US Hog Margins

US - Margins have set back some over the past two weeks due mainly to lower hog prices. Profit margins continue to remain quite strong, particularly for the first and second quarters of 2012, writes Doug Lenhart, General Manager of Genesus US.
calendar icon 22 December 2011
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The feed side has continued to find price pressures, as both corn and soybean meal prices have fallen. Soybean meal is now nearly $110 off the high price made on the last day of August; corn is roughly $2.10 off of that extreme price level and both have contributed greatly to the current strong margins producers are realizing. Global competition for feed grains remains as the Black Sea region continues to have quite competitive prices compared to US offers.

Cutting into margins, however, has been the recent sharp decline in hog prices as demand seems to be waning. The export data showed incredible year over year growth. Exports for the January through September period have been 3.712 billion pounds, 20.6 per cent larger than last year and on pace to be a record year which has buoyed prices during a typically weak period.

Many producers have continued to increase margin protection as a result of the incredible opportunities showing up right now in far deferred production periods.

1st Qtr 2012 Month Ending Offering of $8.13, the low was ($4.22), the high has recently been $13.87 and the five-year percentile of 97.0 per cent.

2nd Qtr 2012 Month Ending Offering of $13.86, the low was $2.42, the high has recently been $19.39 and the five-year percentile of 93.2 per cent.

3rd Qtr 2012 Month Ending Offering of $9.48, the low was $1.20, the high has been $14.07 and the 5 year percentile of 87.1 per cent.

The Hog Margin calculation assumes that 73lbs of soybean meal and 4.87 bushels of corn are required to produce 100 lean hog lbs. Additional assumed costs include $40 per cwt for other feed and non-feed expenses. Thank you to Commodity & Ingredient Hedging, LLC (CIH) for the margin data. Please visit the CIH web site to subscribe to the CIH Margin Watch report.

Genesus Global Market Report
Prices for week of 11 December 2011
Country Domestic price
(own currency)
US$
(per pound liveweight)
USA (Iowa-Minnesota) 81.31¢
US$/lb carcass
60.16¢
Canada (Ontario) 1.60
C$/kg carcass
56.30¢
Mexico (DF) 25.65
MXP/kg liveweight
84.21¢
Brazil (south region) 2.76
BRR/kg liveweight
67.17¢
Russia 92
RUB/kg liveweight
$1.31
China 17.35
RMB/kg liveweight
$1.24
Spain 1.16
€/kg liveweight
68.87¢
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