The spot market for weaned pigs has been at $60/pig for the past 2 weeks, a price pig sellers haven’t seen since last February and early March. This suggests a lot of optimism by producers for the late spring and summer markets.
This past week I was in Columbia, Missouri to speak at the Passion for Pigs conference. I shared the podium with Lee Fuchs from the St Louis office of the Farm Credit System. He reported that there is a lot of optimism by producers for the coming year. However, he also shared data that suggested many producers have hedged this optimism, with some producers having more than 50% of all their hog production for 2012 hedged or otherwise forward contracted.
This extensive use of forward contracting for both inputs and sales during a profitable production window reflects the changing industry. In past cycles, producers would have remained uncontracted so as not to miss the ‘high’. Today, producers sell pigs on margin and when their margin targets are met, they buy inputs and sell pigs. They remember all too well the lessons from 1998-99, 2002-2003 and 2008-09.
At the conference I also talked with exhibitors. It appears there will be a construction boom in the industry this coming year. One builder says their company is getting calls from grain farmers who are looking to build a barn in order to access the manure. Grain farmers report increased corn yields for second year corn in corn on corn rotations when the sites have swine manure applied. The market for manure is heating up with these types of results.
Ten to fifteen years ago I spent a considerable amount of time and effort with the Nebraska Pork Producers Association working to convince grain farmers that hog manure could be a valuable component to their grain enterprise. At that time, not a lot of interest in manure, with many grain farmers expressing opposition to siting of hog production facilities in their communities. Now, these same opponents are in the forefront of seeking such facilities in order to enhance their grain enterprise.
Six dollar corn is changing how we formulate diets for our pigs. It is also changing how rural communities feel about having production facilities in their midst. Who would have thought that corn at $6/bu would have a positive side for the pork industry.