July 3, 2012

US pork producers experiencing higher profit margin gains

Boosted by favourable weather conditions and increasing pork demand, profits for US pork producers are rising with profit margin gains of US$6 per head over the prior week.

The improvement reflects lower slaughter numbers and lighter slaughter weights as well as an increase in pork demand. Meanwhile, packer margins continue struggling - showing an US$11.88 per head loss for the same week.

For farrow-to-finish producers, the average profit margin reported for the week ending June 22 was US$44.22 per head, according to Sterling Marketing in Vale, Oregon. That compares to a US$30.86-per-head profit for the previous week and US$37.64 per-head profit during the comparable week in 2011.

Feed costs continue to offer some relief but are inching their way higher reflecting growing concern over the worsening drought conditions in the US Midwest. For the week ending June 22, feed cost ended at US$113.37, up about US$2.50 over the prior week.

Packer margins are still deep in the red but improving slightly, with losses registering US$11.88 per head compared to the previous week's deficit of US$14.31 per head. The current loss compares to a loss of US$10.77 per head for the same week in 2011.

Western Corn Belt negotiated hog prices rose to an average US$103.33 per hundredweight for the week, up about US$6 from the previous week. For the same week in 2011, hog prices averaged US$102.61 per hundredweight.

Sterling Marketing provides the Sterling Pork and Beef Profit Trackers, which are calculated using actual weekly prices for hogs and cattle, feed costs, pork and beef cut-out prices, drop credits and other factors that influence profit margins.

The Sterling Pork Profit Tracker for the week ending June 22: average farrow-to-finish margins: US$44.22 per head; average pork packer margins: -US$11.88 per head.