Soybean Meal Prices

     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.

So let’s play around a bit with this variation stuff and see how the future cost of production might look for hogs if we forecast it by first forecasting corn and soybean meal prices and then putting those forecasts into a cost of production model to generate a forecast for future carcass prices.

This hog cost forecast was generated assuming that corn would average about $3.50/bushel and that soybean meal would be about $250/ton on average.  Under those circumstances and some stuff I will share in a minute, the average hog cost of production for a 270lb animal would be about $62.50/cwt on a carcass basis.  However, by using the variances and the correlation between the input prices in the forecast model, we can create a forecast not only of the average price but the range over which it is likely to wander and the probability it will reach any one price in the range.