Here’s a look at some of the longer term trends and volatility of the weaner pig market.
Graph 1 reveals the long term trend in the number of weaner pigs sold over the last 11 years.
You can see that sales of weaner pigs sold on formula have been fairly constant since 2004 at about 2.4 million weaner pigs per year. Volume for pigs sold in the cash market (i.e. spot-market sales) the last five years has been basically double the previous six years.
There is also a distinct downward trend from 2011 through 2013. The combined sales of spot and formula weaner pigs has averaged 4.5 million head over the last three years, an increase of over 90 percent compared to 2003.
However, it still accounts for only 4 percent of total hogs marketed. The driving force behind the increasing number of weaner pigs sold in the cash market is thought to be the result of higher feed costs and resulting lower margins when ownership is retained. It appears that as feed costs have begun to moderate, there are fewer spot weaner pigs being sold. Fourth-quarter volume of weaner pigs in 2013 was 75 percent of the 2012 volume and just 68 percent of the 2011 volume.
Graph 2 looks at prices paid for weaner pigs from January 2011 through December 2013, and shows the volatility and seasonality of cash prices compared to the stability of formula prices. The difference between the highest and lowest cash sale price was $75.57 per head, while the difference between the highest and lowest formula sale price was $18.88 per head. The cash price trend follows the predictable pattern of peaking in the winter for weaners that will be slaughtered in the stronger summer markets
and troughing in the summer for weaners that will be slaughtered in the weaker winter months. Over this time period, the average cash price was $37.99 and the average formula price was $40.87. You will note the strong cash price run up in the fourth quarter of 2013 where prices increase 90 percent and reached a high of $83.65 in December.
The Breakeven Purchase Price in Graph 2 is derived from a weekly weaner pig crush and calculates the price you could pay for a weaner pig using various production and cost assumptions and futures prices for hogs, corn and soybean meal. The gap between the Breakeven Purchase Price and the Cash Price reflects the relative net earnings potential for buying and finishing a weaner pig. As expected, the Breakeven Purchase Price follows the general trend of the Cash Price. Note, however, that potential net income narrows during times of high feed prices and no doubt has a major impact on buy/sell decisions.
Editor’s Note: Ryan Cooney is general manager of ePigflow and writes a weekly commentary for PorkNetwork on the weaner pig market. ePigflow is an online market for weaner pigs, feeder pigs and facility spaces. You can find available pigs and facilities by visiting www.epigflow.com. All data used in this analysis, other than the crush data, were taken from the USDA National Feeder Pig Report, reported weekly. This is a voluntary report so it does not capture all U.S. transactions.