April 4, 2007

 

US hog 2007 profit outlook improved on expanded planting intentions
 

 

American swine producers can look forward to profitability if 2007 corn acreage is expanded based on USDA's March 30 Planting Intentions survey, according to swine industry economists in its analysis on last week's USDA Hogs and Pigs Report.

 

An anticipated 15 percent increase in US corn acreage this year, if realized by actual plantings, could take some of the pressure off of feed costs and continue a record stretch of profitability for hog producers, says Shane Ellis, an Iowa State University (ISU) livestock economist.

 

He added good weather conditions for spring planting and the growing season can make livestock producers profitable this year.

 

The USDA quarterly Hogs and Pigs Report released on March 30 showed that on March 1 there were 16.6 million hogs and pigs on Iowa farms, a 1 percent increase from a year earlier. On a national level, the inventory of hogs and pigs on March 1 totalled 61.1 million, up 1 percent from March 2006.

 

Based on the records by ISU economists, Ellis said Iowa hog producers have made a profit on hogs sold for 37 consecutive months, the longest run of monthly hog profits in history.

 

One question that still hangs over hog producers is how much more of the extra corn grown in 2007 will be available for livestock production. Though forecasters stated ethanol will take a significant bulk of corn from its increased acres, Ellis said a bigger corn production will not affect the livestock industry.

 

The planting intentions report indicates corn acres will increase 15 percent nationally and 10 percent in Iowa. Ellis said this will lead to lower corn prices in the short term but actual plantings and weather hold the key for potential corn prices.

 

Economists point out that livestock producers might want to use the recent downward move in corn prices to lock in at least part of their future feed needs. Economists think corn stocks will still be pretty tight going into 2008, because of the continuing increase in ethanol demand, livestock feeding and exports.

 

Some hog price pressure is also seen as the USDA Hogs and Pigs Report shows more swine will go to market in May than had been expected. However, the number of hogs marketed in the second and third quarters of 2007 will be lower than expected, according to the report.

 

Dan Vaught, a livestock industry analyst with A.G. Edwards in St. Louis says he thinks high feed costs in the past six months have caused hog producers to cut corners on their feeding of sows. The cut would also mean a drop in litter size, he said.

 

Vaught noted summer production is below on what had been expected and it will be supportive for hog prices in the future.

 

On the other hand, Vaught said break-even prices for cattle feeding will depend on weather conditions. If there have been no weather problems, cattle producers will be able to make some money and downward pressure on corn prices would be good for both hogs and cattle because it will lower feed costs, he said.