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Rising feed costs hit pork industry

Rising feed costs hit pork industry

young pigs at feeder

Production costs will take a large bite out of any profitability in the hog market this year.

Steve Meyer, an economist with Partners for Production Agriculture, said rising grain costs are attempting to put the brakes on any momentum in the hog market.

“Corn and soybean meal prices have been on a rocket,” he said during a marketing outlook webinar hosted by the National Pork Board Feb. 9.

Meyer said China has been the driving force behind higher prices as it rebuilds its sow herd. He said a ban on garbage feeding and the switch to a grain-based swine diet has also boosted imports into China.

Meyer said soybeans could supply the real firepower.

Record-high yields resulted in a carryover of just 88 million bushels.

“China’s demand for soybeans is still insatiable,” he said.

Higher feed costs will help create break-even prices of $74 per hundredweight for the top producers, with that figure closer to $80 for average producers.

“Remember, we haven’t sold many hogs that have eaten expensive grain yet,” Meyer said. “It’s best to accept a small disaster and protect yourself against a huge disaster.”

Demand for pork remains strong despite fewer people going out to eat. Meyer said cold storage numbers are down a third for pork, while numbers for beef and chicken remain nearly the same.

“We have 400 million pounds in cold storage. That’s just over three days of production,” he said. “We either need higher production for a while or lower consumption.”

Meyer said the recent USDA Hogs and Pigs report indicated the breeding herd was down 3% from a year ago, but he believes that number may be incorrect.

“Even with higher costs, lean hog futures have us at a profit,” he said, adding that should be enough incentive for producers to at least maintain herd size.

Sow productivity is expected to grow again in 2021 after it fell slightly last year,

“We could get two years of litter growth in one year,” Meyer said.

He said slaughter weights have dropped quickly over the first few weeks of the year and will likely fall below year-ago numbers in April. Packer margins are good, Meyer said, and should remain higher than the five-year average.

Meyer said low-cost producers should see some profit in 2021. He said risks include trade-disrupting events like a foreign animal disease, a short crop, PRRS losses and changes in policy under the Biden administration.

Pork exports shattered records in 2020, said Brett Stuart with Global AgriTrends. He said 28% of all U.S. pork exports went to China.

Exports are expected to be down 2% in 2021, but Stuart said that will allow the U.S. to still hold 13% of last year’s overall growth. Exports to China should be about 17% lower in 2021, with shipments to big markets like Mexico and Japan on the rise.

Stuart said a recovery from the COVID-19 pandemic should release some “pent-up demand” from customers. He said continued issues overseas with African swine fever and a weakening U.S. dollar will also impact trade in 2021.

CropWatch Weekly Update

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Jeff DeYoung is livestock editor for Iowa Farmer Today, Missouri Farmer Today and Illinois Farmer Today.

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