Major Losses Expected for Pork Industry

The nation’s pork industry will continue to experience some of its worst economic losses in recent history as record-setting drought decimates feed supplies, says Purdue Extension agricultural economist Chris Hurt.

Producers could lose about $30 per head this summer and nearly $60 per head during the final quarter of the year as continued liquidation of herds drives down market hog prices and drought drives up feed prices. This exceeds the previous record quarterly losses of $45 per head in the final quarter of 1998.

In recent weeks, slaughter has jumped by 6 percent. The unexpected addition of hogs to the market has caused a more than $10 per hundredweight drop in prices since late July with prices now in the high-$50s.

There are two points to keep in mind here. First, because the hogs are being liquidated early, this will result in a reversal of the situation in early 2013----that is, short supplies then and rising hog prices.

The second point to keep in mind is that the rising prices caused next year because of the short-supplies will not be overall price inflation, but the result of the short supply. IF Bernanke starts to aggressively print money again after the election, the price could be pushed even higher because of this money printing induced price inflation.