The Pork Industry at a Glance - National Pork Board

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For America’s pork producers, 2008 and 2009 were
among the most difficult years ever. In fact, the combined
losses incurred by producers in 2008 and 2009 will
exceed the previously worst two-year period on record,
1998-1999. By the end of 2009, U.S. pork producers had
lost money in 24 of the past 26 months, amounting to
nearly $6 billion. The top graph at right shows monthly
profit/loss estimates.
The primary reason for the losses was higher feed costs
Profits/Losses —
Iowa Farrow-to-Finish Hog Operations
$/head
$/head
Costs — $/cwt carcass
Costs — $/cwt carcass
60
60
40
40
20
20
0
0
-20
-20
-40
-40
-60
-60
-80
-80
’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09
’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09
Farrow-to-Finish Production Cost &
Omaha Corn Price
90
90
80
80
Production Cost
Production Cost
Corn Price
Corn Price
70
6
70
6
5
5
60
4
60
4
3
3
50
2
50
2
1
1
40
0
40
0
’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09
’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09
Source: Iowa State University Department of Economics and USA Agricultural Marketing Service
driven by higher corn and soybean meal costs. Since feed
comprises anywhere from 55 to 60 percent of the total
cost of producing a market pig, higher feed costs mean
higher production costs and, unless pig prices rise commensurately,
losses for pork producers.
The bottom chart shows the price of #2 yellow corn
and cost of production estimates. It is clear that these two
data series are highly correlated – higher corn prices cause
the price of soybean meal, the other major ingredient in
hog diets, to rise as well due to corn
and soybeans competing for a limited
number of tillable acres. Costs
averaged $52.76/cwt., carcass weight,
from 1999 through 2006. They averaged
$70.13/cwt. from January 2007
through October 2009, and corn and
soybean meal futures prices in late
November 2009 indicated that costs
will average nearly $69/cwt through
the end of 2010.
These losses have reduced producers’
accumulated profits (a good
indicator of producer equity) by
over 70 percent since they began in
October 2007. In many cases, cash
reserves and credit lines have been
used up, and many producers have
either reduced output or, more commonly,
exited pork production. These
10
10
cutbacks apply to producers of all
9
9
sizes – from the very smallest parttime
operation to the nation’s largest
8
8
7
7
producers.
Corn Price — $/bushel
Corn Price — $/bushel
Steve Meyer, president
of Paragon Economics
and a Pork Checkoff
consultant, helped compile
the information in
the Pork Stats section.
Stats
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