Cargill’s Producer Profitability tool shows October being the tail end of a summer that held some profit potential, for the most part
U.S. Department of Agriculture economists trimmed their outlook for hog prices in their October update, now projecting a 2023 average price of $66.75 per cwt, down roughly 6% from the price forecast for 2022. Despite solid domestic demand, USDA continues to report shrinking inventory numbers, most notably with the September inventory marking a ninth-consecutive quarterly decline in the breeding inventory tally… dating back to Sept. 2020.
“…meaning that in 2 years the September U.S. inventory of breeding animals has lost the rough equivalent of 181 thousand head,” the Economic Research wrote in a report released Oct. 18.
That contraction has perhaps been in response to uncertainty about the global economy, over how inflation might temper meat demand among U.S. consumers, or over the opportunities to produce pigs profitably in the face of escalating costs of generally every input on the ledger.
Indeed, when looking at current marketings (Fig. 1) and placements (Fig. 2) calculated by Cargill’s commercial pork team, hogs marketed this week would be expected to return somewhere from 13 to 92 cents per head, while pigs placed in the barn this week appear poised to rack up a loss of somewhere between $8.69 and $19.21 per head. Put another way, the breakeven price per pig is roughly half of what it was four months ago.
And the outlook ahead appears to tell a similar tale. Using Cargill’s Producer Profitability tool to plot a forward profit curve (Fig. 3), the current outlook shows October being the tail end of a summer that held some profit potential, for the most part. But with combines rolling in earnest across the Corn Belt, the seasonal outlook has shifted firmly to the red until planters are back in the fields next Spring.
Hog prices this year were fairly strong all summer long, with USDA data showing the weekly Iowa-Minnesota weighted average reaching a seasonal peak above $130 per cwt in mid-August, but falling steadily in the subsequent weeks down toward $93 as of Oct. 17. Year-to-date slaughter is down 3%, at 97.9 million head through Oct. 15.
But with nearby corn futures hovering above $6.80 and most other items in the ration holding steady this month as supplies and markets around the world have stabilized, finding opportunities to bank profits until warm weather returns could be quite a challenge. Producers can create their own projections based on their own data and production assumptions using the Producer Profitability Tool by contacting their Cargill representative to learn more or by filling out this form online to request access.
Listen to Feedstuffs Precision Pork. Feedstuffs Precision Pork podcast is a look at market trends and ways to bring more precision to your pork business.
Sign up for the weekly Cargill Pig Flash newsletter.
