By Joanna Newman
PIG prices have now halved since the summer of 1997 as further price drops this week took the market to its lowest levels in decades.
In the futures market, the Chicago December lean pigs contract is at 34.15¢/lb on Wednesday (11 November), down from 35.52¢/lb just over a week ago.
The cash price managed to climb from 20¢/lb a week ago to 23¢/lb, but then quickly dropped back again to 21¢/lb on Wednesday.
The fundamental reason behind the market collapse is oversupply, with production up nearly 10% from last year. Even more capacity expansion is planned for 1999.
The perceived drop in Asian demand also damaged the market. Meanwhile analysts are pointing out that the US market has also been hit by larger shipments of live pigs from Canada to the US, a record 4 million pigs this year.
Talk of pork shipments to Russia in the form of food-aid can do little to help the market. A high slaughter rate is needed to handle the oversupply, but this in turn is pushing prices lower in the near future.
The losses being borne by US producers are astronomical, the worst market conditions since the Depression.
Some analysts are blaming pork retailers, who have failed to drop their prices in line with the wholesale market. They are able to pocket huge profits thanks to the wide retail margins.