cost of production (COP)

SwineCast 0289 Show Notes:

• Wes Jameson looks at the morality of meat
• Some thoughts on expanding your worldview from Dr Dennis DiPietre.  Some sources to quickly provide a perspective on market events
• Combining your financial and production records 

     Here is a handy little abbreviated table to guesstimate your cost of production for a 270lb live weight animal.  Glenn Grimes at the University of Missouri has just indicated that there is a 100% probability that the average COP for pork producers in 2008 will start with a "5" on a liveweight basis.

     Within the table below, you pick a combination of corn price and soybean meal price.  If you pick the combinations in the top part of the table as your guess for the average 2008 feed ingredient prices, use the COP forecasts with a "1" label.  If you pick the corn price/bean meal price combination in the lower part of the table, choose the COP forecast with a "2" label.  I have provided them in both carcass and liveweight amounts to cover everybody's favorite way of thinking.

If you want to know the impact of increased corn prices on your cost of production, chose a forecasted corn price (take your pick of forecaster between $3.40 and $3.85 with some as high as $5.00+ if drought develops) and crank through your feed cost calculation. If you do this and it actually turns out to be your new cost of production, you will be one of the last few producers in the pork industry with absolutely no imagination whatsoever.

One thing we know for certain is that people do not face adversity sitting still. All kinds of secondary strategies, impacts, cost cutting, substitutions, new research and experiments, adjustments in weights and plain ingenuity immediately move to the forefront. In addition, poultry producers and other meat animal species that consume corn are making similar adjustments as are tortilla makers, users of high fructose corn sweeteners and even elevator/feed mills that used to get the corn. As they do, the prices of their products change relative to the price of pork and demand shifts begin to take place at the grocery store and throughout the chain.