Swine Update: $90 Hogs and Still no Profits?

agstar post — Tue, 18 Jun 2013 18:50:01 GMT

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By Mark Greenwood - 2013 has been a tough run for the swine industry so far. We have seen a nice increase in the cash market: up to $90/carcass or close to $185 a head in revenue. Breakeven prices on close outs, however, have been as much as $185 a head —and sometimes even higher.

Feed costs are the culprit. Average feed costs on a wean to finish operation are between $105-$110 a head. Those of us involved in the industry for quite some time can remember that being the total cost of production prior to 2007. It looks as though the remainder of 2013 will be a tough period in terms of profitability, mainly due to these high feed prices.

Margin management - Many swine producers today are using hog, corn and soybean meal futures to lock up a “margin” for their hogs. The level of producers doing this today compared to five years ago is quite remarkable. We have many producers today that have coverage for a good part of 2013 and into 2014. The paradigm is shifting. In the past, we would have not seen this sort of engagement in margin management. More and more producers are adopting an intentional, disciplined margin approach to the pork industry. If this is the case (which I believe is true) it should protect producers and help more remain in the industry longer, even during a prolonged period of economic pain. The U.S. swine industry will have to be cautious about any serious type of sow expansion due to this. Significant sow expansion could be very detrimental and serious pain would likely occur.

Corn Basis Until New Crop - Even though many producers locked up margins for their hogs with futures, the explosion of the basis on corn has eroded some of this margin. In southern Minnesota, the average basis to purchase is close to $.50 a bushel over the board, making it close to $6.90 a bushel. We are hearing the September basis is close to $1.40 over the board, bringing it close to $6.90 a bushel. Delayed planting in the Midwest has resulted in a bit of a runaway freight train with producers trying to figure out if this basis will keep going higher or make a correction.

All the users of corn this summer will be tested on how to manage through until new crop. Many have physical ownership of corn but very few have enough to carry them through this time period. So as a producer, do I try and own corn at $.50 over the board? My answer is yes. Getting physical coverage on corn until new crop will be paramount. I know from a historical basis this is way out of the typical range, but 2013 will not be a normal year when it comes to managing margins. Unfortunately, this might be the new normal.

Will We Run Out of Corn or Feed Until New Crop? The answer is no, but it will take an unprecedented amount of creativity on the part of producers. Summer feed costs could potentially be cheaper in the Southeast part of the U.S. due to winter wheat, South American grain and an earlier corn crop. It will be a different story for those of us in the Midwest. We are in volatile times and the people who can manage through volatility will continue to grow and prosper in the future.

Published: 6/18/2013

Hog Blog - Hog Margins and Recent USDA WASDE Crop Report

agstar post — Fri, 14 Jun 2013 17:26:46 GMT

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For this week’s Hog Blog, Justin Roelofs talks about how Hog Margins have spiked, especially in the summer months, and about a recent USDA WASDE Crop Report.

Published: 6/14/2013

AgStar Hog Blog - World Pork Expo

agstar post — Mon, 10 Jun 2013 20:29:49 GMT

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Did you make it to the World Pork Expo in Des Moines, Iowa this week? Some of our team did, including Mark Greenwood who shares what he thought about the experience!

Published: 6/10/2013

News & Articles: Posts

Swine Update: $90 Hogs and Still no Profits?

Hog Blog - Hog Margins and Recent USDA WASDE Crop Report

AgStar Hog Blog - World Pork Expo