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Senior Contributor
Posts: 1,016
Registered: ‎04-29-2010
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Hogs & $7 corn?

So, what do you think of this? Think Chris Hurt's right? More importantly, is it possible?

 

"For the 2013/14 corn marketing year, hogs are offering an estimated $6.85 per bushel if the profits from hog production are assigned to the value of corn." 

 

Here are a few more of his comments. Interesting stuff. Definitely a healthy picture for the hog business! So, who's throwin' up a new hog building right now?! 

 

JC

Honored Advisor
Posts: 5,179
Registered: ‎07-18-2011
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Re: Hogs & $7 corn?

Jeff -------- am running cost sheet to check but I think it is accurate if you leave out a few management expenses then absolutely.

 

If this is accurate what are cattle paying for corn?  Not feeders ---------- Cattle owned from birth to rail. ----------- What $ corn price is that paying?????

Veteran Advisor
Posts: 717
Registered: ‎05-20-2010
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Re: Hogs & $7 corn?

Pretty easy math. Of course, the basis from the futures prices in hogs is impossible to take advantage of, so just take $8 a cwt off the futures. (ie cash is about $7 under dec futures, yet we had to ship the hogs, so a 88 hedge would be an 81 net, you can't store on the hoof until the day of cash settlement.) This takes away about $1 of his price. Plus you need to include the fact that the building has a negative value the day it is built (you have to bury it someday).

 

Whose building a hog barn now?   Only a mentally challenged group with no knowledge of history.

 

Just like you should never buy inputs when you sell grain, you should never build hog barns when you are finally making money raising hogs. Simple rules, mostly ignored. Everyone else has gone broke running Smithfield. Time for the chinamen to contribute to the cause.Smiley Wink

Advisor
Posts: 5,065
Registered: ‎05-14-2010
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Re: Hogs & $7 corn?

Seems fairly normal that for the (old days) corn/hog guy, the value of high priced corn tended to flow through in the following year. The durn things just smelled in the first year.

 

BTW, the hog business isn much less transparent than it once was. What's going on with PEDV?

Senior Contributor
Posts: 216
Registered: ‎01-08-2013
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Re: Hogs & $7 corn?

Back in the 60's, my dad's rule of thunb for any 3 year period was corn makes money one year, hogs make money the next year, and year three we live off of our depreciation. No idea how the hog thing works these days with the demise of free market competiton for finished hogs.

Veteran Advisor
Posts: 717
Registered: ‎05-20-2010

Re: Hogs & $7 corn?

Great thoughts from your Dad hank. At the end of 30 inflationary cycles, it seems like it is 2 years for grains, 2 years for hogs, and 2 years for depr. :-)