Hog prices may be higher, but so are feed costs that are taking a bite out of industry profits.
According to Iowa State University’s estimated returns data for May, farrow-to-finish operations posted a return of $57.60 per head, the highest since October 2014 and a number five times higher than a year ago.
Those numbers are tempered by rising feed costs, according to a recent analysis from the Livestock Marketing Information Center.
“Although profitability is the highest in nearly seven years, there has also been a rise in feed costs to $107.61 per head, a level not seen in almost eight years,” the LMIC says.
The Iowa State data shows that nearly half of the total feed cost was for corn, with 18% of the cost for soybean meal and 13.5% for dried distillers grains.
“Omaha corn prices have been averaging around $7 per bushel for about the last two months, which is well above the five-year average of roughly $3.80,” the LMIC says. “Central Illinois soybean meal prices have been around $400 per ton the last few weeks, a level that is a low for the year but still well above the five-year average of about $340.
“Corn and soybean meal prices will often decline during the second half of the year, but both have been holding strong since the start of the year. The rise in feed costs this year have become a growing concern for producers.”
Carcass prices posted a break-even of $82.75 per hundredweight in May, the highest break-even price since October 2013. This reflects the rise in feed costs.
“As hog prices have risen so has the pork cutout value, which was $134.13 per hundredweight, up 70.3% ($55.35) since the start of the year and above the pandemic high of $115.12 that occurred almost a year ago,” the LMIC says.
“In 2021, meat demand has been remaining strong and will likely do so through the July 4th holiday season which should help support hog and pork prices, but feed costs will likely continue to be a headwind to profitability in the near term.”