Raising hogs has been profitable for the past several months, and the trend looks like it will continue for a while.
Returns to labor and management have remained positive for hogs leaving segregated early weaning, nursery-to-finishing barns earlier this spring and summer, averaging about $23.24 per head, points out Rodney Jones, Kansas State University Research and Extension livestock marketing specialist. "All indications suggest a continuation of these strong positive returns for the next several months," he says.
Given those break-even levels, most wean-to-finish producers should be seeing returns of $20 to $30 per pig sold. Jones expects that scenario to continue over the next few months. After that, it will depend on product demand, trade sales and producer discipline concerning expansion.
"Break-even prices to cover all costs for the average farrow-to-finish producer remain around $41.75 per hundredweight on a live basis," says Jones. "Given recent cash hog prices, significant positive returns are accruing to these producers as well."
While Jones expects returns to decline seasonally as we enter the fourth quarter of the year, lean-hog futures contract strength suggests that profitability this fall and winter may be better than previously projected.
Whether this year’s profitability has been strong enough to heal the deep economic wounds of 1998/1999 is the nagging question. Glenn Grimes, University of Missouri agricultural economist, says many but not all producers have recouped the losses incurred back then. When producers make enough money long enough, expansion typically follows. But then again, the past few years have not been typical for this industry. Add to that continued environmental pressures and public opposition facing pork production, as well as a cautious lending sector, and expansion may be held at bay longer than past trends suggest.
USDA’s June Hogs and Pigs Report revealed a restrained producer segment in terms of expansion. Everyone has been trying to determine whether that’s an accurate assessment or not. The monthly reports have been of little help so far because their numbers have not generated confidence. Focus on the September pig crop report for more insight into next year’s price potential – and meanwhile tuck away those extra dollars.