Tuesday, June 1, 2010

Cost of Raising Hogs Keeping Expansion In Check

Hog producers have been enjoying some decent profits the past couple of months, with margins in the $40 per head range. While that's great news after more than two years of losses, it's costing those producers a lot of money to raise a hog, and that's keeping expansion in check. Market hogs once could be produced for around $100 but now require $130-$140, and about 70 percent of that is feed.

Today's CME Group Daily Livestock Report looks at information in USDA's Agricultural Prices report -- released Friday -- on the ratios for food animals of output prices to feed costs. It notes that May's hog:corn ratio of 18.3:1 (live weight price of $62.40 per 100 pounds to $3.41 for a bushel of corn) is still below the level that usually drives expansion. Generally, a ratio of 20:1 prompts expansion of the breeding herd and, within a year, an increase in hog production.

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