* Big U.S. corn crop likely to extend hog farmers' profit
* Cheaper pork prices not expected until 2014
* U.S. hog industry lost an estimated $3 billion last year
* Spread of deadly U.S. pig virus could be wild card in 4th
By Theopolis Waters
CHICAGO, Aug 12 For the first time in nearly 12
months hog farmers in June turned a profit as high pork prices,
the result of consumers needing meat for backyard grills as the
summer cookout season gained traction, had meat companies paying
more for hogs.
Now, hog farmers are expecting more profit going into the
coming year due to a change on the cost side of the business.
The U.S. Department of Agriculture delivered a
smaller-than-expected crop forecast on Monday.
The data suggests that 2013 still should set a record, which
could slash historically high feed costs for an industry that
lost an estimated $3 billion last year as the 2012 drought
damaged the corn crop and sent feed prices soaring.
Should a long stretch of profitability materialize, some
producers will use their money to pay off debts or increase
their herds, economists said. But it may take time before they
open their checkbooks, to ensure Mother Nature does not
introduce some crop-damaging weather before the fall harvest.
Iowa State University's profitability index showed hog
producers in June turned a profit of $10.92 per hog - the first
profitable month since July 2012.
Based on an average loss of $31.08 per hog over the 10
months ending in May, University of Missouri economist Ron Plain
calculated the U.S. hog industry lost $3 billion. While that is
a sizable loss, most producers had enough money saved from
previous profitable periods to survive.
With harvest on the horizon, the USDA forecast a corn crop
of 13.763 billion bushels, a 28 percent increase from
drought-stricken 2012, but 2 percent smaller than traders had
As a result, an increase in hog numbers could moderate
prices for pork chops and bacon next year, industry analysts
said. The average price of pork at retail in June was a penny
shy of the all-time high of $3.56 per lb set in September 2011,
according to USDA's Economic Research Service.
"Hog producers can see the promised land in corn prices that
in the next 30 to 60 days are going to come down sharply," said
Purdue University livestock economist Chris Hurt.
Hurt estimates that the total input costs to finish pigs to
market weight will drop to about $55 per 100 lbs (cwt) in the
fourth quarter of 2013 from about $69 during the second quarter.
That $14 drop would be the largest on record, barring any
unforeseen weather interruptions, he said.
"But today's signals suggest they (producers) should begin
to get the celebration under way," said Hurt.
BETTING ON THE FUTURE
In anticipation of a big fall harvest, the price of corn
, the main ingredient in livestock feed, at the Chicago
Board of Trade fell 27 percent last month, the biggest monthly
loss for the lead contract on a continuous basis since July
The Chicago Mercantile Exchange hog futures contract for
June 2014, the time when producers will begin sending more hogs
to market, has dropped nearly 5 percent since late June. Traders
sold with the view of more hogs at lower prices when those
animals go to market next year.
Nonetheless, October and December hog futures remain well
above last year's levels. Speculators are betting that the
spread of the Porcine Epidemic Diarrhea Virus (PEDV), which is
fatal to baby pigs, will shrink hog supplies during that time
"These back-month premiums are pretty fat even though grain
values have come down precipitously. But we kept a premium in
the market partly because of uncertainty with PEDV and how the
harvest will pan out," said Don Roose, an analyst with U.S.
Commodities in West Des Moines, Iowa.
Dave Struthers, 46-year-old owner and operator of Struthers
Farms Inc in central Iowa, is not ready to strike up the band.
He turns out about 3,600 hogs per year on 1,000 acres of land
where he also grows corn, soybeans and hay.
Corn from last year's harvest still hovers above $6 per
bushel in parts of the country, and supplies remain tight
following the 2012 drought. Grain farmers are holding on to
supplies, hoping for a fall rally should harvest be delayed as
corn development lags after spring rains stalled planting.
"Guys are doing fairly well in Illinois, Indiana and Ohio,
but to say we're going to have cheap corn next fall and next
year is a little bit ahead of the game," Struthers said. "In
Iowa, no one's bragging about how good their crop looks."
Struthers has enough corn to feed his hogs through the fall
with some leftover to sell to local ethanol plants and
feedmills. He also offsets fertilizer costs by spraying his
crops with nutrient-rich manure from his hogs.
"A lot of other independent guys are doing this as well.
We're hanging in there, but we're by no means rolling in dough."