U.S. hog producers are unlikely to increase the size of their herds because of the soaring cost of livestock feed, AgStar Financial Services Inc. said, signaling higher expenses for meat processors including Hormel Foods Corp. (HRL) and pricier pork chops at the grocery store.
“There’s just way too much inherent risk to expand your operation,” said Mark Greenwood, who oversees $1.4 billion in loans and leases to the hog industry as a vice president at AgStar in Mankato, Minnesota. “Anybody involved in the protein sector, your cost of production is going up exponentially. Pork at the retail level will have to go up.”
Seaboard Foods LLC, the third-biggest U.S. hog producer, said this week that the nation’s herd will be little changed this year. Prospects for increased animal supplies in the U.S., the world’s leading pork exporter, have been eroded by feed-corn prices that are 85 percent higher than a year ago, mostly because more of the crop is being used to make grain-based fuel, the company said.