What a Difference a Year Makes

What a difference, indeed, between 2010 and 2009. Barrow and gilt prices were nearly $25 per hundred pounds of live weight higher this August than last. Iowa State University calculations indicate the year-over-year profit turnaround was $78 per head for Iowa farrow-to-finish operations. Fewer hogs and no Novel H1N1 (swine flu) scare pushed retail pork prices to four consecutive months of record highs in May through August of this year.

The record pork prices were due in part to record bacon prices. Grocery store prices for sliced bacon this August averaged $4.353 per pound. That’s 47 cents higher than any month prior to this summer. Bacon is a popular food item right now and has a broad range of uses. But be warned, food fads do not last.

Canada’s Cuts Mean Fewer Hogs for the U.S.

The Canadian swine herd has been below year-earlier levels for 17 consecutive quarters. Canada’s mid-year 2010 hog inventory was down 2.4 percent from last year and down 22 percent from five years ago. The production cutback there is having a direct impact on U.S. swine imports. In 2007, the United States imported 10 million hogs from Canada. This year fewer than 6 million head will be imported. 

Canadian hog slaughter this year is expected to be close to the 2007 level, so all the Canadian herd reduction has translated into fewer U.S. swine imports. The rate of decline in imports of both feeder pigs and slaughter hogs from Canada is slowing Imports may stabilize around 100,000 slaughter hogs and 400,000 feeder pigs monthly.

$4+ Corn, the Future Norm

Corn prices are headed up. After nearly two years with corn averaging close to $3.50 per bushel, cash prices are now above $4 with corn futures above $5 per bushel. USDA is forecasting the 2010 corn crop will be sold for an average price of $4.40 per bushel, 20 cents higher than the current price record held by the 2007 corn crop. 

If USDA is right, higher feed costs will push production costs for hogs close to $56 per hundredweight on a live basis or $75 per hundredweight carcass. Lean-hog futures are offering some attractive prices for 2011 hogs.