Pork production in fourth quarter of 2015 is expected to be about 6.5 billion pounds, about 6 percent higher than the fourth quarter a year ago and over 3 percent higher than the same period of 2013. Hog prices are responding to larger product supplies and sluggish foreign demand for U.S. pork: fourth-quarter prices of live equivalent 51-52 percent lean hogs will likely finish at $45-$46 per cwt, more than 30 percent below prices last year when PEDv (Porcine Epidemic Diarrhea) had reduced hog supplies.
While the extent of the change in fourth-quarter hog prices is striking, USDA prices and futures prices suggest that the spread between hog prices and feed costs remains positive. The figure below represents quarterly feed spreads—hog price minus costs of a typical corn-soybean meal ration—calculated with USDA historical and projected prices for hogs, and historical and futures prices for corn and soybean meal. The figure shows positive spreads for each quarter of 2015, although secondhalf values are below those of 2013. While it is true that positive feed spreads say little about producer profitability, the figure suggests that the price environment in which the U.S hog industry is currently operating—30 percent lower output prices than a year ago—speaks more to the extraordinary nature of hog prices in 2014 than to the industry’s financial wellbeing in 2015.
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Source: USDA