Pork Profits Improve with Shifting Grain Prices and Exports
Pork Profits Improve with Shifting Grain Prices and Exports
The pork industry is buzzing with activity lately, with a lot to unpack. Let’s dive in, starting with grain prices. Since the switch to the fall new crop, grain prices dropped and provided relief for producers after a tough 19 months economically.
Feed Costs Impacting Revenues
According to the Iowa State Estimated Livestock Returns, the average estimated breakeven was $97 per carcass cwt in 2023, with feed costs averaging $120 per head. Estimated feed costs have been above $120 since the second quarter of 2022, peaking around $131 per head before dropping to under $100 per head in March 2024. These high feed costs, combined with insufficient revenues, caused significant losses for swine operations starting in the fourth quarter of 2022.
The estimated returns showed an average loss of $27 per head marketed (before a credit for manure) over the last 19-month period – the most significant in history. While a shorter period than the losses incurred by the industry from 2007-2009, the losses this time have been more significant as both feed costs and all other fixed costs remained high. Feed costs moving lower are helping with cost structures, but other fixed costs including labor may stay elevated, making a return to the lower cost structures seen several years back challenging to achieve.
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Productivity Gains Boosting Efficiency
In March, the hogs and pigs report was released, sparking debate about the amount of pork the US will supply this year. The breeding herd was down 2%, but productivity gains offset this decline with pigs per litter up approximately 5% year-over-year. This trend isn’t surprising, as lower performing sows have been culled from the market while genetic improvements continue to boost efficiency. However, reports of PEDv and lateral PRRS breaks in nurseries and finishers across the country raise questions about finishing and grow-finish performance for the remainder of 2024.
US Pork Capitalizing on the Export Market
Exports remain a bright spot, showing strength in the first few months of 2024. Total US pork exports reached $1.37 billion through February, making a 10% increase compared to the previous year, following a record-setting 2023. Mexico led in both volume and value. With pork production declining in other regions and US cost structures improving, the US pork industry in well-positioned to further capitalize on export markets. This has contributed to a significant price surge in recent weeks, with both the CME Index and the PK 602 (cutout) rising by about $10 over the past six weeks.
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Planning Ahead to Capitalize on Market Opportunities
It’s crucial for industry players to closely monitor marketing plans and market conditions with stakeholders. Many have been eagerly awaiting this market upturn, which presents profitable opportunities for those with aligned cost structures. Implementing price protection strategies, including flexible options for participating in market rallies, can help swine operations capitalize on this opportunity and avoid surprises when market conditions inevitably shift again.
While the swine industry faces challenges like fluctuating grain prices and disease outbreaks, there are promising signs of recovery and growth, particularly in export markets. By staying vigilant and adaptable, producers can navigate these dynamics and position themselves for success in the evolving landscape of the swine industry.
Speak with a Compeer swine specialist today to see how we can help you navigate the complex issues facing pork producers today.
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