CattleNetwork.com, KS
10-06-06
Hog Breakeven Value Stable Despite Volatile Corn Prices
KANSAS CITY (Dow Jones)--Hog producers' break-even levels so far this year have been relatively stable despite very volatile corn prices in recent months, and analysts say low costs for other input factors and improved performance and efficiency on the farms have - so far - helped keep overall costs down.
According to monthly calculations for livestock producer break-evens done by
John Lawrence, agricultural economist at Iowa State University , the cost of producing slaughter hogs at farrow-to-finish operations through the first eight months of this year has averaged $38.93 per hundredweight on a live weight basis. The range of monthly break-even prices has been from a low of $38.41 in
January to a high of $39.25 hit in July.
Lawrence said he uses monthly average corn prices in his livestock break-even calculations, which tends to even out the volatility of daily and weekly market swings. Also, the amount of corn included in the cost analysis is weighted on the basis of when in the life of the animals it is used. In the case of hogs, the majority of the corn consumed by an animal being raised for slaughter occurs in the last two months of its life, he said.
Chicago Board of Trade corn futures prices on weekly continuation charts have varied from a low of $2.05 per bushel in mid-January to a high of just over $2.76 this week. The recent rally began from a cycle low hit in mid-August that was at
$2.17 1/4, the lowest level since mid-March.
Don Roose, market analyst with U.S. Commodities in West Des Moines, Iowa, said that although corn prices have been rising, soybean meal prices are at low levels. Soybean meal is a protein source used in swine rations.
Low interest rates and improved efficiencies at the farm level also have helped keep overall costs low for hog producers, Roose said.
Even higher corn prices are projected out ahead as illustrated by the futures market, Roose said. For example, CBOT December corn futures on Friday closed at $2.71 per bushel, with each of the other months carrying a premium to the previous contract. December 2007 corn closed at $3.05 1/2 per bushel.
Higher corn futures prices out ahead may buy additional corn acreage next year and beyond, Roose said. The strength in near-by corn futures seen in the past few weeks has raised concerns among livestock and poultry producers as they must compete with the ethanol industry for corn.

In a Dow Jones story released Thursday, John Bekkers, president and chief executive of Gold Kist Inc. (GKIS), told attendees at the National Chicken
Council's annual conference that "at some point in time there's going to be a bidding war (for corn) between us and the ethanol plants, and we better get used to that idea."
Members of the pork industry have expressed similar concerns since corn makes up the majority of swine rations.
CATTLE/HOG SLAUGHTERS
The USDA estimated this week's cattle slaughter at 635,000 head, compared with 639,000 a week ago and 622,000 a year ago. Year-to-date cattle slaughter is 25.531 million head, up 3.8% from 24.603 million a year ago.
This week's hog slaughter was estimated at 2.159 million head, up 0.8% from last week's 2.142 million and 3.8% above the year-ago figure of 2.079 million.
Year-to-date hog slaughter is estimated at 78.102 million head, up 0.8% from the year-ago figure of 77.464 million.
TOTAL MEAT PRODUCTION
The USDA estimated total beef, pork and lamb production for the week at 933.3 million pounds, compared with 930.0 million last week and 906.7 million a year ago. Year-to-date combined meat output is 35.766 billion pounds, up 3.8% from the 34.444 billion pounds produced a year ago.
Broiler/fryer slaughter this week was estimated at 170,111 million head, compared with 164.748 million a week ago and 166.544 million a year ago.
Source: Curt Thacker, Dow Jones Newswires; 913-322-5178; curt.thacker@dowjones.com