Low feed costs and strategic risk management are driving profitability recovery in the U.S. swine industry. Hog producers are currently enjoying low feed costs as corn and soybean meal prices are at comfortable levels. One person’s loss is another one’s gain. We see that scenario play out often on the agriculture stage.
Though low corn and soybean prices don’t bode well for grain farmers’ bottom line, those feeding livestock are enjoying this low tide.
Most producers have grain storage allowing to have some of the “cheap” corn on hand. But depending on the size of the hog operation, they ate through the $3.50 corn fairly quickly and moved on to the $5 corn.
As of now, livestock producers are enjoying this corn market level. According to Michael Langemeier, a Purdue University Extension agricultural economist and associate director of the Purdue Center for Commercial Agriculture, average feed costs this year are expected to follow suit of those in 2025 that were around 9% lower than 2024 feed costs and 44% lower than 2023 feed costs.
As we know all too well, feed costs are driven by corn and soybean prices, and those can be volatile as global weather conditions and trade impact supply and demand. Langemeier explained in a February 13 report that in swine-finishing rations, each 10-cent-per-bushel change in corn price changes feed cost by 43 cents per cwt. Similarly, each $10-per-ton change in soybean meal price changes feed cost by 37 cents per cwt.
Steve Malakowsky, director of swine lending at Compeer Financial, summed up a late-February report in which year-over-year data confirms profitability recovery for the U.S. swine industry.
He wrote that “approximately $24 per head of margin is currently available to producers over the next 12 months. With prudent risk management strategies in place, many operations are positioned to rebuild financial strength following the losses experienced between late 2022 and early 2024.”
Riding out the cycles that occur in agriculture can churn the stomach, but building a disciplined risk management strategy (and enjoying low feed costs) can set producers up for stability moving forward.
EDITOR’S TAKE:
As the article so eloquently states, low corn and soybean prices don’t bode well for grain farmers, however, those feeding livestock are enjoying this low tide. The good news is that livestock, in this case hog farmers, are able to put some money in their bank accounts. As we have noted many times in the past few months, agriculture is bifurcated at the moment with grain producers on the losing side of the equation and livestock farmers/ranchers on the winning side.
When people enter your dealership, be sure you ask that all important question – “Are you a farmer or rancher?” If so, ask – “do you farm mostly crops, livestock or both. Depending on the answer will determine how you approach that sale….. Crops only, emphasize AgPack® and the nearly $50,000 in exclusive rebates and discounts on products they can use. Livestock only, talk about full current year depreciation and show them an AGwagon®. If they produce both – then, of course, use your best judgement.
