WASHINGTON – Positive feeding margins for hogs suggest US hog prices have increased faster than feed costs, according to the May 17 Livestock, Dairy and Poultry Outlook from the US Department of Agriculture’s Economic Research Service. Given that the average 2011 farm price of corn is expected to increase almost 52 percent over its average price in 2010, this is a somewhat surprising contention.

Since 2009, hog prices have increased sharply and are expected to achieve a record high in 2011. This year hog prices are expected to increase more than 15 percent compared with 2010, after having increased almost 34 percent in 2010.

Record-high 2011 hog prices are the consequence of modest-growth supplies and stronger demand. US pork production peaked in 2008 at more than 23.3 billion lbs. In 2008, US pork exports were record-high at 4.7 billion lbs. Although 2011 production is forecast at 22.6 billion lbs., up almost 1 percent from a year ago, it remains below its peak. US pork exports for 2011, however, are forecast at 4.7 billion lbs. — equal to 2008, and well above 2010.

As a result, US consumers are expected to consume almost 2 percent less in 2011, on a per capita retail weight basis, compared with 2010. Retail price data suggest US consumers are willing to pay higher prices for slightly smaller ‘disappearance’ quantities of pork products. Retail pork price data also show first-quarter 2011 retail pork prices were 13.4 percent higher than a year earlier.

Along the entire pork supply chain, small gains in pork production have combined with strong foreign demand and robust domestic pork demand. Modest growth in supplies and strong demand are translating into hog prices high enough to leave producers with money in their pockets to cover other production costs, even after paying sharply higher feed costs.