What is in this article?:
• For the 2013/14 corn marketing year, hogs are offering an estimated $6.85 per bushel if the profits from hog production are assigned to the value of corn.
Most corn growers can't add hogs
Today, most corn growers cannot add hogs to their farm enterprises. Modern hog production is large-scale, high-tech, high-investment, and highly coordinated. So, the hope for most corn growers is that large hog production corporations will expand rapidly and thereby expand the corn usage base.
How big is the incentive for hog expansion?
At first glance it appears to be very large. During the period that spans the 2013/14 corn marketing year, live hog prices are expected to average about $67 per hundredweight with costs of production closer to $56. That means an expected profit of $32 per head and relates to the $6.85 per bushel for corn marketed through hogs.
Unfortunately, it takes time to get into hog production, and gilts retained now will not have market-ready pigs until late 2014 when much of the profit incentive will be eroded. That profit erosion is due to the expected expansion already under way and to somewhat higher corn prices for the 2014/15 marketing year.
The best news for the hog industry and other animal industries is that feed prices will probably moderate for a series of years, not just this one year. If so, that means an extended period of lower feed prices and expansion of animal production.
Over the next three to five years, expect a “mini-boomlet” for animal industries in which three positive demand drivers will occur: higher U.S. per capita consumption; modest domestic population growth; and continued growth of exports.
For hog production in the coming year, this means a one to three percent expansion of the breeding herd that has already begun. Increased pork production from this expansion will begin by late summer of 2014 and prices will move below year previous levels at that time.
As an example, hog prices in the last quarter of 2014 are expected to be $58 per live hundredweight compared with $65 during the last quarter this year.
The big profits will come during the 2013/14 corn marketing year, reaching $37 per head of profits on average during the second and third quarters of 2014.
Hog prices are expected to average around $65 in late-2013 and the first quarter of 2014. Then record high hog prices are anticipated in the second quarter with an average near $72, followed by $67 for the third quarter.
As pork supplies begin to rise into the fall of 2014, hog prices are expected to drop $9 per live hundredweight to around $58. While hog prices are strong, it is really lower feed costs that are providing the strong profitability forecasts.