Surge In Wholesale Ham Prices To Boost Cost Of Holiday Dinners

The cost of a holiday ham in the U.S. is expected to surge this year as fewer hogs come to market and export demand strengthens.

Wholesale ham prices have nearly doubled from a year ago, and one analyst expects average prices during the fourth quarter to approach a 15-year high. Driving prices up are strong export demand, reduced hog supplies and expectations for a bump in U.S. supermarket sales as the economy recovers. A squeeze in the supply of frozen hams could provide an additional boost to prices as processor buying picks up ahead of the Thanksgiving and Christmas rush.

As of Thursday, the U.S. Department of Agriculture reported the price of a 23-pound to 27-pound ham at $85 per hundred pounds. That is up 77% from a year ago. Independent analyst Bob Brown, in a recent forecast, projects the average fourth-quarter price will be near its highest level in 15 years.

Prices for holiday hams "will be higher, no doubt about it," said Kevin Bost, owner of market advisory and consulting firm Procurement Strategies Inc. in Chicago, who expects retail prices for hams to be 60% to 70% higher on average than a year ago.

Demand for wholesale hams is typically strongest in the fall as processors such as Smithfield Foods Inc. (SFD) gear up production to match a surge in holiday sales. Because of the high demand, processors must build up additional supplies of raw cuts in the nation's freezers during the year. A recent USDA report shows an above-average number of frozen hams in storage. Yet, buyers and analysts said the data may be deceiving since it is unknown how many of those frozen hams already have been sold or committed to foreign buyers. A high level of hams already sold could cause a supply squeeze.

Since wholesale prices for fresh hams this summer were well above the 10-year average, Bost said domestic buyers likely have been reluctant to purchase and store hams. Therefore, a "fair amount of domestic ham business is left to be done," he said.

Worldwide pork output is down even as signs of an economic recovery have pepped up retail demand. U.S. hog slaughters for the first three quarters of this year are about 4.5% lower than a year ago due to herd reductions by the nation's swine producers. Record high grain prices two years ago along with the economic crisis and the discovery of H1N1 influenza caused hard-hit swine producers to trim their breeding herds.

At the same time, reduced output of pork worldwide and favorable exchange rates have contributed to increased sales of U.S. pork abroad. Exports of fresh and frozen hams have grown significantly in recent years, particularly to Russia and Mexico, which has taken more product off the U.S. markets.

-By Curt Thacker, Dow Jones Newswires; 913-322-5178; curt.thacker@dowjones.com

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