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Hog profitability

[JAN. 7, 2003]  URBANA -- Hog prices may benefit in the coming year from a reduction in supply pressure from other meats and poultry, said a Purdue University Extension marketing specialist.

"USDA is currently expecting beef production to drop by 5.5 percent, with chicken production up only 1.4 percent and turkey unchanged," said Chris Hurt. "Added to the decline in pork production, total meat and poultry supplies are anticipated to drop by 1.6 percent.

"A decline in total U.S. production of meat and poultry is rare. The last time this occurred was in 1982. A drop of 1.6 percent in total meat and poultry production means about a 2.5 percent drop in per capita supplies."

Hurt's comments came as he discussed the outlook for hog prices in 2003.

"The new year brings renewed hope for a return to profitability for hog producers," he said. "Last year was another tough one, as hog slaughter reached 100.3 million, the second highest annual count after the 101.6 million of 1999. Pork production set a record at 19.7 billion pounds, surpassing 19.3 billion pounds in 1999."

Hog prices were depressed in 2002. The annual average price for 51 percent to 52 percent lean hogs on a live weight basis was $34.90 per hundredweight, $11 lower than in 2001. Another discouraging factor was an increase in estimated production costs by about $1.50 per live hundredweight, to an estimated $38.60. Losses for average costs for farrow-to-finish producers taking spot prices were estimated at $3.70 per

hundredweight. The largest estimated losses occurred in the last two quarters, with averages of $6.10 and $8.20 per hundredweight, respectively.

 

"For 2003, price and profit prospects brighten considerably because of both supply and demand factors," said Hurt. "Slaughter is expected to drop to 97.9 million, a 2.4 percent reduction. Pork production is projected to be at 19.4 billion pounds, a 1.6 percent reduction."

The decline in pork production is a result of a declining breeding herd as the industry experienced financial losses starting last spring, Hurt noted.

"In the last half of 2002, sow slaughter averaged about 12 percent greater than during the same period one year earlier," he said. "As a result, USDA reported that the breeding herd had dropped 3.2 percent by Dec. 1. The total number of animals in the herd stood at only six million, the lowest number since USDA began tracking the breeding herd in 1963. Farrowings in the fall of 2002 were down by 2.5 percent, and the number of pigs per litter was constant at 8.83 pigs per litter. Intentions are down 1 percent for the winter quarter and down 3 percent for the spring quarter."

 

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Prices for 51 percent to 52 percent lean hogs on a live basis are expected to increase to near $40 for the year. Price recovery in January and February into the mid-$30s may be a bit slower than anticipated prior to the report. However, Hurt noted, much of the price recovery for the year could come in from March to June, perhaps reaching the mid-$40s by June.

Third-quarter prices are expected to average near $40, with prices in the fall of 2003 falling back into the mid- to higher $30s.

Hurt addressed the question of when the highest prices on the next cycle might occur.

"The most recent loss period stretched from the second quarter of 2002 through the first quarter of 2003," he said. "Generally, it takes about four to six quarters after the loss period to reduce farrowings and six to eight quarters to increase prices. These cycle guidelines would result in the highest prices on the cycle in late 2003 and the first half of

2004. If so, once the industry turns back to profits in the spring of 2003, we can expect a favorable return period through the summer of 2004."

Given the tight carry-over situation for both corn and soybeans, some ownership protection, especially on corn, seems worthy of consideration at this time, Hurt said. Soybean meal prices will be sensitive to weather in South America through the winter, and corn prices will be sensitive to the pace of exports and weather in the United States through next summer.

"A return to the depressed corn prices of the 1998 to 2001 crops is not expected," he said. "At this point, an average U.S. market price of about $2.25 per bushel is expected for the 2003 crop rather than the sub-$2 of the abundant crop years. This means that hog production costs, while dropping, will not achieve the low levels experienced from 1998 to 2001."

Hurt noted that in the past he has argued that producers should be cautious about using futures to hedge when price prospects are improving as they are now.

"This is because the ultimate cash market prices have tended to be higher than anticipated by futures," he said. "Following this logic, hedging with options tends to be preferred. Of course, everyone wonders just how much faith to put in historical facts in the 'new' hog industry, and thus each individual will have to evaluate the opportunities to 'lock-in' profitable hog prices using futures or options over the next 14 months."

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Illinois Dairy Days set

[JAN. 7, 2003]  URBANA -- "Solutions for Success" is the theme for the 2003 Illinois Dairy Days program scheduled for 10 sites in Illinois in January. Each meeting will feature advice from specialists on management, reproduction, economics and feed strategies.

"The dairy business continues to face challenging times," said Michael Hutjens, University of Illinois Extension diary specialist who organizes the annual event. "This one-day meeting will help producers make the most of their resources and remain a productive part of the dairy industry."

In addition to U of I Extension, the program is sponsored by the Department of Animal Sciences, the College of Veterinary Medicine and the Illinois Department of Public Health's Alternative Drug Residue Penalty Fund.

With the exception of the Jerseyville site, each program begins at 9:45 a.m. and ends about 3 p.m. The Jerseyville program begins at 7:30 p.m.

Presenters include Hutjens; Darrel Kesler, U of I Extension reproduction specialist; Dave Fischer, U of I Extension dairy educator; and Geoff Dahl, U of I Extension dairy specialist. Commercial displays will also be available for viewing.

 

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People interested in registering or obtaining more information should contact their local Extension office.

Dates and locations are:

Jan. 8 -- Effingham, Knights of Columbus Hall

Jan. 9 -- El Paso, Elms Restaurant

Jan. 10 -- Arthur, Yoder's Country Kitchen

Jan 14 -- Quincy, Adams County Farm Bureau Building

Jan. 14 -- Jerseyville, Super 8 Motel (7:30 p.m.)

Jan. 15 -- Okawville, Community Club Building

Jan. 16 -- Breese, American Legion

Jan. 21 -- Freeport, Highland Community College

Jan. 22 -- Elizabeth, Community Center

Jan. 23 -- Harvard, Stratford Inn

[U of I news release]


Olympia FFA Alumni Chapter prepares for banquet

[JAN. 6, 2003]  The Olympia FFA Alumni Chapter met on Dec. 5 and 17 in the Olympia High School ag room, with Todd Wibben presiding over the meetings. The chapter draws members from parts of Logan, DeWitt, Tazewell, McLean and Woodford counties.

In old business, the group talked about raffle ticket sales at Thanksgiving basketball tournaments and at the Stroll Into Christmas event in Minier. At the Christmas event the door prize of a yard ornament went to Pat Peifer of Minier.

In new business the group discussed plans for the FFA Alumni Chapterís banquet on Jan. 11 in the Olympia Middle School cafeteria at Stanford.

The banquet will consist of a social time, followed by a pork chop dinner with the trimmings, along with a program, a silent auction and the drawing of prize winners for raffle ticket items -- a 36" color TV, a chain saw and a maple tree.

The officers for the chapter are Todd Wibben of Atlanta, president; Jeff Springer of Minier, vice president; David Deal of Danvers, secretary; Jeff Schnieder of Armington, treasurer; Kyle Haning of Delavan, reporter; and Melvin Springer of Armington, member at large. The vo-ag advisers are Chris Embry Mohr and Heather Obert.

[News release]


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