Top Farmer Conference: January 5, 2024

Explore key factors influencing the U.S. economy & biofuels future. Join us for a one-day conference that will stimulate your thinking about agriculture's future and how you can position your farm to be successful in the years ahead. Attend in person in West Lafayette, Indiana or join us remotely.

October 9, 2017

Pork Industry’s Sustainable Expansion

The pork industry has been in expansion now for three years dating back to 2014 when the PED virus reduced pork supplies and sent hog prices to record highs. After an initial surge of breeding herd expansion of 2-3 percent three years ago, that expansion has been steady at between 1.​2 and 1.5 percent for the past four quarters. States with the most robust expansion over the past three years as measured by the largest increases in breeding herd animals include: Missouri +50,000; South Dakota +40,000; Texas +35,000; Illinois +30,000; North Carolina +30,000 and Oklahoma +25,000.

The good news is that a breeding herd expansion of about 1 percent is sustainable. This means that pork supplies will grow at 2 percent per year, or maybe slightly higher. This is about the same rate that consumption is increasing. So with the current rate of expansion, hog prices would be expected to stay near levels that are reasonably close to total costs of production.

Pork supplies this fall are expected to be about 3 percent higher than year-previous levels. In the first three quarters of 2018, pork supplies are expected to be up about 2 percent.

Live hog prices are expected to average in the mid-$40s in the final quarter of this year and then move upward to the higher $40s in the first quarter of 2018. Prices are expected to return to the mid-$50s in the second and third quarter next year and then be back around the mid-$40s in the final quarter.

For calendar year 2017, prices are expected to average about $50 on a live-weight measure. For 2018, current futures estimates are for hogs to be about $1 higher, near $51. Production is anticipated to rise by 2.4 percent in 2018 and that would generally mean slightly lower prices. However, strong pork demand and reduced packer margins may help bolster hog prices somewhat above those of 2017.

While hog prices may be somewhat higher in 2018 compared to 2017, feed costs may also be somewhat higher. Current estimates suggest that the U.S. farm price of corn for calendar year 2017 may average about $3.38 per bushel. That is the lowest calendar year price since 2006. My estimate for calendar year 2018 is currently higher at $3.60. The $3.60 estimate is based on current corn futures prices where there is a high level of futures carry. This simply means that the market is providing higher prices in the future to provide a sufficient financial incentive for market participants to store corn. The reason for the large futures carry is the surplus corn inventory. Large surpluses do not sound like a reason to think corn prices should be higher next year. The point is that while forward prices in futures markets suggest corn prices will be rising over the next two years, the ultimate price levels may not rise as much if surplus inventories continue.

Expected soybean meal prices based on current futures suggest that Decatur hi-protein meal will average about $325 per ton in calendar year 2018 compared to $315 in 2017. So, meal is also expected to be somewhat higher in 2018 on a calendar year base.

What do estimated returns look like for 2017 and 2018 for average costs farrow-to-finish production? Right now, returns in 2017 and 2018 are expected to be similar. For 2017, live hog prices are expected to be near $50 per live hundredweight with costs about $1 less. For 2018, costs are expected to rise about $1 per hundredweight with hog prices up about the same amount. The bottom line is that annual estimated average returns will be about $2 per head above all costs in both 2017 and again in 2018. Of course, many events in 2018 could change that near equilibrium situation.

The pork industry continues to expand the breeding herd to meet new packer capacity, but is doing so in an orderly way, at least so far. Pork consumption is growing as well with expansion in both the domestic and the export sectors. This means the industry can grow at a rate of 2-3 percent per year and not generate excess supplies that would depress prices below costs of production. This is consistent with the current one percent growth rate of the breeding herd.

While pork demand growth has supported the expansion of the recent steady breeding herd expansion, there are a couple of issues to remember. The first of these is that export sales have to continue growing. There are many things that can disrupt this growth and unfortunately, those include trade issues that could harm U.S. agriculture. Those start with NAFTA negotiations currently underway. As a reminder, Mexico and Canada have purchased 41 percent of our total pork exports so far this year. Concerns over trade with South Korea and China have also been in the news with those two countries representing an additional 19 percent of our pork exports so far this year.

With feed prices expected to stay moderate for the fourth year in a row in 2018, pork producers may be getting complacent as lower feed prices become the new norm. Producers can lock in these low prices for much of the coming 12 months. While world inventories of grains and oilseeds are abundant now, short yields in a major growing region can still have an upward impact on feed prices. Owning cash corn inventory and covering some meal-feeding needs feels like a prudent strategy during this fall’s harvest.​​




Prospects for Swine Feed Costs in 2024

November 30, 2023

Indiana corn prices have dropped sharply since September. The most recent WASDE report indicates that corn prices could remain low for the foreseeable future. Obviously, lower expected corn prices will translate into lower expected feed costs during the first part of 2024. What trends in feed costs will we see for 2024? And what’s the impact of corn and soybean meal prices on feed costs for farrow-to-finish and swine finishing operations?


Impact of Lower Corn Prices on Swine Feed Costs

May 22, 2023

Indiana corn prices during the first quarter of this year were on average approximately $6.60 per bushel. The most recent WASDE report indicates that corn prices could be substantially lower for the upcoming crop.


Prospects for Swine Feed Costs in 2023

November 1, 2022

Corn prices are 25% higher and soybean meal prices are 1% higher. Given that many of the supply and demand factors impacting the 2022 crop are going to persist way into 2023, what are the prospects for feed costs for farrow-to-finish and swine finishing production in the upcoming year?



Purdue Income Tax School: Ag Tax Webinar

December 13, 2023

The 2023 Ag Tax Webinar, part of the Purdue Income Tax School, will provide in-depth coverage of selected agricultural and farm income tax issues to supplement material provided at the two-day in-person or virtual tax schools. The 2023 webinar will be taught by Guido Van Der Hoeven, an expert on agricultural tax issues and one of the authors of the 2023 Agricultural Tax Issues book, on Monday, December 13, 2023, starting at 9:00 am ET.

Read More

Top Farmer Conference 2024

January 5, 2024

A management programs geared specifically for farmers. Surrounded by farm management, farm policy, agricultural finance and marketing experts, and a group of your peers, the conference will stimulate your thinking about agriculture’s future and how you can position your farm to be successful in the years ahead.

Read More

2024 Crop Cost and Return Guide

November 22, 2023

The Purdue Crop Cost and Return Guide offers farmers a resource to project financials for the coming cropping year. These are the November 2023 crop budget estimations for 2024.


(Part 2) Indiana Farmland Cash Rental Rates 2023 Update

August 7, 2023

Purdue ag economists Todd Kuethe, James Mintert and Michael Langemeier discuss cash rental rates for Indiana farmland in this, the second of two AgCast episodes discussing the 2023 Purdue Farmland Values and Cash Rents Survey results.


(Part 1) Indiana Farmland Values 2023 Update

August 6, 2023

Purdue ag economists Todd Kuethe, James Mintert and Michael Langemeier discuss Indiana farmland values on this, the first of two AgCast episodes discussing the 2023 Purdue Farmland Values and Cash Rents Survey results. Each June, the department of agricultural economics surveys knowledgeable professionals regarding Indiana’s farmland and cash rental market.