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Record-high feed costs caused by
the worst drought in half a century are forcing farmers to
slaughter more of their hogs, with the number reaching 9.9
million head in August, the highest-ever for that month, data
analyzed by Reuters showed.
The U.S. Department of Agriculture will not issue its August
monthly tally until next month, but its daily slaughter data
after revisions shows that 9.857 million head were killed in
August, the most since 9.868 million in December 2011.
With the pace of slaughter set to increase seasonally in the
fourth quarter, the country is going to be awash with pork, and
prices of hog futures at the Chicago Mercantile Exchange, which
are hovering around 20-month lows, could go lower.
"If we continue to go seasonally higher (slaughter) from
here, as we normally do in the fourth quarter, this is going to
be a much larger number than anticipated and we've got a wreck
on our hands," said Jim Robb, director of the Livestock
Marketing Information Center in Denver.
"Feedstuff costs are high and hog prices are headed lower,"
said Robb, whose agency provides economic analyses and market
projections to its members, including government agencies.
The livestock sector was hammered by the surge in grain
prices to record highs in the aftermath of the drought, which
has devastated the corn and soybean crops, scorched pasture and
caused the price of hay to more than double.
Analysts said producers also pushed more hogs to slaughter
because of cooler weather -- after the sweltering heat of July
-- helping hogs to gain weight faster.
USDA weekly average weight data showed hogs in the benchmark
Iowa/southern Minnesota market for Aug. 25 at 268.6 lbs. It was
3.1 lbs more than the week of July 28 and 5.1 lbs higher than
during the same period last year.
Robb also pointed out that the conception rates of sows are
better in the first half of the year due to weather conditions,
resulting in more hogs coming to market in the second half.
On Tuesday, the average price of hogs in the Iowa/southern
Minnesota market slid to $70.75 cents per cwt after starting the
month at $91.49, according to USDA data.

PROTEIN TURMOIL
The surge in hog and pork supplies hurt the earnings of
Smithfield Foods Inc., the world's largest pork and hog
producer, with its quarterly profits falling short of analysts'
expectations.
"On the operating side, our results reflect the ongoing
turmoil in all protein and grain based businesses today, high
volatility and increasing cost of production primarily tied to
higher grain costs," Smithfield Foods President and Chief
Executive Larry Pope told analysts on a conference call.
He characterized third-quarter pork results as
"disappointing," citing the usual slowdown in fresh pork demand
during the summer months.
How to stem the tide of losses incurred by hog producers
will be the main focus of the National Pork Board when its meets
on Sept. 5 and 6 in Des Moines, Iowa.
The board, too, has been affected by the drought as its
budget for next year of $67 million will be 5 percent smaller
than this year's due to reduced income for its members.
The board collects 0.4 percent of the sale price of a hog to
be used in its various programs, including raising pork
consumption.
"We expect to see relatively good market prices for our
pigs, but the drought has significantly depleted the corn and
soybean crops that are the foundation of hog diets," said NPB
President Conley Nelson in a press statement.