Many readers of this blog are not involved in the daily sales and pricing activities of the US pork industry. While they are aware of reports of very high prices, I thought I would put the recent market in perspective. The data is from the USDA mandatory price report for the prior day slaughter of federally inspected barrows and gilts (LM_HG201).
For the week ending on February 21, 2014, the report covers 1,941,172 pigs. The weighted average carcass weight was 213.4 lb with a net price received before market fee deductions, etc. of $89.32/cwt. This translated into an average net of $190.61 per barrow/gilt slaughtered that week.
Fast forward 4 weeks. Last week there were 1,894,807 barrows and gilts (46,365 fewer pigs) covered by the report. While carcass weight increased to 214.7 lb (1.3 lb/pig increase), the net price received jumped to $114.21/cwt. The net value per barrow/gilt slaughtered last week was $245.21, a $54.60/hd jump.
While everyone didn’t receive this much for the pigs they delivered to slaughter because of forward pricing and risk management plans, the impact is being felt throughout the production chain. Last Friday USDA reported a spot market price of $101.50/pig for weaned pigs with 40 lb pigs as high as $128/pig (NW_LS255).
The hog market is reacting similar to the corn market in the past few years. While corn rose to $8/bu, many didn’t capture that price due to risk management sales or drought shortened yields. However, crop insurance allowed many of these to participate at some level in this income spurt.
It sure would be nice if there was a risk management tool for livestock producers similar to crop insurance that would allow producers to participate in these record setting prices when their production has been so adversely impacted by PEDv.
The problem with crop insurance is when you take some of the risk away you also take some of the reward away. My crop business will never be as profitable as it could be because crop insurance takes away some of my risk. Over the years crop production has not been as profitable as pork production because of the amount of risk we have.
Also, if it goes through the government it will take two dollars of taxes to get one dollar of benefit. Livestock insurance is a nice thought but I just don’t feel it would be positive long term for the industry. Maybe something to help if we had a FAD introduced is needed. That would make PEDV look like a minor problem.