Chicken glut pushes hog prices down

COLUMBIA, Mo. – Hog prices have turned upward after dropping every day for the first two weeks of April.

Hog prices dropped unexpectedly from 36 cents per pound March 10 to 26 cents per pound April 15.

Too much chicken. On March 10, Russia stopped importing U.S. chickens. “It’s pretty obvious a big part of the downturn was from too much chicken in the U.S. grocery stores,” said Ron Plain, extension economist at the University of Missouri. “The rebound in hog prices can be credited to the resumption of exporting chickens to Russia.”

At the end of the first trading week after the Russian ban was lifted, hogs were up to 31 cents.

Plain sees a summer peak of 44 cents a pound, although it will be a little later than usual because of the low starting point.

“There’s a definite turnaround in hog prices,” Plain said. “We have the trade ban partially lifted, and the seasonal upswing is in place.”

Big buyers. The Russians stopped buying chicken until their health inspectors could visit U.S. processing plants.

“Russia imports 8 percent of the total chickens and 15 percent of the leg quarters grown in the United States,” Plain said. “Last year, they bought 2.3 billion pounds of U.S. chicken.

“When they stopped buying for about a month, that put a lot of extra chicken into U.S. grocery stores. When grocery store owners can get chicken for practically nothing, they will fill their meat cases with chicken instead of buying more expensive pork and beef.”

Plain estimates that the sudden glut of chicken in April amounted to about three-quarters of a pound for every man, woman and child in this country.

“Grocers could advertise low-priced chicken to attract customers who would then fill their carts with more expensive lettuce, soap and other products,” Plain said.

After Russian inspectors visited major packing plants, the way was opened for exporting chicken again, Plain said. “That’s when the price of hogs started back up.”

Steel connection? Plain noted that while Russian buyers were voicing health concerns about the quality of U.S. chickens, some trade observers noted that the chicken buying ban came soon after the U.S. imposed a stiff tariff on imported Russian steel, cutting their sales.

“The question becomes, ‘Was that more than a casual coincidence?'”

The chicken trade with Russia also benefits U.S. poultry consumers. Russians prefer dark meat, while Americans prefer white meat from chicken breasts.

Unexpected. “Pork prices were expected to stagnate during April,” Plain said. “We didn’t foresee anything like the dime drop in prices. If you’d asked us on March 10, we’d have said the price would move sideways for a month before going into a summer seasonal upturn.”

Annually, hog prices normally peak June 1. The peak likely will be in late June this year, Plain said.

The domestic pork supply was up slightly this spring with about 1 percent more of the 180-pound market hogs. The trend on pork supply has been slightly upward as hogs are fed to heavier weights before being sold.

“Hog producers had profitable years in 2000 and 2001,” Plain said. “That always leads to increased production.

“Corn prices are cheap and that leads to heavier market weights.”

In the hog cycle, the U.S. production is now in a herd expansion phase, with a 2 percent increase expected for the year.