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Volatile hog prices like a roller coaster ride for farmers
CONRAD, Iowa (AP)--Hog farmers have seen great prices for their livestock this summer but also vividly recall the all-time low prices only a few years ago.
Many farmers say it's like a roller coaster ride that's just part of the livestock trade these days.
"On the way back up it's a real pleasant (ride). When you're at the top of the wave it's great," said Dave Hommel of rural Conrad in central Iowa, who raises about 2,000 head a year with his father. "I know it won't last forever. That's the reality."
At times the ride can be an incredible high, especially with this summer's unexpected profitability. Other times it can make producers sick to their stomach.
Most hogs today are sold by contract, which assures some income stability. But some producers said they still like the unpredictable nature of the cash market.
And some small farmers don't raise enough hogs to get a contract, forcing them into the market.
A survey last year by Iowa State University and the University of Missouri found that pork producers are satisfied with their profession. Most have learned to cope with the ups and downs of the market, it found.
"Mentally, it can get to you. You have to be prepared for it," said Hommel, who's been in the business about 20 years.
According to Iowa State statistics, hog farmers lost an average of $4 per head from 1994 through 2003. There were profitable times during the 10-year period, but losses overshadowed gains.
"It's stressful when things are going along good and the floor drops out, and it keeps dropping. Taking a load of hogs in knowing you'll get less than before isn't fun," Hommel added. "Now I enjoy it. It's nice to get paid for my labor."
Hog prices peaked in May at more than $62 per hundredweight. They're currently hovering in the very profitable low $50s.
The survey found most farmers believe $40 to $42 per hundredweight will keep them in business.
Prices tend to drop at the end of summer, and U.S. pork production is up about 3.9 percent from last year. Experts said prices should be plunging downward.
Instead, the latest Iowa State figures show farrow-to-finish producers earning $30.35 profit per head.
"Go back five to eight years, this is surprising. People are very happy," said John Lawrence, Iowa State Extension livestock economist.
A number of factors are contributing to the sustained upswing, with domestic and foreign demand the driving force.
Lawrence said the popularity of high-protein diets continues to promote meat consumption. U.S. beef exports are also essentially shut down due to the bovine spongiform encephalopathy scare, prompting buyers like Japan and Mexico to increase pork purchases.
As long as demand stays strong, Lawrence says, hog prices will remain profitable well into next year.
Date: 9/22/04
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