By Jennifer Brown
This market update is a PorkBusiness.com weekly column reporting trends in weaner pigs. All information contained in this update is for the week ended Dec. 17.
NutriQuest Business Solutions publishes weekly weaner pig profitability calculations which uses industry representative production costs and futures pricing for lean hogs, corn, and soybean meal, using historical basis assumptions, to establish approximate profitability and break-even pricing for the current sale or purchase of weaner pigs. Prices are based on closing futures prices on Dec. 17, and assumes CME Lean Hog Index cost and historical basis assumptions.
When you consider that today’s purchased weaner would be sold in June 2022 using July 2022 futures, the weaner breakeven was $69.68, up $5.92 for the week. Feed costs were down $1.21 per head, and July futures decreased $0.63 compared to last week’s futures, while historical basis is improved from last week by $2.89 per cwt.
The “weaner pig breakeven” is an all-in break-even considering fixed costs (e.g., housing and labor) that would be incurred by the buyer. However, many buyers of weaners have empty space and therefore will incur these fixed costs whether the buildings are stocked with weaners. For those producers with empty space, the maximum price a buyer could pay for a weaner pig and breakeven is the “margin over variable costs,” which is $88.96.
NOTE: We re-evaluated our feed cost assumptions and adjusted based upon our quarterly review of representative industry diets and inclusion levels which increased breakeven by ~$2.66 per head.
Although the industry has been expecting increasing prices in many ingredients, we’ve noted many are making significant diet changes in response.
Note that the weaner pig profitability calculations provide weekly insight into the relative value of pigs based on assumptions that may not be reflective of your individual situation.
From the National Direct Delivered Feeder Pig Report
Cash-traded weaner pig volume was below average this week with 24,959 head being reported which is 64% of the 52-week average. Cash prices were $58.38, up $2.87 from a week ago. The low to high range was $40 - $65. Formula-priced weaners were up $1.82 this week at $53.17.
Cash-traded feeder pig reported volume was above average with 9,150 head reported. Cash feeder pig reported prices were $76.25, up $2.51 per head from last week.
Graph 1 shows the seasonal trends of the cash weaner pig market.
Graph 2 shows the cash weaner price and cash feeder price on a weekly basis through Dec. 17.
Graph 3 shows the estimated weaner pig profit by comparing the weaner pig cash price to the weaner breakeven. The profit potential increased $3.05 this week to a projected gain of $11.30 per head.
Jennifer Brown is Director of NutriQuest Business Solutions, a division of NutriQuest. NutriQuest Business Solutions is a team of leading business and financial experts that bring years of unparalleled experience in the livestock, row crop and financial industries. At NutriQuest our success comes from helping producers realize improved profitability and sustainability through innovation driven by a relentless focus on helping producers succeed. For more information, please visit our website at www.nutriquest.com or email jenniferbrown@nutriquest.com.
