Lower Feed Costs Driving National Pork Herd Expansion

If corn and soybean meal prices stay low as expected, hog weights and pork production should continue to increase into 2015, economist says

Published on: Jan 20, 2014

Last year, live-hog prices averaged $65 per hundredweight. Hurt said they are expected to average about $66 this year, with the highest prices ranging from $69 to $71 in the second and third quarters. Increased production during the summer and fall will then drive prices back down to below the 2013 levels.

Low production costs will, however, help maintain strong profit margins for pork producers.

"From 2000 to 2006, the estimated total costs of raising hogs was about $36 per live hundredweight," Hurt said. "That reached a high on a calendar year basis of $67 in 2012. Costs were estimated at $64 last year and are expected to average about $56 for the 2014 calendar year."

Part of what continues to drive low production costs is low feed prices. Corn averaged an estimated $6 per bushel in 2013. That price could fall to an estimated $4.45 per-bushel average for the 2014 calendar year. Soybean meal averaged about $440 per ton last year and likely will drop to an average of $395 per ton in 2014.

According to Hurt, profits could reach about $27 per head, making this year the most profitable for pork producers since 2005. As supplies increase, he said those margins will tighten, but not disappear.

"Profit margins are expected to narrow in the fall of 2014 and into 2015 as pork supplies increase," Hurt said. "Returns, however, still look to be profitable at least until the fall of 2015."

Source: Purdue University; University of Illinois Farmdoc