Meat production costs rising, but so are profits

Hogs: One of the biggest questions we get, generally from grain-only people, is, “When will we turn off demand?” They are generally asking if corn prices have moved high enough to make livestock producers lose money. Yes, pork production costs have increased dramatically from last year. However, the better question concerns profits. With futures running from $91 to $101, producers will be making money from April through September. In the fourth quarter, due to lower futures for new-crop corn, it appears hog prices will be able to cover the $81 cost set for that time frame. Why should producers sell their herds? The market is telling them they can still make money!

Cattle: Beef production was increased from the Jan. 12 estimate due to strong December placements into feedlots (not known about on Jan. 12), higher finishing weights, and expectations for strong cow slaughter levels. On the last issue, as long as we have reduced imports of beef, we have a ground beef market that is offering high prices for cows…Rich Nelson

Rich Nelson is Director of Research at Allendale, Inc. in McHenry, IL. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.

About the Author
Rich Nelson

Rich Nelson is Director of Research at Allendale, Inc. in McHenry, IL. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.

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