There has been a lot of talk lately about hog futures. And the increase that commodity is experiencing as other commodity prices are declining.
“We are seeing the result of last years commodity prices. Last fall we talked about food maybe seeing an increase based on a push through of grain prices last year. But due to those prices, our herd size numbers were reduced. So when those numbers go down and the markets being to recover, the supply and demand dictates that the values go up. So the reduction of grain due to the drought and the subsequent reduction in herd size.
We don’t have that many independent farmers left, most are contract growers, but some of our leading hog producers are able to make up for last year when they likely dipped into savings to keep things going. These markets tend to repeat themselves over time, so experienced managers will know that and stay the course.
In the livestock business, sometimes you have to carry the operation when you are not making a profit month to month in anticipation that things will turn around. Some of these market cycles tend to repeat themselves. The farmers share of that food dollar averages 15-18%, so while the futures are up, the processing, packaging and delivering are independent of commodity prices.”