Forego Hog Expansion Plans for Now
June 13, 2013
With delayed planting and uncertainty about this fall’s corn harvest, pork producers who are currently enjoying a return to breakeven levels should forego any expansion plans for now, advises Purdue University Extension agricultural economist Chris Hurt.
Pork producers were among some of the hardest hit financially when the drought of 2012 decimated grain supplies and sent feed prices skyrocketing. But hog prices have rallied this spring, from the mid-$50s per hundredweight in March to the low-$70s, and feed prices have fallen somewhat on the heels of the U.S. Department of Agriculture's March Grain Stocks report that showed more grain than expected.
Even so, late spring planting has brought on some worries about hog production costs, Hurt says.
“Delayed planting has most recently sent corn and soybean meal prices trending upward, raising concerns that hog production costs will not drop as much as some had anticipated,” he says.
Current production costs are about $67 per live hundredweight. Hog prices for the third quarter are expected to remain about the same, leaving producers at breakeven levels for the foreseeable future, Hurt says.
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Breakeven means that all of a producer's costs are covered, including depreciation and family labor. According to Hurt, most producers could continue their operations under break-even conditions, but they aren't likely to expand.
While corn and soybean meal prices are expected to decrease in late summer and into fall as the new crop supplies become available, Hurt says hog prices also would fall, continuing the breakeven trend.