Higher Pork Prices in 2013 Due To Lower Exports, Hog Sow count in US, Canada, Europe, Brazil

 

                            The US drought of 2012 affected the country's output of corn (-21.4% --> 11.093 billion bushels 2012 est), soybeans (2.663B bushels) and other feedstock leading to near record high prices.  Unable to adapt to higher costs (feedstock, fuel, unstable currency rates) major hog producers are closing up shop, among them North America's #2 producer of hogs Big Sky Farms (bankruptcy protection last week) and #4 producer, Manitoba's Puratone Corporation.  The shutdown of Big Sky is sure to affect global market prices given that Canada is the world's third leading exporter of pork - $3.2 billion last year;  Big Sky produces 40% of Saskatchewan Pork, has 42,000 sows in Sask and Manitoba, and produces 850 thousand pigs for slaughter in the United States and Canada.  According to Canada's agriculture minister, at current prices it costs $30 more to raise a hog than the market prices it at.  More ... A study released in June 2012 showed that the production and export of hogs and pork contributes $9.28 billion to Canada's economy;  Last year hog producers netted $20-$30 per hog --> Pork exports are important because it provides the economy with added value (+$3.5 billion).

On September 20, 2012 Britain's National Pork Association said with 100% certainty that there will be a worldwide shortage of pork / bacon in 2013.  According to the Association the problem isn't just North America;  For the year ending June 2012 European countries are reporting smaller herd sizes, Germany (-1.3%), Sweden (-7.2%), France (-3.2%), Netherlands (-3.6%) among others.  Brazil's industry is also in crisis mode as it expects to lose more than 30% of local production (40th sows).

on Sept 26, 2012 Martin Rice of the Canadian Pork Council said that pork prices will increase by anywhere from $0.50 --> $1.00 per kilo.

For the long term, there's still good reason to be optimistic !  The market price of corn fell by more than 10% last month and the most recent data out of the USDA showed a slight increase in soybean output.

Other Notes: -- Higher prices won't take effect until about half a year from now -- Iowa leads all states in terms of pork production;  Iowa's output at just under 4.0 Mt would rank fourth among countries -- In 2011 21.3 million pigs were slaughtered in Canada.

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