When pork producers' close their books for 2008, many will be looking at substantial red ink.
For the year, hog prices are expected to have averaged about $47.85 per hundredweight, says Dale Lattz, a University of Illinois Extension farm financial management specialist. The sharp run up in corn and soybean meal prices during the planting and growing season of last year pushed feed costs significantly higher. "Feed costs are expected to come in about $38.75 per hundredweight and non-feed costs at $19.70 for 2008," notes Lattz. "Total production costs would be $58.45 per hundredweight, or significantly above the average price received. If these projections materialize, 2008 will result in substantial losses for pork producers."
Read Lattz's complete report, "More Red Ink Expected for Hog Producers in 2008 after Experiencing Losses in 2007."
On the good news front, Lattz points out that this year's hog price and input cost situation is looking to offer some pricing opportunities. Whether or not it actually generates a profit will depend on the producer's risk-management and marketing strategies. While it's not crystal clear how the markets will unfold, the growing consensus is that the second and third quarters could offer some profits. However, pressure could return by fall.
Pork production will be down modestly this year from 2008's levels, but so will beef and poultry supplies. The domestic market may not see much change in the meat supply, however, as exports sales are sure to be off, which means more of that meat will appear in a domestic market. Domestic meat sales for the year also are expected to sluggish due to the overriding economic conditions.
"Pork producers could experience near-breakeven levels in 2009, depending on corn and soybean price levels," Lattz says..
In the end, profitability will be modest this year and in some cases losses will dominate, but looking ahead, 2010 holds more upside potential.