with no dollar limit on aid, and access by more producers to the Paycheck Protection Program.
Market prices for hogs plummeted last April and May during coronavirus outbreaks among workers at packing plants. The slowdown in pork production prevented farmers from sending hogs to slaughter. “Producers had to euthanize animals, extend feeding periods, and delay the arrival of new feeders,” Lusk wrote. “Because the majority of hogs … are sold on contract, many hog producers are not directly affected by the the adverse movements in hog prices witnessed during parts of this spring and summer.”
USDA analysts also forecast higher hog prices as fall moves into winter. “Hog prices in the fourth quarter are expected to average $51 per (100 pounds), more than 18% above the same period a year ago. Higher fourth-quarter prices reflect, in part, a continuation of the level of demand that resulted in higher prices in September,” they said in the monthly Livestock, Dairy and Poultry Outlook released on Friday.
A month ago, the USDA estimated market hogs would sell for an average of $37 per 100 pounds during October, November, and December, compared with the current estimate of $51. The trend of higher prices will extend into early 2021 due to a pinch in pork output because fewer hogs will be available, said the Outlook. “First-quarter 2021 hog prices are expect to averaged $47 per (100 pounds), almost 11% greater than a year ago.”
Despite the disruptions last spring, pork production is forecast to be 2% higher this year than in 2019, and to rise again in 2021 by 1%.
Americans will consume an average of 51.3 pounds of pork per person this year, 1.1 pounds less than last year due to the pandemic, estimated the USDA.
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