Hog barn building binge may lower prices

Cheap feed and strong pork demand encouraged farmers in Iowa to build 280 barns last year, up more than 60 percent

CHICAGO, Ill. (Reuters) — U.S. farmers have ramped up construction of hog barns as they take advantage of cheap feed and strong demand for pork.

Some are also looking to add space for the heavier pigs currently favored by customers and to cater for extra piglets as sows become more fertile, experts said.

However, hog prices are languishing near six-year lows and profits have plummetted from the boom year of 2014 when porcine epidemic diarrhea virus ravaged supplies. As a result, adding numbers to the U.S. herd could cut incomes further this year.

Last year, Iowa farmers built 280 hog barns capable of holding more than 1,250 head, which is up more than 60 percent from 2014 but shy of the 347 constructed in 2012, according to data recently released by Iowa’s natural resources department.

“There is a demand from our customer for heavier market weights, five to 10 pounds heavier than two years ago,” said Allen Whiley, who oversees raising hogs at Iowa Select Farms.

“At the same time, our sow productivity has increased, meaning there are more pigs weaned and marketed per sow,” he added.

On average, U.S. sows gave birth to a record 10.53 piglets per litter in the September-November quarter.

Josh Flint, a spokesperson with the Maschhoffs hog farm, said the company had contracted with family farmers for new finishing barns.

The company did not expand in 2015 and has no plans to do so this year.

The U.S. hog inventory hit 68.3 million head as of Dec. 1, the highest since 1988 when the U.S. Department of Agriculture started collecting data.

“Generally, I think the farmer who partners with us to build a finishing barn is looking to diversify their source of farm income,” said Flint.

Farmers view building a hog barn as an effective way to increase income without having to spend a lot of cash to expand their corn and soybean operations.

However, they may be disappointed. Pork profits are already weak and could head lower this year, Iowa State University economist Lee Schulz said.

The university estimated that Iowa producers who take hogs from birth to slaughter made a profit of $7.93 per head in 2015, a little better than a tenth of the $61.85 per head in 2014 when PED-constricted supplies sent hog prices climbing.

It predicted that farmers could struggle to make any profit in the first half of this year with annual earnings sliding to $5.41 per head.

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