U.S. hog farmers should “think twice” before expanding herds because too much supply may create a “bottleneck” in 2013 that would send prices lower, said Steve Meyer, the president of Paragon Economics.
Meat prices are poised to extend a 14 percent rally this year that drove U.S. retail costs to the highest levels since the 1980s as surging corn futures prevent livestock producers from expanding their herds.
U.S. hog producers may start to cull herds as the faltering economic recovery curbs pork demand and tightening corn inventories boost livestock-feed prices, curbing animal supplies and increasing costs for meatpackers.
Smithfield Foods Inc., owner of the world’s biggest hog slaughterhouse, is looking for deals in smoked ham, bacon and frozen meatballs. That may put Sara Lee Corp. and People’s Food Holdings Ltd. on its shopping list.
Pork producers say U.S. consumers will pay more for the meat if the industry abandons the practice of confining sows to single stalls to appease food companies including McDonald’s Corp. demanding open pens.