Livestock specialists say with prices at current levels, it will cost an extra $4.00 to $5.00 a hundredweight to fatten a market hog. With breakeven points on hog production at about $43 a hundredweight, that puts significant pressure on profit margins.
But there are market factors at play that could rewrite those cost equations, including the potential for a bumper harvest in 2004.
Favorable planting weather over much of the corn belt has many farmers in the fields early this year. According to a USDA report released Monday, 20 percent of the nation's corn has been planted. That's twice as fast as last year and the second fastest rate in history.
Corn supplies continue to be very tight, but the rapid progress of planting is pressuring prices, and nearby futures have fallen from contract highs in early April to trade around $3.00.
In the soybean pit, massive selling by the commodity funds is depressing prices. Ever since the market peaked in the first week of April the funds have been closing out long positions.
Nevertheless, nearby soybeans futures closed above the 9.00 mark again Friday for the 9th consecutive week.
Harvest pressure from South America also is a factor. With the Brazilian soybean harvest virtually complete, producers have begun to hedge a smaller than expected crop.