Iowa Farmer Today
11-25-06
Few profitability periods seen
By Jeff DeYoung, Iowa Farmer Today
With lower hog prices and higher feed costs, periods of profitability soon could
become few and far between.
Profitability is going to depend on how much producers are paying for corn, says
Shane Ellis, Iowa State University Extension livestock marketing
economist.
“As of last month, the farrow-to-finish operations were still making some money,
but I’m not sure if that will be the case in November,” he says. “Finishers are still
paying good money for feeder pigs as well as corn.”
With a slight expansion in the sow herd along with feeder pigs coming in from
Canada, Ellis says there is no shortage of hogs. Prices should trend lower
seasonally as the year winds down, he notes. What happens after the first of the
year could depend on pork demand, Ellis says.
“We are seeing an increase in beef exports, and although pork exports remain
strong, that could put a dent in them. We aren’t sending a whole lot of beef into
the Asian markets, but what we are getting there is selling pretty well and at a
pretty good price.”
Ellis says domestic demand for pork has weakened a bit over the past few
weeks. Live hog prices generally trend upward in the first quarter, but he says
with $3 per bushel corn in 2007 expected, it could be a rough year for the market.
“It’s really tough to make money with $3 corn. It’s just tough to make it work. “We
are hearing more producers looking at feeding DDGS (dry distillers grain
solubles) to offset some of the corn costs, but our research indicates 10 percent
of the dry ration is about the most they can handle.
“With all the competition now for corn, it could be a tough year. It’s not going to
be a bloodbath, but it will get pretty tight.”
Ellis says the dramatic decrease in feeder cattle prices indicates the confidence
feedlots have in the fed cattle market as well as a reflection of higher corn prices.
Fed cattle prices could depend on consumer demand, he adds.
“We are seeing more beef exports, but we are starting to see consumer demand
for beef increase. We have a very large number of cattle on feed, so there will be
a lot of beef on the market pretty soon.”
Ellis says cow/calf producers remain profitable despite the dip in feeder cattle
prices. Any increase in the cow herd, he says, will depend on how low calf prices
go.
“If they can make 95 cents a pound or better, and they have access to pasture
and forage, they are going still going to make money.”
Ellis says fed cattle prices should remain in the mid- to upper-$80s for the
remainder of the year, adding prices should creep above $90 at times in the
coming months.
“Without cheap corn, there is no longer an incentive to pay whatever they need to
pay to get the cattle like they were able to do in the past.”