Things to Consider….
For almost every hog producer in North America, the cost of feed has been a major topic of discussion at every staff or producer meeting since the middle of the 4th quarter of 2021. As many can remember near the tail end of the 2021 harvest, soymeal prices traded around $330 US/T, corn at $5 US per bushel and wheat was $4 lower at $8 US per bushel.
Fast forward 6 months and hog producers across North America are facing a very different situation. Although grain prices continue to register record highs, protein costs have shown signs of a change to the previously established trend. As illustrated with the December soybean meal graph US per ton prices peaked in early April and have since retracted to the lowest level since February 1st. Technically speaking the soybean meal graph has completed a head and shoulders formation which historically can prove to be the beginning of a new trend, in this case lower.
With the recent delay in planting south of the border due to adverse weather and a cooler and later start, many planned acres have shifted to soybeans from corn with trade speculating as many as 4 million acres could make the switch. That potential shift in acres is one of the reasons the influence on the protein market has turned bearish. On the other hand, reduced corn acres can still prove to be a major problem going forward particularly if a weather scare enters the market later this summer.
A common question that arises when talking about feed is “what feed costs are correct?” The answer to that question is “all of them”. One producers feed cost compared to other producers can not be easily compared and nor can they be compared directly to the numbers reported in many publications. Feed cost calculations vary for every producer because of factors such as market weight, average daily gain, feed conversion, health status, disease pressures, grain quality, delivery costs and many other independent variables. For a true comparison of feed costs between producers or calculated values, an in-depth analysis is required to first rule out the differences that exist prior to pointing the figure at ingredient costs or suppliers.
In this publication margins are calculated using a feed cost measured daily and weekly. Most feed purchases do not occur daily or weekly which can prove to cause differences between actual and reported. To assist with clarification, some of the variables used to calculate feed cost per head are included at the bottom of the margins table.