Hog Outlook Bright for 2014
The outlook is bright for hog profits in the coming year. Record feed costs from 2011 to 2013 caused brad financial losses for livestock and poultry producers, which led to a cutback in meat production and thus higher meat prices. A record corn harvest in 2013 caused 2014 to begin with corn prices $3 lower than a year earlier.
The cost of raising hogs has fallen with the price of corn (see Chart 1). The breakeven price for market hogs declined from $74/cwt of live weight in January 2013 to $63/cwt for hogs sent to slaughter in December 2013. The average cost of slaughter hog production in 2013 was the highest ever, leaving pork producers with an average loss of about $9 per head. Based on futures contracts for hogs, corn, and soybean meal, hog profits are expected to average close to $25 per head in 2014.
Higher Slaughter Weights
Lower feed prices appear to be giving a big boost to slaughter weights. Each of the nine weeks with the highest average hog slaughter weight in Iowa-Minnesota came in the fourth quarter of 2013.
Barrow and gilt slaughter weights in Iowa-Minnesota averaged 279.8 pounds in the fourth quarter of 2013, up 6.4 pounds compared to October-December 2012. Despite a 2.1 percent decline in fourth-quarter hog slaughter, October-December pork production was up 0.4 percent because of heavier weights.
Don’t be surprised if heavy weights add 1 percent to 2014 pork production.
Will Production Expand?
USDA’s December Hogs and Pigs report said that the market hog inventory was down 0.6 percent on December 1. When combined with reduced live hog imports from Canada, this implies that hog slaughter in the first half of 2014 should be down 1 percent or so compared to last year.
For the time being, tight meat supplies mean relatively high prices for the livestock industry. With time, meat production should expand, unless corn prices rebound. Which way corn prices go in 2014 will depend a lot on the weather. Profits lead to increased production. On average, over the last several decades, hog producers have started expanding the breeding herd roughly five months after the end of an unprofitable period.
Given the June 2013 start to profitability, this would mean increased breeding in November, increased litters farrowed in March, and increased slaughter starting in September 2014. Of course, PEDv may seriously impact this schedule.
The December hog inventory survey said producer farrowing intentions for December-February were for 1.3 percent more litters than a year earlier. Spring farrowing intentions are up 1.4 percent.