Hopes for pork producers’ return to profitability have taken a turn for the worse, according to the Chicago Mercantile Exchange Daily Livestock Report. In the past week, projected feed costs have risen and CME Lean Hogs futures have hit new contract life lows, write DLR authors Steve Meyer and Len Steiner.
Projected corn and soybean meal futures have rebounded recently driving up projected costs by $5-$6 per hundredweight carcass. The sell-off in lean hog futures has pushed projected cash prices for this fall below $50 per hundredweight carcass. That equates to live weight prices below $37.50 per hundredweight, levels not experienced since 2002.
According to the report, the only month that can be projected to be profitable through the end of 2010 is July and the projected profit is $0.76 per hundredweight carcass or about $1.50 per head.
The problem boils down to the challenge large producers face in reducing sow numbers. Sow slaughter through the week of July 17 was 11 percent lower than in 2008. The report estimates 80 percent of hog marketings are in the hands of large producers. Due to large investments in fixed assets, they are less flexible and reluctant to reduce the scope of their operations. For many, the hog operation represents the entire farm enterprise mix and, understandably, one they will not give up without a fight.
Source: The Pigsite