ProFarmer Crop Tour impact on the Pig Industry

In the past 2 weeks we’ve been hearing reports of the battle for the remainder of this year’s corn crop. On July 25 I wrote about the battle for the available supplies using local basis bids versus historic bids to see how tight supplies might become.

It appears that we’re going to have enough corn to feed. While it may be at a price we don’t like (bid is $7.61/bu at Sioux Center, Iowa this afternoon), at least the basis has lowered, suggesting supplies will be adequate. On July 25 Sioux Center was bidding +$0.33 while the basis bid today is only $0.08. I did an internet search of other corn purchase sites that I routinely check and all of them have dropped their basis bid by $0.30-40/bu from the July high. I even saw a covered pile of corn at a regional coop that grinds a lot of hog feed this morning. It looks like feed supplies, while expensive, will be adequate.

However, the results of the ProFarmer crop tour are sure to make feed grains even more expensive. They peg the US crop at only 12.48 billion bushels and 147.9 bu/a, well short of the 13+ billion and 160 bu/a that everyone was hoping for when we put the crop in the ground.

The disappointment in the size of the crop and the resulting increase in price has already shown up in feeder pig and SEW prices. Today’s USDA Feeder Pig price report had a low of $5 for SEW pigs, something we haven’t seen since August of 2009. The absolute spread in price (from $5 for the lowest price paid per pig delivered to $47 per pig delivered) is the widest I’ve seen since I’ve been tracking the data. Either someone has corn locked in at a relatively good price (something under $6.50/bu), or gambling has returned to the pig industry.

Many producers have historically bought corn from neighbors this time of year as they clean out bins to make way for the new crop. In past years, this has been a good time to buy as supplies were more than adequate with carryout numbers being more than ample. This year, if that was your buying strategy you’re facing some of the highest prices ever paid for corn. Even with lean hogs closing at $84.57 for December and $97.15 for next June, there isn’t much room to lock in profits with feed ingredient prices this high.

One thought on “ProFarmer Crop Tour impact on the Pig Industry

  1. The current crisis of high corn price and a lack of open market iso-wean demand has our operation in a cash upside down situation. Our current formula is the ave of the USDA iso wean matrix + open market ave price divided by 2. With open market prices at this low, even the average is well below production costs. Yes we raise our own corn and have adequate supplies til harvest, but why do us as isowean producers always have to bear the burden of giving up the opportunity cost of selling corn on the open market for record prices. It seems we have entered a new era where open market prices are not relevant to pricing our isoweans. I can rationalize that if you are feeding your own corn and have a finisher unit paid off or the profits from selling high corn prices will cover your payments that you will choose not to feed pigs. Thus if the packer does not offer a futures price that is competitive to the price of corn, which is happening at this time, then there is no demand for open market pigs. Are we to price these isoweans at cost of production and risk feeding all our pigs ourselves? And if we cannot recover the cost of production feeding these pigs in house, will not the future of pork production come to a perilless state of all corporate production and eliminating the independent isowean producer? Or even the independent finisher? Encourage your advise to this situation. Do we risk putting the price at cost or cost plus and having our current finishers find other pigs to feed?

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