On Wednesday of this week I was a speaker at the Midwest Pork Conference in Indiana, sponsored by the Indiana Pork Producers. In spite of tough current economic conditions, attendance at the meeting was surprisingly good. I spoke with several vendors who were pleased with the attendance and the interest shown in their products and services.
All of the producers that I spoke with expressed the opinion that they would weather this period of no-profit and be around when profit returns. In other words, they weren’t going to be the ones selling sows and reducing production. What they were doing was tightening their belts even more and continuing to get even better at doing all of the little things right. Some were taking this opportunity to do depop/repops, with the repops being a gradual phase-in rather than using off-site breeding projects. During these repops, producers are utilizing their employees to do repairs and updates to their facilities.
Proof of this optimism is in this weeks weaned pig pricing. Every Friday, USDA issues their weekly feeder pig pricing report. This weeks report, based on 82,394 SEW pigs, quoted a weighted average price of $25.92 per pig delivered price. For the week ending August 21, the quoted weighted average price was $15.32. The spot market price for weaned pigs averaged $19.67 per pig, up from $10.43 per pig for the week ending August 14. Historically, weaned pig prices reach their low for the year in early September, and then climb to a high in December and January. Spot prices of almost $20 per pig, while not enough to cover all costs of production will cover almost all cash expenses for many producers. With the very strong likely hood that weaned pig prices will continue to climb this fall, the pressure to sell sows is very much reduced for SEW sellers. If they’ve made it this far, there appears to be a glimmer of light for their future chances.
I have known many of these Indiana producers for a number of years and for many, pork production is tied to a land base that produces the feed grains fed to the pigs. As one producer in Iowa told me this summer – for years the pigs paid for my grain habit – now my grain habit is paying for my pig habit. I think this downturn is once again highlighting that producers who grow their own grain and capture all of the fertilizer credits from the manure from pigs fed this grain are in a much better long-term financial position. The challenge to these producers is to identify the right set of advisors so both their grain production and pork production enterprises operate at levels that are competitive long term.
Once again, the common question was – when will somebody else throw in the towel and sell sows? The sharp uptick in lean hog futures early in the week on rumors of a possible large Russian purchase of US pork and the continued prospect of a very large corn crop keeps delaying the towel toss for many. There appears to be just enough optimism in the futures market for both pork prices and feed grain prices that many are deciding that they can hang on for a little longer.
On another note, I saw my first combine in a bean field late on Wednesday. At least in the Mankato area of Minnesota, we are not expecting a bin busting year for both corn and soybeans because of drought. I pulled up the data from the National Weather Service for North Mankato. For the May thru September period, we have had a total of 10.6 inches of rainfall. This contrasts with 10.4 inches in 1988 and 10.9 inches in 1976. Unless it rains quite a bit in the final 10 days of the month, we are on track to have the second driest 5 month period on record since 1970. Many of us remember the drought of 1988 because the lack of rainfall was accompanied by many hot days that added to the stress on the growing crops. The cool weather this summer has been a blessing in our area as it allowed the limited moisture to be available for crop growth, rather than being evaporated rapidly on hot days.