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Pork Profits Wane with Grain Selloff
The selloff in grains has pushed projected breakeven costs for average farrow-to-finish operations back below the $90 mark for the second half of 2011 and first half of 2012 (Figure 1). The average for 2011 is now forecast at $84.69/cwt., carcass. That compares to $69.22/cwt., carcass, last year and $52.76/cwt., carcass, from 1999 through 2006. This year’s cost level is 22.3% and 60.5% higher than those two historical measures, respectively.
The only problem with that selloff, of course, is that it hit Chicago Mercantile Exchange (CME) Lean Hogs (LH) contracts as well. May, June and July LH futures have all declined by over $10/cwt., carcass, since early April, while August has fallen by over $8/cwt., carcass. The decline for fall hog contracts is a bit smaller, but still very significant.
The net impact has been to dim the profit prospects for this year and next pretty dramatically. In late February, CME Group lean hogs, corn and soybean meal futures prices combined with the production parameters used by Iowa State University in their costs and returns forecasts implied 2011 profits of just under $10/head. As of Friday, that number stands at $1.90/head. For the next 12 months (May ’11 through June ’12), that figure is -$1.86/head.
These numbers provide very little incentive for changing hog and pork output. The profits are certainly not enough to encourage expansion using either equity or debt. They are also probably not large enough to force many producers out of business, given some recovery over the past 12 months. I expect the sow herd will remain pretty stable with slightly higher slaughter numbers and production very close to last year’s level. Weights will remain historically high but will likely get closer and closer to last year’s inflated levels as we approach fall. Will grain quality and slack space continue to allow barrow and gilt carcasses to average 205 lb. and more?
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You Can Save More Pigs from Those Large Litters
Over the last several years, the total number of pigs born per sow has increased and piglet survival (preweaning death loss + stillborn loss) has declined. This raises the important question, “Are farms weaning more pigs per litter or just disposing of more dead pigs?
Swine Management Services (SMS) reviews data from over 100 farms, either monthly or quarterly, from the United States and Canada, and prepares a written analysis and makes suggestions to help improve farms’ production levels. Fifty farms with current data through March 2011, which had been in production for at least three years were selected for this article. These farms confirm that there is a great deal of variation in this important production parameter.
Chart 1, Total Born / Female Farrowed, taken from the SMS Farm Benchmarking database illustrates the large spread in total pigs born per litter, ranging from less than 9.4 pigs to more than 15 pigs per litter. In the last six years, total pigs born have increased by 1.41 pigs/litter, which is an average of 0.24 pigs/year.
In Chart 2, Piglet Survival (Preweaning Death Loss + Stillborn Loss, the most recent 52 weeks of data shows farms in a range of saving less than 67% of the pigs to several farms with more than 90% of pigs saved.
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Producers Address the State of the Hog Industry
The House Agriculture Livestock Subcommittee held a hearing to focus on the state of the pork industry. A key message was the U.S. pork industry can continue to be a leader in food production and meet world and domestic demand, but certain issues need to be addressed. These include passing the pending free trade agreements with Colombia, Panama and South Korea; the negative impact the proposed GIPSA rule on buying and selling of livestock; concerns with tight feed-grain supplies driven in part by the current ethanol policies; and the proposal to ban the use of antibiotics for livestock. The National Pork Producers Council (NPPC) said, “The U.S. pork industry can continue to be a leader in food production and meet domestic and world demand for pork as long as exports continue to grow feed grains are available and producers are allowed to operate without undue legislative and regulatory burdens.” The witnesses were Doug Wolf, president of the NPPC; Julie Maschhoff, vice president of The Maschhoffs, Inc.; and Rod Brennemann, president and CEO of Seaboard Foods.
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Penn State Student Nabs Fulbright Grant to Research Swine Abroad
Seth Dunipace, a graduating senior at University of Pennsylvania’s School of Veterinary Medicine, has been awarded a coveted Fulbright grant to study swine abroad.
Dunipace will be spending the 2011-2012 academic year studying and conducting research in Denmark. He is the first graduating veterinary student in more than 15 years to be awarded a Fulbright grant.
Dunipace is a native of California and a graduate of Princeton University. He gained a special interest in swine farming since arriving at the Penn veterinary school. He spent last summer in Denmark studying Danish methods of swine husbandry and medicine.
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May 22-25, 2011: Alltech’s International Animal Health and Nutrition Industry Symposium, Lexington Convention Center, Lexington, KY. For more information contact: www.alltech.com/symposium.
May 24-26, 2011: Pork 101, hosted by the American Meat Science Association in cooperation with the National Pork Board, Texas A&M University, College Station, TX. For more information contact: Deidrea Mabry, program director, American Meat Science Association, 800-517-2672, ext. 12, dmabry@meatscience.org or www.meatscience.org.
June 6-7 – PORK 505 Short course: University of Nebraska, Lincoln, NE.
For more information, please contact Deidrea Mabry at 1-800-517-AMSA ext. 12 or dmabry@meatscience.org.
June 8-10, 2011: World Pork Expo, Iowa State Fairgrounds, Des Moines, IA.
For more information contact: www.nppc.org.
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"Producers throughout the world come to World Pork Expo for one reason: to see what's state-of-the-art in pork production and technology," says Doug Wolf, NPPC president, Lancaster, Wisc. "It's a chance to hear experts present the latest information, then talk face-to-face. And, you can experience first-hand the new products that are on display, both indoors and out." Register now
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