NASHVILLE, Tenn. (RFD News) — Hog producers remain profitable, but shrinking margins are making risk management increasingly important as weaker hog prices offset lower feed costs, according to Matt Erickson with Terrain.
Forward profit margins have fallen sharply since spring. Erickson projects returns of about $13 to $15 per head over the next year, down from expectations near $30 per head just a few months ago. Lower corn prices around $4 to $4.20 per bushel have reduced feed costs, but those savings have not fully offset weaker hog prices.
The market still has supportive factors. Pork supplies remain relatively tight, exports continue running ahead of last year, and Mexico and Latin America remain strong buyers. Higher disease pressure also continues to limit available hog supplies.
However, heavier market weights, softer domestic retail demand, and the potential for larger pork production later this year could pressure prices. Erickson says even small declines in hog prices or increases in feed costs could quickly erase profits because producers have much less financial cushion than earlier this year.
