Production Costs for Hog Producers Look Positive

US - EMI Analytics says the anticipated cost of producing hogs is looking particularly positive this coming summer, Bruce Cochrane reports.
calendar icon 1 May 2017
clock icon 3 minute read

The USDA's March Hogs and Pigs report indicates the US breeding herd is expanding and slaughter hog numbers this coming fall will be even higher than one year ago.

Dr Steve Meyer, the Vice-President Pork Analysis with EMI Analytics, says right now pork producers need to be watching the same things they always have, the cost of production and the price of pigs.

Dr Steve Meyer-EMI Analytics

The cost of production side is really positive at the moment.

If we have normal weather going through the summer, we're going to have large crops and even lower cost of production than we've had the last 12 months.

Right now the futures market is covering for break evens in the upper 60s probably for the average US producer on a carcass weight basis and that number could go down into the mid to lower 60s pretty easily with a normal kind of weather situation given the huge soybean acres we're going to have and the fact that we seem to have jumped this corn yield situation again due to a number of factors.

We think cost of production is going to be in pretty good shape.

The moisture conditions in the United States are very good right now and, as long as we can get it planted, I think we're going to be in pretty good shape on that.

On the hog side, certainly there's going to be some pressure this fall with large numbers.

We've raised our forecasts on prices up into the low 70s for the summer and the lower 60s for the fall out of this March Hogs and Pigs report.

The key is going to be exports of course.

Domestic demand has been a little soft by our measurements but our measurements are kind of subject to some time lags on retail price data from USDA and we think those are going to improve as we go into March.

The macro situation is still pretty good in the US.

Employment is still high and the inflation rate is still low and we think those are the things to watch.

Dr Meyer suggests watching for opportunities on the differed hogs.

He says we've seen strength on the summer of 2018 hogs contracts already, up to levels that we might be hard pressed to meet from a cash basis.

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