Pig costs up, prices down as US drought impacts producers

Farmers face challenges as they sell at a loss

U.S. hog producers are seeing increased feed costs and decreased pork prices, a combination resulting in some farmers selling their stock at a loss.

Corn on the futures market is at nearly $8 per bushel through summer 2013, roughly a 50-percent increase over prices before the drought that has hit the U.S. all season. At the same time, hog prices have dropped significantly, falling nearly 30 percent in the last six weeks due to an oversupply moving from farms to market. For the week ending September 14, pig producers lost an average of $36.15 per head, down roughly $7.00 from the week before when margins averaged a $29.00-per-head loss. One month prior to that pork producers were gaining $14.76 per head, and for the same period in 2011, producers were profiting by $11.77 per head. 

The oversupply is coming from farmers who are trying to manage their costs by decreasing the size of their herds. “That’s probably caused some producers to sell hogs a little bit sooner than they otherwise would,” said Ron Plain, an agricultural economics professor at the University of Missouri. “To try to get them off the feed bill and that’s probably impacted a bit on why we’ve had so many hogs to slaughter here in the last few weeks.” Feed costs for pigs placed into the finishing unit as of September 14 is estimated at $136.32, according to Sterling Marketing. At the same time in 2011, that cost was $112.58.

In the short run, these lower prices might be good news for consumers, as wholesale prices have dropped 15 percent since mid-August, according to analysts. Lower prices should stimulate demand for pork, which may ultimately lead to better hog prices — but farmers say anything like that is still a long way off.