Hog Profit Outlook Improved By Planting Intentions

Prospects for expanded corn plantings could keep the lid on feed costs.

Hog producers can look forward to profitability if 2007 corn acreage is expanded as much as USDA's March 30 Planting Intentions survey indicates. That's the word from swine industry economists after analyzing last week's USDA Hogs and Pigs Report and the planting intentions report.

An anticipated 15% increase in U.S. corn acreage this year, if realized by actual plantings, could take some of the pressure off of feed costs and continue a record stretch of profitability for hog producers, says Shane Ellis, an Iowa State University livestock economist. "If the weather is good for spring planting and for the growing season, we'll see livestock producers stay profitable," he says.

USDA's quarterly Hogs and Pigs Report released March 30 shows that on March 1 there were 16.6 million hogs and pigs on Iowa farms, a 1% increase from a year earlier. Nationally, the inventory of hogs and pigs on March 1 totaled 61.1 million, up 1% from March 2006.

Hogs profitable for last 37 months

According to records kept by ISU economists, Iowa hog producers have made a profit on hogs sold for 37 consecutive months, says Ellis. That's the longest run of monthly hog profits in history.

One question that still hangs over hog producers is how much more of the extra corn grown in 2007 will be available for livestock production. "There are forecasters who say ethanol and other industrial uses will eat up the production from the increased corn acres," notes Ellis. "But producing more corn sure isn't going to hurt the livestock industry."

The planting intentions report indicates corn acres will increase 15% nationally and 10% in Iowa. That will lead to lower corn prices in the short term but actual plantings and weather hold the key for potential corn prices. Economists point out that livestock producers might want to use the recent downward move in corn prices to lock in at least part of their future feed needs. Economists think corn stocks will still be pretty tight going into 2008, because of the continuing increase in ethanol demand, livestock feeding and exports.

Hogs to stay profitable into summer

Some hog price pressure may be coming because the USDA Hogs and Pigs Report shows more hogs will go to market in May than had been expected. However, the number of hogs marketed in the second and third quarters of 2007 will be lower than expected, according to the report.

Dan Vaught, a livestock industry analyst with A.G. Edwards in St. Louis says he thinks high feed costs in the past six months have caused hog producers to cut corners on their feeding of sows. That would mean a drop in litter size. "We're looking at summer production to be below what we had been expecting and that will be supportive for hog prices in the future," he says.

Thus, the stage is set for hog producers to earn a profit through this spring and into summer. What about cattle feeding?

Break-even prices for cattle feeding depends on what part of the country you are in, he says. There have been different weather problems in different parts of the United States. If there have been no weather problems, cattle producers will be able to make some money. Downward pressure on corn prices would be good for both hogs and cattle because it will lower feed costs.

TAGS: USDA
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