Source:  Rita Jane Gabbett, MEATINGPLACE.COM, 11/24/10

Despite the run-up in corn prices that made hog production unprofitable in recent months, live hog prices should climb seasonally in the coming months which coupled with recent declines in corn prices could mean profitable margin opportunities in 2011, according to Purdue University Extension Economist Chris Hurt.

In an outlook report, Hurt noted that while hog producers are losing an average of $15 per head in the last quarter of 2010, strong profits earlier in the year will average out to an estimated profit of $14 per head for 2010.

Over the past five years, hog prices reached highs in the warm weather months of May through August, and lows in November, especially the last-half of November. After Thanksgiving, hog prices have tended to rise slowly into mid-February and then dip modestly into early-April before moving to highs in May and June.

Hurt said he expects this pattern to play out into next spring and summer. Live prices are expected to average near $50 per live hundredweight in the final quarter of this year and then move higher into 2011.
First quarter prices are expected to average near $55 per hundredweight with second and third quarter prices stretching to $62 and $61. Fourth quarter 2011 prices are expected to drop to the mid-to-lower $50s, according to Hurt.  

Current estimated returns per head by quarter in 2011 are a loss of $4 per head in the first quarter, a return of $14 per head in the second quarter, a return of $16 per head in the third quarter and a return of $1 per head in the fourth quarter for an average near $7 per head for the year.

“It is clear that the second and the third quarters are where the money will be made, with the first and fourth quarters closer to breakeven or a small loss,” Hurt wrote. “This reflects the seasonality of hog prices with higher hog prices in the warmer weather months providing the greatest profitability.”

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