1. Sponsored by
Vol. 11, No. 25 / February 5, 2013
Another reason to provide financial support to The Daily ACTUAL & PREDICTED HOG
Livestock Report: The next generation of analysts/employees.
Have any readers tried hiring a trained analyst with some experience in PRODUCTION COSTS* AND PRICES
livestock markets lately? If you have, you probably know that there $/cwt carcass
Actual Costs
2/4/2013
aren’t too many of them out there and that our colleges and universities 110
Predicted Costs
are not producing very many. We know that Daily Livestock Report is 100 Forecast Costs
used in many classrooms and one of the reasons we want to make the 90 Futures-Implied IA-MN Price
Hog Price -- Ia/Mn & National
voluntary system work is to make it easily accessible at no charge to 80
students. Consider these recent comments from DLR readers: 70
60
“I teach a livestock marketing course which focuses on utilizing hedging 50
to eliminate risk. I use your reports daily and encourage my students to 40
sign up for you services as well.” 2011 Profits = $4.59/hd.
30
Kelly Bruns, South Dakota State Forecast 2012 Profits = $-9.67
20
Forecast 2013 Profits = $-6.86
“I use the DLR in my classes everyday and have for several years. The 10
96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 #N/A
information you and your group put together does a very good job of *Based on relationsip between ISU Estimated Costs & Returns data and historic Omaha corn and Decatur soybean meal prices -$6.87
helping students think critically about the major issues in agriculture. “
same time that prices fell by roughly $12.50/cwt., dropping total reve-
David Newman, North Dakota State nue to $143.02/head. Toss in another estimated $2.02 per head in the
We even know of an economics professor at the University of Tulsa — loss of value for sows and one gets total losses of $54.02 per head, the
no bastion of agricultural learning — that uses the letter in his general third worst month in history, trailing only November and December of
economics classes! That has to enhance the understanding and ap- 1998. Those months saw prices of just over $10/cwt and some prices
preciation of agriculture, does it not? And there are many others. as low as $8/cwt.
Please do your part to keep this resource easily accessi- But costs have NOT MODERATED. In fact the estimated cost
ble to students. Yes, we could get that done even with a mandatory of producing a market hog sold in December was a record-high
subscription system but it would take time and more time means more $199.71/head. That amounts to $98.62/cwt. carcass and feed costs
costs and a higher rate. Sorry, but those are the cold, hard facts. Sup- represented a record 70.6% of total costs.
port is still coming in but right now the proportion of subscribers who How can feed costs be rising when corn and soybean meal
have not contributed, either on their own or through their companies, is prices were falling? The answer lies in timing. Pigs sold in September
too high to make this a fair deal for the ones who are “totin’ the load” for ate a lot of very expensive corn late in life but some relatively cheap
The Daily Livestock Report. corn early. Pigs sold in December ate rather small amounts of very
Simple solution: Go to www.dailylivestockreport.com, click on expensive corn in August and September but a lot of slightly less ex-
Register and follow the steps. Then either log in and click on Support/ pensive but still very pricey corn in November and December. Put the
Donate to contribute with a credit card or send a check to Daily Live- patterns together and one can see how costs kept rising.
stock Report, P.O. Box 2, Adel, IA 50003. If you send a check, put Are we at the peak? That is possible but the increases in both
your email address in the memo line so we know who gets the credit! corn and soybean meal futures during January are keeping costs high.
A question on Monday set us to looking at recent devel- Our model based on the historic ISU estimates says that $425/ton bean
opments in hog production costs, prices and profits. The inquirer meal and $7.25/bu. corn will result in costs of just under $194/hd. or
seemed to think that things must have changed a lot since last summer $95.40/cwt carcass. At present, only June, July and August Lean Hogs
since hog numbers have not shrunk in the manner that some had futures exceed those costs and normal basis levels would put cash
warned. We can understand why this lack of response might suggest hogs below those costs in most areas.
that things must be better. But they are not. At least not yet. As you can see in the chart, futures contracts suggest that
The chart at top right shows clearly the impact that last sum- hogs prices will rise, reducing losses in January through April to an
mer’s drought had on hog costs. In steal of a late-year decline as was average of about $19/hd. Only good 2013 crops will return the busi-
seen in 2011, costs exploded to new record highs in August and kept ness to profitability. The size of those crops are of course, highly de-
rising. The surge in costs drove a surge in earlier-than-normal market- pendent on weather but acres will be important too. We’ll get our first
ings and September’s new record highs costs of $195.02/head (as esti- glimpse of USDA’s thoughts on acres at its Agricultural Outlook Forum,
mated by Iowa State University’s Department of Economics) hit at the February 21-22 in Washington, DC.
The Daily Livestock Report is made possible with support from readers like you. If you enjoy reading this report and would like to
sustain it going forward, consider becoming a contributor by going to our website: www.DailyLivestockReport.com
Thank you for your support!
The Daily Livestock Report is published by Steve Meyer & Len Steiner, Inc., Adel, IA and Merrimack, NH. To subscribe, support or unsubscribe visit www.dailylivestockreport.com. Copyright © 2013
Steve Meyer and Len Steiner, Inc. All rights reserved.
The Daily Livestock Report is not owned, controlled, endorsed or sold by CME Group Inc. or its affiliates and CME Group Inc. and its affiliates disclaim any and all responsibility for the informa on
contained herein. CME Group®, CME® and the Globe logo are trademarks of Chicago Mercan le Exchange, Inc.
Disclaimer: The Daily Livestock Report is intended solely for informa on purposes and is not to be construed, under any circumstances, by implica on or otherwise, as an offer to sell or a solicita-
on to buy or trade any commodi es or securi es whatsoever. Informa on is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or
possible where projec ons of future condi ons are a empted. Futures trading is not suitable for all investors, and involves the risk of loss. Past results are no indica on of future performance.
Futures are a leveraged investment, and because only a percentage of a contract’s value is require to trade, it is possible to lose more than the amount of money ini ally deposited for a futures
posi on. Therefore, traders should only use funds that they can afford to lose without affec ng their lifestyle. And only a por on of those funds should be devoted to any one trade because a
trader cannot expect to profit on every trade.