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Cattle, hog prices struggle in August
MISSISSIPPI STATE -- Record-low hog prices in August added downward pressure on cattle prices as both industries struggle into the last quarter of 2002.
"As long as we see hog prices at historically low levels or even with a slight recovery, cattle prices will not be able to improve much either," said John Anderson, agricultural economist with Mississippi State University's Extension Service.
"Hog prices got to the lowest August levels in 30 years during the last week of that month. That represented a fairly rapid decline in prices," Anderson said. "The low prices wouldn't be so startling if they had occurred later in the year when seasonally larger slaughter numbers typically depress prices."
Anderson said live hog prices averaged around $25 per hundredweight for the month of August and dropped below $20 during the last week. October futures prices lost $12 per hundredweight in four weeks, bottoming out the last of August.
Anderson said part of the market problems could stem from an underestimation of slaughter numbers. Based on pig crop reports in March, the August hog slaughter was expected to be no more than 3 percent higher than in August 2001. Actual numbers ran near 6.5 percent higher.
"Typically, the largest numbers of hogs slaughtered occur in the last quarter of the year," Anderson said. "If the low August prices are the result of an underestimation of slaughter numbers, then prices could continue down this fall. If August prices were from producers marketing hogs early, then prices could rally somewhat."
Mark Crenshaw, Extension swine specialist, said cash hog prices have been 14 to 20 cents per pound below the breakeven price. That would result in a loss of between $35 and $50 on a 250 pound hog. He said breakeven prices typically are between 36 and 42 cents per pound.
"Many producers who survived the record-low prices of 1998 and 1999 haven't recovered from those losses, which makes this year's prices even harder and recovery even less likely," Crenshaw said.
Anderson warned that if fourth-quarter hog slaughter numbers run 6 to 7 percent higher than last year, producers could see prices in the single digits, much like in 1998. If slaughter numbers are only 2 percent above last year, prices should be better.
"In the last week of August, fed cattle prices were relatively high compared to hog prices. Since cattle prices were not that good, it emphasizes how low hog prices were during that time," Anderson said. "If the large number of hogs continue, they will keep cattle prices from increasing."
Anderson said the numbers of cattle have been going down, which is good for prices, but an abundance of meat on the market is not going to help producers.
"The real pressure on the cattle market is from competing meats including pork, poultry and fish, and not from an oversupply of cattle," Anderson said.
Blair McKinley, Extension beef specialist, said prices have decreased about 15 cents per pound from last fall when the market was in very good shape. The Midwest drought will drive up feed prices and put more downward pressure on livestock prices.
"While we have been able to harvest plenty of hay this year, conditions may force producers to start feeding early," McKinley said. "Pastures are very dry and armyworms are taking a toll. Some people are planting ryegrass, but others are holding off to see what happens with the armyworms. Plus, if we'd don't get any rain, the ryegrass won't come up anyway."