Hog Profits Continue Despite More Hogs

Iowa now has the highest number of hogs and pigs on farms in 51 years.

Despite raising the largest number of hogs in 51 years, Iowa hog producers are headed for a record number of consecutive months of profit.

USDA's quarterly hogs and pigs report released September 30 said on Sept. 1 there were 16.9 million hogs and pigs on Iowa farms. That's an increase of about 2% from a year ago and more than 2% from June 1, 2006.

USDA statisticians also say that's the largest number of swine on Iowa farms since September 1955 when there were 17.2 million hogs and pigs. It is the third largest Iowa hog inventory since estimates began in 1866.

Hog profits to continue awhile longer

There were 62.7 million hogs on U.S. farms on Sept. 1, 2006. That's a 1% increase from a year ago. Although there are a larger number of hogs on farms, market analysts expect hog operations to stay profitable at least through June 2007. That would set a new record for consecutive months of profitability.

Iowa State University economists keep track of financial returns to hog producers. Those data show that January 2004 was the last month Iowa hog producers lost money. Farrow-to-finish hog producers in Iowa have had a profitable 10 years, ISU statistics show, with average net returns for the last 10 years amounting to $2.50 for each hog sold.
ISU Extension livestock economist Shane Ellis says last Friday's USDA report shows that hog profits in the fourth quarter won't be as high as they have been in the previous three months, but they should stay in profitable territory.

Why aren't producers expanding?

"As long as corn prices don't get too out of hand and feeder pigs don't get too expensive, hogs should stay profitable through this year and into June 2007," he says. The pork export market will also be a factor for hog prices. If pork exports continue to grow, and most analysts think they will, that will be supportive to prices. Another support factor for hog prices is a decline in poultry supply. Poultry supplies are forecast to decrease, which will mean less competition for pork.

Why aren't hog producers expanding production more than just 2% in response to the current long-running period of hog profits? "The cost of building new facilities is high and getting permits to build them is a slow process," says Glenn Grimes, livestock economist at the University of Missouri. "Some large producers are expanding but small producers are continuing to get out of the hog business and that is offsetting some of the growth of the large producers."

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