Will Low Hog Prices Continue in 2019?

posted by Chris Mandt on Thursday, February 07, 2019

2017 Versus 2018

2018 saw decreased hog prices received for most months compared to 2017. This was partially due to trade disputes that have remained. Figure 1 shows especially poor months of July, August and September when prices were $9, $17 and $6 less respectively than in 2017. Chris Hurt from Farmdoc Daily says “For the year, current estimates of losses are $6 per head compare to $12 per head in 2017.” Although this is an improved situation, producers continued to see losses. NASS data reported for 2018 stops in October.

Figure 1

2018 Price Versus Cost

2018 saw an average of $50.94/cwt price received which is $0.53/cwt below cost of production, $51.47/cwt. The $51.47/cwt cost of production was calculated using Iowa State Extension Hog Farrow-Finish Enterprise Budget 2018 which assumes a $3.40/bu corn price, $0.16/pound soybean meal price and $0.06/pound DDG price.

Figure 2

2010-2018 Prices

In 2018, April, May, August and September were all the lowest monthly price for 2010-2018. Every observation for 2018 fell below the average for each month 2010-2018.

Figure 3

2010-2018 Prices

From 2010 to 2018 there are two distinct periods, 2010-2014 and 2015-2018. 2010-2014 saw a $13 higher average compared to 2015-2018. This has been amplified by current issues that are facing the swine industry.

Figure 4

Looking into 2019

Chris Hurt says “Prices are expected to average in the low-to-mid $40s in the first quarter. Second and third quarter averages are expected in the low-to-mid $50s and then back down to the mid-$40s in the final quarter of 2019.” He uses a similar $51 cost of production comparable to the ISU Extension estimate of $51.47. In this scenario he is predicting that there will be profits in the second and third quarters of 2019, but this will be set back by losses in first and fourth quarters.

References:

Hurt, C. "Pork Industry: Some Recovery from Decade Low Prices." farmdoc daily (9):4, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, January 7, 2019.

Ellis, Shane, and Lee Schultz. Livestock Enterprise Budgets for Iowa — 2018. 2018, pp. 1–22, Livestock Enterprise Budgets for Iowa — 2018.

This blog was originally posted here: https://www.iowafarmbureau.com/Article/Will-low-hog-prices-continue-in-2019

About The Author

Chris Mandt

As a Research Analyst for Decision Innovation Solutions (DIS), Chris is responsible for analyzing economic and agricultural data to assist clients in making informed strategic business decisions. In this role, he will assist clients in the areas of farm policy, feasibility assessment and economic ... read more