Feed prices continue to decline in the United States

Not long ago, the idea that the average cash price of corn in the United States market would be US$3.65 per bushel would have been considered crazy. Well, applaud the madmen - the average US cash price for corn was $3.65 US per bushel last Friday, with some varieties of corn selling below $3.00 US per bushel.


Changes in corn and soybean meal prices have reduced production costs at farrow-finish operations by approximately US$20/head compared to last year.

Thank God, the cost of feed has decreased. Iowa State University estimates July production cost was 86.73¢c/lb ($1.91 US/kg) with an average selling price of 91.10¢c/lb ($2.01 US/kg), resulting in a profit of $8.86 US/head. Last year, feed prices

would have driven the industry into losses. If you're strapped for cash, you might want to take a look at Iowa's report on the profitability of farrow-finish operations to see why.


If we add up the average losses for January-February, we get $75.15 US, and the average profit for April-July is $34.72 US, the difference is $40.43 US, divide by 7 months = the average losses from the beginning of the year until July inclusive are $5.77 US /head.

In 2023 and the end of 2022, losses amounted to $31 US/head. As an industry, we have a big problem with profitability.

Compounding the story of lack of profit, futures prices for hogs with 53-54% lean muscle yields show that from October to May the average price will be in the range of 75¢c/lb ($1.65 US/kg) with a cost of production of 87¢c/lb ($1.92 US/kg). If lean pork futures are a true reflection of what the market could be, losses over the next few months will be $25 US/head.

Piglets

In the United States, the price of piglets is higher than a year ago.


Piglet prices are US$15-18 higher than a year ago, likely reflecting lower feed costs for farrow-finish operations. We also understand that there appears to be good demand. Demand can best be illustrated by the current piglet purchase price being approximately US$10/head above the breakeven point estimated using lean pork futures.

China

The current price for slaughter pigs in China is now 20.66 RMB/kg or $1.33 US/lb live weight ($2.93 US/kg). The break-even threshold for production is around 15 yuan/kg. Simple calculations show that the Chinese pig industry is currently making profits of US$90-100/head.

The reason why prices have jumped so much is the liquidation of three to four million sows due to billions of dollars in losses in the industry (7-10% of the total pig breeding stock). It seems that in China, unlike in the United States, financial losses have led to lower output. We are talking about approximately 12 million market pigs per week. If the calculation is correct, then the industry is currently earning plus one billion US dollars per week. This will help fill financial capital holes.

China is the largest importer of pork in the world. The current price difference between China and major exporting countries will lead to an increase in the supply of pork to the Chinese market. It's simple - Chinese businesses can buy imported pork at a favorable price, and then sell it in China for a very good profit.

Tariffs on US pork imports into China will limit United States participation, but with pork exported from Canada, Brazil and the EU , these countries will have less pork for other markets, which will support the United States pork industry. We believe that 'this rising tide will lift all boats'.

We're heading to China soon, where we hope to find out everything first-hand. Spencer and I will be presenting at GPGS 2024 (Global Pig Genetics Conference).