It is likely that farrowings will continue to increase in the summer of 2001, perhaps by another 4 percent to 6 percent. Production Millions Percent Change Vs. Prices used for my analysis are the national average barrow and gilt price for 51 percent-52 percent lean hogs converted to liveweight with a .74 conversion. Early summer prices may be considerably higher than late summer prices. While it is still very early to be making projections for the fourth quarter of 2001, my best guess is that prices will drop well below costs of production.
Some cautions are necessary when models are used to predict prices.
Thus, when supplies for the fourth quarter of 2001 are expected to exceed those of the last quarter of 1998, pricing models come up with some low prices. Perhaps slaughter capacity will not be as limited this time and prices may not be as low. However, there are plenty of reasons to keep the upcoming expansion in check. I normally don t make estimates for more than one year into the future, but make an exception this time because of the potentially devastating price impacts if the upcoming expansion becomes too robust. The industry may be on the verge of an expansion that could collapse margins during late 2001 and 2002, perhaps with devastating results once more.