STEINBACH, Man. – Hog prices look profitable in the middle and second half of next year, but producers are being warned to watch out for rising feed grain prices.
“Where the risk, I think, lies in terms of your profitability is largely on the feed side,” said Tyler Fulton, risk management specialist with Hams Marketing Services, the Manitoba-Saskatchewan hog marketing agency.
“I think that there’s not a great deal of risk in terms of hog prices.”
Hog profits come mainly from the spread between hog prices and feed grain prices because feed is 70 percent of the cost of producing a market hog.
Read Also
Agriculture ministers agree to AgriStability changes
federal government proposed several months ago to increase the compensation rate from 80 to 90 per cent and double the maximum payment from $3 million to $6 million
Hog prices have dropped this autumn as a surge of heavier pigs suddenly hit the slaughter market, but prices from March onward look profitable.
December Chicago lean hog futures are $67 per hundredweight as of Nov. 19, but are $76 for February, $80 for April, $86 for May and $88 for June. Chicago lean hogs set the basic reference price for pigs in North America.
Fulton told hog producers at a recent meeting in Steinbach, Man., that those are good hog prices for 2011, but the profit margin could decline if corn prices surge, as some expect them to do.
He said producers may want to consider protecting prices on some of the feed grain they will need to buy in coming months not only because of this danger, but also because prairie feed grain prices are undervalued.
“Generally, feed grains in Canada have lagged the move in corn by a significant margin,” Fulton said.
“This might be a fairly tight window of opportunity that if you don’t grow your own feed or don’t have it currently secured, with the price locked-in, then this might be a good opportunity.”
Most grain market analysts think corn prices need to move higher compared to soybeans to convince American farmers to plant a sufficient acreage.
Corn stocks could become extremely tight in 2011-12 if the corn-soybean spread doesn’t encourage more corn to be planted, said Kerensa Voth of Hams Marketing Services.
“We’re really seeing the possibility that we might not have enough corn until 2013,” Voth said.
