WEST LAFAYETTE, Ind. — Sharp increases in feed prices
brought about by the onset of more widespread hot, dry weather have threatened
the potential for hog producers to return to profitability, Purdue Extension
agricultural economist Chris Hurt said.
December corn futures rose to $5 per bushel — a $0.50
increase since the early August lows and soybean meal increased $90 per ton.
These equate to about $5 higher hog production costs per live hundredweight.
While that doesn’t completely dash producers’ hopes of
returning to profitability, it does mean they need to think twice before growing
“This has not wiped out profit potential, but should make
hog producers more cautious about expansion,” Hurt said. “Expected margins have
narrowed, but not collapsed.”
Hog producers can cover their costs with hog prices above
$59 per hundredweight, he said. Current forecasts show fall and winter hog
prices at $61 per hundredweight, which should rise to about $65 in the second
quarter of 2014 before falling back to $62 for the third-quarter average.
If the forecasts are correct, the average per-hundredweight
price over the remainder of 2013 through the third quarter of 2014 would be
$62.50 per live hundredweight, which Hurt said would lead to expected average
profits of $3.50 per hundred weight, or $10 per head.
“The unexpected recent surge in feed prices might cause some
preliminary expansion plans to be aborted and, therefore, increases the
likelihood that lean hog futures prices also will rise some from current levels
that are based on expectations of larger expansion,” he said.
At this point, there’s no way to know exactly how much corn
and soybeans will yield, how much grain and feed prices will increase or how
they will affect hog producers. Both crop and livestock producers will know more
when the U.S. Department of Agriculture releases its Sept. 12 crop production
report, but feed prices won’t be known with any real certainty until harvest is
In addition to the uncertainty in feed prices, hog producers
also need to be cautious about expansion because even small growth in the
national breeding herd could increase pork supplies enough to send the industry
back into losses starting in the fall of 2014, Hurt said.
“Expansion needs to be constrained to no more than a 3
percent increase in the breeding herd over the next year,” he said. “A 2 to 3
percent breeding herd expansion would be expected to push the industry back to
While a 2 percent increase in the breeding herd might seem
like a relatively small expansion, it means exponential growth in
“A 2 percent increase in the breeding herd means about a 4
percent expansion in hog production,” Hurt said.
Other meats, such as poultry and beef, also will play a role
in pork profitability because meat producers compete for consumers. However,
current forecasts show beef production down 5 percent, which means pork
producers could grab a larger share of meat consumption.
The bottom line, Hurt said, is for hog producers to consider
“When all of these factors are brought together, it means
that the industry should strive for a modest expansion,” he said. “Advice to
individual pork producers at this point is to limit expansion to 2 or 3