Lower Feed Costs Keep Hog Producers in the Black

Total costs of production projected at $36.90 per hundredweight, or about $13 below the average price received.

Published on: Nov 17, 2005

Continued strong market hog prices for most of 2005 and lower feed costs will result in another profitable year for hog producers, according to a University of Illinois Extension study.

"Hog prices are expected to average about $50 per hundredweight in 2005," says Dale Lattz, U of I Extension farm management specialist and author of the study. "Relatively large corn and soybean crops in 2005 will result in lower feed costs. Feed costs are expected to average about $20.65 per hundredweight and nonfeed costs at $16.25 in 2005. Total costs of production would be $36.90 per hundredweight, or about $13 below the average price received.

"If these projections materialize, 2005 will be another profitable year for hog producers with profit levels at one of the higher levels in recent years."

The study can be viewed online through the farmdoc site at: www.farmdoc.uiuc.edu/manage/newsletters/fefo05_21/fefo05_21.html .

Lattz notes that 2004 was also a profitable year for Illinois hog producers. Higher total returns due to higher market prices in 2004 resulted in an increase in profits by $14.36 per hundredweight compared to 2003.

"Total returns in 2004 were the highest since 1996," Lattz notes. "Total returns in 2004 averaged $54.50 per hundredweight produced compared to $38.15 in 2003 and the 2000 through 2004 five-year average of $42.02.

"Total returns for the farrow-to-finish hog enterprises exceeded total economic costs by $13.58 per hundredweight produced in 2004. The 2003 return was a negative-78 cents. Three of the past five years show a positive return for farrow-to-finish enterprises."

In 2004, feed costs made up 61% of the total costs faced by hog producers and were at the highest level since 1997. Nonfeed costs accounted for $15.87 in 2004, an increase of 46 cents from 2003. Nonfeed costs included $8.46 per hundredweight of operating costs and $7.41 per hundredweight of other costs.

"Maintenance and power expense and labor expense are the most significant nonfeed costs," Lattz notes.