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Pork Outlook Turns Sour

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Hog prices have fallen far below breakeven levels. There are worries about the number of hogs headed to market in the fall, and a Purdue University report says the numbers may exceed packer plant capacity. A recent USDA September Hog and Pig report did not help the situation as numbers are three percent higher this year. Animal numbers in the heaviest categories were up four percent. The number that brought the greatest concern in the September report was packer head counts which were up by eight percent. Slaughter capacity is about two percent higher than the headcounts over the past couple of weeks, but the USDA expects slaughter numbers to ease by the end of the year. If those USDA predictions are correct, packers should have enough capacity. Two new processing operations are scheduled to open in Iowa and Michigan in 2017, increasing slaughter capacity by another six percent.

The recent squeeze on slaughter capacity has meant stronger packer margins. The increased capacity next year should reduce packer margins and provide higher prices at the farm level. However, that does not help this fall and winter, as losses are expected to be as large as they have been since 2012. Experts say expected losses in 2017 may lead to ideas of shrinking the breeding herd, and that could lead to higher prices returning in 2018.

Source: NAFB News Service