Break-even costs for hog producers could reach as high as $95 per hundredweight or more in 2009 according to Steve Meyer, president Paragon Economics. “The futures price run-up would add about $40 per ton to the cost of the corn and soybean component of a 16 percent protein diet for hogs,” according to Meyer’s column in the Daily Livestock Report distributed by the Chicago Mercantile Exchange.
"The roughly $40 per ton increase of the past 10 days is the largest we can recall witnessing since we began using this index in the late 1990's," said Meyer. Corn and soybean component costs now running at about $240 per ton could escalate to over $270 per ton if current futures prices turn out to accurately predict prices by next summer, according to Meyer's calculations.
Corn futures prices topped $7.00 per bushel for delivery this July and topped $7.55 per bushel for delivery in July, 2009 on the Chicago Board of Trade this week.
Other components of the calculated break-even price include vitamins, minerals, synthetic amino acids and fat, as well as the cost of grinding, mixing and delivery. But it is the price rise in the corn and soybean components that account for 90 percent, maybe even 95 percent of the cost of production increase, Meyer said.