Hog production has returned to profitability as prices rallied from the mid-$50s per live hundredweight in March to the low $70s today (June 3).

Moderation in feed prices after the USDA’s March Grain Stocks report was released in late March also helped reduce costs of production with second quarter costs averaging about $67 per live hundredweight compared to an estimated $70 in the first quarter.

Delayed planting that is raising concerns about fewer planted acres and reduced yields has most recently sent corn and meal prices trending to the upside, raising concerns that hog production costs will not drop as much as some had anticipated.

Looking backward, the drought of 2012 caused large losses for pork producers due to high feed prices. Losses from the spring of 2012 to the spring of 2013 averaged about $23 per head. This was the most severe period of pork producer losses since the financial collapse and recession in late 2008 and 2009.

Hog prices for the third quarter are expected to average $67, which is similar to the second quarter average. Currently, costs are expected to be at about the same level with breakeven conditions prevailing.

As a reminder, breakeven means all costs are covered including full depreciation and family labor. This means that a hog operation can continue into the future with breakeven returns calculated in this manner.

Prices for corn and meal are expected to drop sharply into the late summer and fall as markets make the transition to new crop supplies.