CHICAGO - Financially stricken U.S. hog producers are cutting back on supply in a bid for profits but consumers will continue to get plentiful pork at grocery stores well into next year, analysts said on Friday.
Pork should continue to be a very good buy, especially in the fourth quarter, said Ron Plain, livestock economist at the University of Missouri. Normally pork is a good buy in the grocery store during the fourth quarter and that should be especially true here this year.
The country is awash in pork amid a slowdown in export demand due to the spread of the H1N1 flu, commonly referred to as swine flu despite the absence of evidence to show that the disease can be contracted through consumption of pork.
Exports are down so there is probably going to be more pork on the market in the fourth quarter of this year than there was a year ago, Plain said.
A U.S. Agriculture Department report on Friday said the U.S. hog herd as of Sept. 1 was down 2 percent from a year ago at 66.626 million head and the breeding herd was down 3 percent at 5.874 million head. But the number of pigs per litter was put at 102 percent of last year.
USDA earlier in the week put the total supply of pork sitting in U.S. warehouses at the end of August at 517.9 million lbs, a record for the month.
The average wholesale pork price reported by the USDA recently was the lowest in six years.
We are producing less meat and we are selling it at lower prices. That tells you the demand curve is going down. The demand for meat is less today than it was a year ago because of the recession, said Len Steiner, a principal at the food consulting firm Steiner Consulting.
But analysts noted that the speed at which pork moves off the grocery store shelves will depend on prices. With the slow economy, consumers are always looking for bargains.
There is plenty of pork around and consumers should benefit, assuming the retailers will lower the prices. There is no guarantee that they (retailers) are. They have good margins and are making good money on selling pork, said Dan Norcini, an independent hog trader.
I would like to see retailers lower prices on pork to get the domestic market moving better, Norcini said.
FEWER HOGS LATER AS PRODUCERS LOSE MONEY
Pork supplies may start to tighten sometime in late spring or early summer of next year as hog producers cut back further on the number of hogs produced.
Hog producers have been losing money for about two years, hurt initially by high feed and fuel costs. They continue to be hurt by a slowdown in pork sales as the recession hits restaurant sales and H1N1 flu curbs pork exports.
Two of the nation's largest hog producers, Smithfield Foods Inc (SFD.N) and Tyson Foods Inc (TSN.N) have reduced their hog herds, with Smithfield cutting its breeding herd by 13 percent.
But analysts believe smaller producers have not been as quick to pare herds. These producers may be hoping to benefit from higher prices after their neighbors quit or reduce production, analysts said.
The end result has been more hogs than expected and pork production has held at high levels, which has forced hog prices to be cut back severely from last year.
There will be an awful lot of red ink this fall and winter and well into spring. May is the first chance of a profitable month, for pork producers, Plain said. (Reporting by Jerry Bieszk; additional reporting by Bob Burgdorfer; Editing by Lisa Shumaker)