Economist predicts a normal range for hog price rally

Friday, April 24, 2009

© AgMedia Inc.

by SUSAN MANN

Guelph university production economics and agribuiness professor Ken McEwan is more conservative in his view of where live hog prices will go this spring and summer compared to a Manitoba pork industry spokesman who’s predicting a dramatic price increase.

Perry Mohr, CEO of the Manitoba Pork Marketing Cooperative, says hog prices could increase by $20 to $40 per 100 kilograms compared to current prices and they might even be up by $50 per 100 kgs. Factors contributing the price increase are: reduced hog supply in the United States, a decrease in the Canadian dollar, and lower feed prices.

McEwan, of the University of Guelph’s Ridgetown Campus, says traditionally there’s a seasonal price rally that peaks in June/July. The rally is expected to happen this year too but he’s more cautious than Mohr in his opinion of where prices will go.

Looking at the top four pork-importing countries - Japan, Russia, Mexico and China - and factoring in the global recession, “I think you have to be somewhat prudent in the estimation of where prices might go,” McEwan says.

Another factor that may affect prices is an excess of animal protein currently in the U.S. market. And many U.S. hog packers have said they won’t take Canadian pigs because of the American country of origin labelling laws.

“I think we’re going to see seasonal peaks but we’re not going to see above average peaks,” McEwan adds. The average peak from 2003-2007 was $160 per 100 kgs.

Now the futures market has August hogs at $174 per 100 kgs (100 index). May’s futures market price is $157, while for June it’s around $160 and by December it crashes down to $130, McEwan says. Those futures market prices are way above current prices.

For the week ending April 17, the Ontario pool price was $134 per 100 kgs and the contract price was $125 per 100 kgs. BF