Losses Continue
The swine industry is going through a very painful period. To put it in perspective, let’s suppose the average producer is losing $30 a head every day. Let’s also assume an average slaughter of 425,000 head per day, the industry is now losing $12.75 million each day. With at least 22 days of slaughter each month, the industry is losing $280.5 million a month. This has been occurring for at least 3 months and---probably closer to 4 ½ months---resulting in a lost of $841 million for the first 3 months of this year. Some producers have some margin protection, but the point that I am making is that equity is eroding very quickly in the industry.

Swine Industry Economics Report

Mark Greenwood
April 2008

Background
This report outlines the economic situation the U.S. swine industry is currently facing. It is important to note that a large-scale liquidation of swine producers large and small will not only dramatically impact family farms, but will have a ripple effect on businesses relying on the swine industry. This in turn will cause a loss of jobs in rural America and will affect entire communities.

At the outset, it is vital to understand the current situation has no resemblance to the short-term hog market crisis of 1998-1999. This earlier crisis was caused primarily by hog overproduction and a lack of sufficient slaughtering capacity. In contrast, the current situation has more to do with dramatically higher feed prices than the oversupply of hogs. While the U.S. swine industry is producing and slaughtering a record number of hogs, it is also exporting a record amount of pork. Demand for US Pork has increased in the US and worldwide. In February of 2008, the U.S. Pork industry exported 20% of its supply which helped bolster prices. Current hog prices would be at breakeven which historically occurs during this time of year for many producers if their input costs were near what they were a year ago. The issues hog producers are facing today was not of their own making. This ‘perfect storm’ has been caused by dramatically escalating feed prices encountering stagnant pricing during a time of unexpected increases in productivity.

Swine Industry Update: It is worse in the EU

Mark Greenwood
March 2008

It is not getting any better – The losses are continuing in the swine industry. This past month feed prices kept going up while hog prices improved some but not near enough. Losses in the open market are still close to $40 a head and everyone keeps wondering when will it get better and what do prices have to get to before we start getting profitable? Well, the first thing we need to do is to somehow get supply reduced. The last cold storage report shows that we have an abundant supply of product. Even though exports have been very good we need to reduce supply to get any significant improvement in prices.

Swine Industry Update: Producers are Nervous

Mark Greenwood
February 2008

Producers are Nervous – I attended both the Minnesota and Iowa Pork shows this month and there are a lot of producers that are nervous about the future of the Pork industry. I spoke to several groups and outlined what I am currently seeing in the countryside. There are very few systems that locked in 4th quarter and 1st quarter of 2008 margins. I have been asked to give an estimate on margins that were covered and I would say 30-35% have feed coverage and hog coverage through that time period. These producers that locked in that amount of coverage are still losing over $20 per head. Even if you locked in the futures on hogs, the basis widened dramatically because of the large slaughter numbers. In summary, swine economics are ugly and people are hoping that we will see some liquidation.

Recent Podcasts

More...