Swine Morsels
Swine Morsels XV
Published: Sep. 05, 2008
I have the deranged answer of a non-economist, non-business educated, non-relevant veterinarian looking for explanations of current isowean/feeder/market pig pricing.
No one wants to own pigs anymore without making huge profits to make up for previous recent losses. Isowean and feeder pig producers recently had the chance to lock in $25 per head purchased/sold. The pig rearing barns are full so only those select folks that were able to use their own barns or procure barns were able to take advantage of this rare phenomenon. Currently market pig prices have fallen by $23 per pig. Granted, inputs have fallen also and profit potential still exists for the pig grower.
It almost seems like the pig finishing folk of the country have formed a union and just are not paying the prices the sow farms need to stay in business because they need to make up for some losses recently. That’s great for the finishers because many lost A LOT of capital the last 8 months. However, soon the sow farms really will start to liquidate unless some profits start to show up in the finishing community and are partially funneled back to the piglet producing farms. Piglet and feeder pig producing farms without enforceable contract have gotten crunched. Some piglet producers still do need to fold. How could all of the nursery/grow/finishing barns still be full if piglets were not available at bargain prices? I talked with a finish pig producer today that said he needed $20/head instead of what was previously $10 to make that capital come back somehow. This hungry subset of producers has still been successful at procuring piglets for $10 less than a sustainable price for the piglet producer. Breakeven today for an isowean, if I were to purchase it for my farm, came out to $38.34. I’m using Apr ’09 Lean Hog futures and Feb ’09 corn and SBM futures. I’m assuming I’m into the April LH contract. Feeder pig breakeven, if I’m to purchase a pig for my farm, came out to $50.06. Feeders today are selling for around $29 for a 40 lb pig. That spread once again provides a $20 bill for the purchase of the pig for the person that has the buildings to finish in. It’s no wonder there are no vacant hog growing buildings in the Midwest. I am allowing $19 for a wean-to-finish space in my calculations. Highly depreciated wean to finish space owners are at an advantage, as always.
Have you seen what the October up-close lean hog futures have done recently? The growing buildings are FULL. The supply line is FULL. I imagine the packers will have to play golf again one of these days to arrange to remove some shackle space during times of intense supply - - - or is it the retailers that need to play golf to insure meat shelving space is dedicated to foods other than pork and no longer need it from the packers? I sure hope that never happens again. Maple Leaf already has shut some shackle space due to bacteria contamination. We’ll have to keep our eyes open for developments in shackle space availability and the reasons for the reductions.
But hey - - I’m not an economist and I know I’m talking out of turn. I’m sure we mostly should disregard this edition of Swine Morsels. I already have.