Economist: Hog Producers Face Record Economic Losses

August 30, 2012 10:34 AM

Purdue University ag economist Chris Hurt says producers could lose around $30 per head this summer and nearly $60 per head during the last quarter of 2012 as continued herd liquidation drives down market hog prices and drought keeps feed grain prices historically high. This exceeds the previous record quarterly losses of $45 per head in the final quarter of 1998.

Hurt says in the next 12 months, losses could average $33 per head, meaning about $4 billion in losses for the U.S. pork industry. "A tsunami of red ink is about to wash across the pork industry, which is facing losses unseen even in the fall of 1998 when hog prices approached zero value," he said. "Stressors include more hogs than expected in the market, rapid sow liquidation and record feed prices."

Hurt said the market anticipated a 1% increase in slaughter numbers, but in recent weeks, slaughter has jumped by 6%. The unexpected addition of hogs to the market has caused a more than $10 per hundredweight drop in prices since late July with prices now in the high-$50s.

"Tragically, costs of production are expected to be above $75 per live hundredweight for the remainder of this summer, fall and winter," Hurt said.

Meanwhile University of Missouri ag economist Ron Plain says based on current futures prices, it looks like breakeven prices for hogs will average close to $90 per cwt of carcass both this year and in 2014. For 2013, a carcass price of $102 per cwt will likely be needed to cover production costs.

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