The cost of bringing home the bacon
The 2012 summer drought is having a dramatic affect on pork and other livestock producers. As the summer wore on with little or marginal rain over an increasingly larger area of the United States, feed grain prices soared in anticipation of a shorter supply of corn and soybeans. Because pork producers are large consumers of corn and soybeans to feed their animals, their feed cost began to escalate at a rapid rate. Feed cost is the largest single expense in producing pork. I might add, the same is true of all animal production.
In this article we hope to demonstrate how serious an effect the drought has been to those who produce pork. Pork producers have zero opportunity to have insurance that protects them from natural disasters like this summer has produced. Grain producers have multi-peril crop insurance available to them to soften the effect of a disaster such as we experienced during this summer. We are quite grateful for crop insurance. I have read that it is estimated 85 percent of crop producers carry crop insurance. Livestock producers do not have an opportunity for such protection from losses they incur while producing their meat, poultry or dairy products.
Corn increased by nearly $3 a bushel this summer. At the same time soybean meal increased by $250 a ton. These two products make up most of a pig’s diet. There are other ingredients available that can be substituted in a pig’s diet that can help reduce the cost of the diet by a small percentage. For our discussion I calculated a corn soybean meal diet. In an efficient operation that produces baby pigs to weaning age, the feed cost rose by $5.25 per pig.
At the same time market prices dropped to a record low. The reason for the drop in price is two-fold. First, summer is the seasonal low price for wean pig producers. Secondly, because of the extremely negative outlook for pork producers, the market evaporated. Producers did not like the profit potential of finishing pigs with the extremely high feed costs. Therefore no one wanted to purchase weaned pigs.
For an efficiently operated finish pig operation, (an operation that takes pigs from weaning age to market weight), the cost of feed to feed the animal rose by $43 a pig. Likewise these producers realized a decline in market price because more sows were being sent to market. That is to say an unexpected and unusual supply became available that the market place could not absorb. The summer months are usually the best market price of the year for the finish producer.
The average profit potential over a large period of time for a weaned pig operation is $5 a pig. For a finish operation over a long period of time the profit potential is $20 a pig. The combination of increased feed cost and depressed market has created losses up to $30 a pig for wean pig producers and $60 a pig for finish producers. This is an example of the volatility that those involved in food production deal with on a daily basis. It is part of our life.
I have two requests of you. First, as you interact with pork producers, give them a smile and a warm greeting. They need the encouragement. Secondly, when you think about your grocery bill, please separate the costs of the edible and non-edible items so you may realize the good value that food really is.
Steve Cowser is a pork producer in the Bradford area.
