Economics

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.

SwineCast 0286 Show Notes:

• "We estimate losses of $27 per head on average for 2008 for farrow-to-finish operations and those taking the market risk" - Chris Hurt
• Ron Plain looks at feed price support elements
• Belstra Milling's Jon Hoek explains why his organization bends over backwards to engage the local citizenry
• Dr Dennis DiPietre stops by to look at impact of outside influencers on our markets... today we discuss stagflation and the importance of world markets
• PCVAD update with Dr Lisa Tokach speaking at Pigski in Colorado

SwineCast 0281 Show Notes:

• Paul Jeske at Pigski reports his experience with the new upper midwest strain of PRRS his practice is investigating
• Iowa Select's Joe Kerns shares important pricing knowledge and the possibility of another marketing opportunity
• Iowa State's fuels and feeding info
• Exploring feedstock alternatives in Canada
• Manager's minute with Sarah Fogelman... more than filling an opening
• USDA says the next decade should be plenty positive for ag 

SwineCast 0279 Show Notes:

• Smithfield cutting sow herd 4-5% in light of high feed costs
• Julie Maschoff shares that company's views on human resources and public relations
• Dr George Foxcroft looks at sow prolificacy issues
• Comment period for "naturally raised" term extended

Mark Greenwood
January 2008

Bad As I Have Ever Seen - The current economics of the pork industry makes me look back at 1998 and 1999 and that seems not as bad. With most producers in the last 60 days getting maybe a $100 for their hogs on the open market and with cost of production on close outs at $140 a head producers are losing money quickly. The other part of this equation is that cost of production keeps going up with corn in Southern MN at $4.75 a bushel and soybean meal at $330 a ton. In looking at cost per head on a farrow to finish operation we are over $90 per head! We were almost at a point where feed costs were not being covered by what the producer was receiving for revenue. The mood of the industry is one of almost disbelief and fear.