QUICK READ: High on the hogs
One of the best commodities to invest in during the first half of 2013 was hogs. Hog prices rose about 50 percent between Jan. 1 and June 30, largely as a result of fears of the PED virus that claimed the lives of many young pigs.
Purdue University Extension economist Chris Hurt said the pork industry is enjoying record profits as a result of the run-up in prices. But prices, which have already tapered, seem likely to fall sharply this fall and further moderate in 2015.
In a release distributed by the University of Illinois, Hurt said:
— Deaths due to the porcine epidemic diarrhea virus may have been "overanticipated." Producers made up for the lost animals by increasing the weights of surviving hogs.
— During the first five months of this year, the total number of hogs coming to market was down 4 percent, but weights were up 3 percent. Result: the total supply of pork was down only 1 percent compared with the same period a year earlier.
— Demand for pork remained strong this year. With retail beef prices at record highs, some shoppers substituted pork for beef. Pork prices also benefited from a 10 percent surge in exports.
— Hog prices, which started the year in the low $60s per hundredweight, peaked near $100 in late March and have since fallen back. One forecast suggests hog prices will be in the mid-$80s this summer before falling to about $70 per hundredweight in the fourth quarter of this year. During early 2015, prices are expected to fall to the mid-$60s.
— Profits for hog producers who aren't strongly affected by the virus are expected to average $70 per head for the six months ending Sept. 30, 2014. By the fourth quarter, those profits are expected to shrink to $40 per head, and during the first three quarters of 2015, profits could shrivel to $20 a head. By late 2015, producers could be looking at prices that will allow them only to break even.
"The biggest concern for the industry now is a potential overexpansion of 2015 pork supplies," Hurt said.