Global Information would like to present a market research report, "Five year Forecast and Analysis on the United States Hog Market" by Doane Advisory Service.
Over the 23 month period, budgets show losses averaging $22.50 per head. With hog slaughter over that period totaling more than 220 million head, a total of nearly $5 billion in this downturn. Even so, the cutback in hog inventories is modest at best. According to the September Hogs and Pigs report, the breeding herd inventory is down just 3 percent from a year earlier and farrowing intentions are also down just 3 percent this quarter and during the winter months. If these numbers are accurate, the losses hog producers are enduring will continue at least into early 2010 and possibly longer.
USDA s forecast shows U.S. pork production falling by about 1.5 percent from 2009 to 2010. With a reduction in output of less than 2 percent next year, it is hard to see how hog producers will be able to return to solid financial footing. We expect a slightly bigger reduction of about 2.2 percent in output for 2010. Under that scenario, hog prices may move back above breakeven by next summer, but profits remain relatively modest. Producers continue to reduce the size of the breeding herd throughout 2010, and there is a resulting improvement in profits two years from now. By 2011 the good profits provide economic incentives for producers to begin to expand again, but the expansion is modest.