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Pork producers could see record drop in feed costs
Story Date: 7/16/2013
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Source: MEATINGPLACE, 7/16/13
Lower feed costs could be just weeks away, turning losses to profits for pork producers who can see the “promised land” on the horizon, said Purdue University economist Chris Hurt.
Producers know there are still unknowns on the horizon, including acreage, weather for the remainder of the growing season, and the chance for early frost, Hurt recently wrote. However, the outlook for the year ahead is the polar opposite of the past 12 months, he said.
“Today’s signals suggest they should begin to get the celebration underway,” Hurt said in his report. Hog prices are expected to be somewhat higher in the next 12 months as well.
“The bottom line is that losses of $21 per head during the last 12 months give way to projected profits of $16 per head in the 12 months spanning the last half of 2013 and the first half of 2014,” he concluded.
Producers can see prospects for $2 per bushel lower cash corn prices and $130 per ton lower soybean meal prices in the July to October futures spread. If such feed cost reductions are realized, estimated total costs for farrow-to-finish hog production will drop to about $56 in the final quarter of 2013 from $69 per live hundredweight in the second quarter of 2013. This $13 drop would be the largest on record, Hurt said.
Pork producers absorbed large losses due to the 2012 drought because much of the feed price surge occurred during three weeks from mid-June to early July, which gave producers almost no time to adjust their breeding programs.
Compared to the last 12 months, corn prices are expected to be nearly $2 per bushel lower in the coming year, and soybean meal prices are expected to be about $100 per ton lower on average. The combination reduces estimated total costs by about $13 per live hundredweight, Hurt projected.
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