Source:  Rita Jane Gabbett, MEATINGPLACE.COM, 3/3/11

Rising hog prices have kept pace with rising feedgrain prices, and if hog futures prices are any indicator, hog producers might be able to afford $7.50 per bushel corn this spring and summer, according to Purdue University Extension Economist Chris Hurt.

In a recent report, Hurt outlined current and future price scenarios that would put hog prices at about $60 per live hundredweight in the first quarter, near $70 in the second and third quarters, $60 in the fall and winter and about $63 in the second quarter of 2012.

He noted that while last fall pricing models suggested corn prices above $5.50 would throw pork producers into losses, now lean hog futures prices for this spring and summer have moved high enough to suggest that pork producers can pay up to $7.50 per bushel for corn during part of the year and still make money.
Based on feedgrain and hog futures prices on Feb. 25, Hurt said pork producers could pay about $7.50 a bushel for corn in the second and third quarters this year, around $5.75 in the fall and winter and about $6.25 in the spring of 2012.

Hurt’s calculations suggest a possible record high average hog price for the year of $64.50 per hundredweight with an average cost of production at $64.

But it’s fragile
There are reasons, however, for pork producers to be worried that the delicate balance between high hog prices and high feed prices could be upset, according to Hurt.

The first is the concern that consumers will back away from pork consumption as grocery store prices shoot up this spring and summer. In order to pay $7 or more for corn, live hog prices at times will have to move toward $75 per live hundredweight this spring and summer, up from the current price in the low $60’s.

The second concern is that corn prices will rise above $7 this spring and summer, and/or that the anticipated $1.50 a bushel drop in cash corn prices from this summer to fall does not develop due to adverse growing conditions.

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