Relax, the Great Bacon Shortage of 2012 Is a Myth
High feed prices mean more pork, not less.
In fact, weak demand has been responsible for losses on both sides of the Atlantic. Earlier this month, Smithfield Foods (NYSE:SFD) failed to meet analyst expectations due to “weak retail demand” in its fresh pork business. Tyson Foods (NYSE:TSN), which enjoyed decent results within its chicken segment, reported "very difficult market conditions" in pork.
Further exacerbating the situation is the fact that low demand coupled with high feed prices will only serve to increase the supply of pork on the market, while simultaneously lowering prices even further.
“If all the money you put into raising your pigs is a loss, you cut your losses and slaughter them and sell them for meat,” Hackett explains.
Indeed, the statistics confirm that a large culling is already underway.
From BPEX, an outfit representing the British pork industry:
It's also occurring in the US. From Ron Plain of The Pig Site:
"So far this year, 175,000 adult pigs have been slaughtered, seven per cent more than during the same period last year."
As Hackett explained, this means more meat, not less -- for now.
"Last week’s hog slaughter was the third largest ever. This week’s kill is the fifth largest ever. Hog slaughter this week totaled 2.406 million head, down 0.9 per cent from the week before, but up 5.0 per cent compared to the same week last year. Over the last six weeks hog slaughter has been 5.5 per cent above year-ago and 4.2 per cent above the level implied by the June hog inventory survey. Look for some big upward revisions next Friday in past inventory numbers when the September Hogs and Pigs Report comes out."
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.