Cheaper soybean meal prices will help take the edge off the cost of finishing hogs in the year ahead, according to a recent study by Michael Langemeier, agricultural economist at Purdue University.
Low corn prices have been a boon to hog-feeding operations, Langemeier writes on farmdoc Daily's “Feed Cost Indices for Swine Enterprises,” but with soybean prices expected to remain soft in the year ahead, the price of soybean meal is expected to bring even further relief on feed costs following years of record-high commodity prices.
“One of the big feed cost drivers is the corn price. There has probably been more help with lower corn prices in the last year than there has been soybean meal,” Langemeier says. “Having said that, I think there’s a lot of potential here in the next year to get some help with feed costs from soybean meal. Soybean prices are going to be fairly low here for at least a year.”
Since May, 2014 corn price has been below the average price of $4.92/bu., measured from 2007 to present. Soymeal price during the same time period, though, has generally been above its 2007-present average of $367/ton, Langemeier points out, noting that soybean meal prices have been much more variable compared to corn.
Soybean meal prices in the year ahead will likely bring more stability in feed costs for hog producers as soybean prices trend lower. USDA currently forecasts an average soybean price of $8.40/bu. to $9.90/bu., for the 2015-2016 marketing year, down from $10.10/ bu., last year, with soybean ending stocks expected to more than double over last year to 425 million bushels. Soybean meal prices are also forecast to fall between $310/ton to $350/ton, down from last year’s average price of $368.49/ton.
Most relief in the cost of finishing a lean hog in the past year has come in the form of lower corn prices. Every $10 increase in soybean meal prices increased hog-finishing cost per hundredweight by $0.32, according to Langemeier, while each $0.10 increase in corn price increases feed cost per hundredweight of hog by $0.48. Feed cost per hundredweight in August 2015 was $32.85.