Chicago - U.S. hog prices rose about $3 per 100 pounds this week in Midwest markets to the $14-$15 area after Farmland Industries, the nation's sixth largest pork producer, said Tuesday it would pay farmers a minimum of $15 per 100 pounds for live hogs.
Hog producers have been stung recently by the lowest hog prices since 1941. Prices dropped below $10 per 100 pounds earlier this month in the Midwest and near $15 in Eastern markets.
“I'm absolutely ecstatic with the increase in the live hog prices today,” Farmland President Harry Cleberg said in a teleconference Wednesday. “We wanted to do something to help get the prices moving in a more positive direction.”
Kansas City-based Farmland, which slaughters about 22,800 hogs daily at its four plants, and Hatfield Quality Meats of Hatfield, Pa., which slaughters about 7,000 a day, are the only major pork processors to announce price assistance plans for hog producers.
Hatfield guaranteed farmers a minimum of $25 per 100 pounds in northeastern U.S. markets for the rest of December.
“Hopefully, it will put a smile on their faces,” Hatfield's meats supervisor Tom Moyer said of the new price floor.
Farmland buys many of its hogs from the major hog-producing areas of Nebraska, Iowa and Illinois, while Hatfield buys from New York, Pennsylvania and Maryland.
For Midwest producers, Farmland's $15 offer was still well below production costs, livestock industry sources said.
They estimate it takes $30 to $35 per 100 pounds to feed a hog to market weight of 250 pounds or so. At $15 per 100 pounds, producers were still losing $45 to $50 a head.
Livestock analysts applauded Farmland's action, but said hog prices were probably due to reach $15 in Midwest markets by early January anyway. They said fewer hogs would be available then because extremely low hog prices in the fourth quarter had forced producers to shrink herds.
“It's definitely a gesture of goodwill, but it doesn't do much for the producer's bottom line,” said Paul Georgy, president of Allendale Inc., an agriculture consulting firm.
The higher prices should not affect earnings at Farmland or other pork processors, because the companies have enjoyed healthy profits due to the low hog prices.
“Pork margins for processors are high, historically high,” said George Richter, president of Farmland's pork division.
Huge hog supplies were largely responsible for the sharp drop in prices this year. Exports of U.S. pork have dropped in the wake of economic problems in Asia and Russia, but supermarket sales have been robust, Richter said.
Meatpackers have slaughtered huge numbers of hogs to prevent backlogs of the animals. The U.S. Agriculture Department estimated Monday's hog slaughter at 395,000 head, the largest one-day slaughter this year and the highest since the record 400,847 slaughtered on December 1, 1983.
Richter said the hog slaughter rate may continue high for three to four more weeks.
Meat Industry Insights News Service
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Phone: 631-757-4010
Fax: 631-757-4060
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