Hog production has returned to profitability but Purdue University Extension Economist Chris Hurt says delayed planting has many producers wondering if hog production costs will drop as much as some had anticipated. Hog prices have rallied and moderation in feed prices helped reduce costs of production – but as delayed planting has raised concerns about fewer planted acres and reduced yields – corn and soybean meal prices have trended to the upside. For the third quarter – hog prices are expected to average 67-dollars – with costs expected at about the same level. Hurt says corn and soybean meal prices are expected to drop sharply into the late summer and fall as markets make the transition to new crop supplies. He says that means costs will drop from about 67-dollars per live hundredweight this summer to closer to 60-dollars for the final quarter of the year. With hog prices expected to be near the 60-dollar level for the final quarter of 2013 and first quarter of 2014 – Hurt says breakeven conditions will continue.
Hurt says prospects for the entire year of 2014 are beginning to come into focus – though the size of this summer’s crops can still have a strong influence on final outcomes. He says USDA has forecast 2014 hog prices in a range from 56 to 60-dollars per live hundredweight – which appears considerably lower than current lean-hog futures are suggesting. He says the primary difference is that USDA made its forecast in early May when low corn and meal prices were anticipated. The substantially higher feed costs – Hurt says – would be expected to keep the pork industry from expanding and result in hog prices more in line with current lean-hog futures prices. Hurt suggests keeping expansion plans on hold – awaiting better clarification of the size and prices for 2013 crops and the implications for hog production costs.
If corn prices stay below six-dollars per bushel – Hurt says the pork industry would be able to survive another year of low-crop production. Higher corn prices would push the outlook back into losses – while Hurt says a more aggressive expansion would be expected with corn prices dropping below five-dollars.
Source: NAFB News Service