By Joanna Newman
US pig prices have now dropped so low that commentators are no longer able to count the decades since the market was last at these levels. Estimates calculate that it must be at least thirty or thirty-five years.
The cash price has dropped to 17-18¢/lb, compared with 21¢ last week. The Chicago December lean hog futures contract settled on Tuesday (17 November) at 30.95¢/lb, down from 34.15¢/lb just under a week ago and roughly half its level in May.
In sheer desperation, the National Pork Producers Council has put out a letter to producers suggesting they each give away a pig to charity.
Clearly, the crisis is not driven by lower consumption. Consumer demand for pork is up by 7.1% from last year and pork exports have also climbed by 32% in volume terms from a year ago. If this higher demand can comfortably absorb the nations increased capacity, many must question why prices have collapsed as they have done.
Part of the problem, according to the NPPC, is that the growing supply of market-ready pigs has overwhelmed the nations packing houses. Over the past year and half, the US has lost 35,000 head of slaughter capacity to a mere 385,000 head/day.
Even though the slaughter houses are killing 2.0 million head a week, this needs to rise to 2.2 million head a week if producers are to regain any bargaining power with the packers. The NPCC wants pork packers to work through the weekends.
The other part of the problem is that retailers are failing to pass along lower costs. The retailers margins have widened from a historical average of 47% to 60% today, while the producers share of a typical retail sale has dropped from the usual 37% to a mere 21%.