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Corn and soy prices weak; livestock feed costs expected to rise in 2019


WEST LAFAYETTE, Ind. — Corn and soybean prices have weakened considerably since late May, with feed costs expected to be about 2-3 percent higher for the fourth quarter of 2018 and for 2019 than they were for 2017, according to a Purdue University agricultural economist.

“Using USDA-NASS (National Agricultural Statics Service) corn and soybean prices for Indiana, corn prices declined from $3.92 to $3.54 per bushel from May to August, while soybean prices declined from $10.50 to $8.85 a bushel during the same period,” said Michael Langemeier, professor of agricultural economics.

“What do these price declines imply about swine finishing feed costs? The period starting in 2007 is often thought to be a new price regime. Corn price averaged $2.18 a bushel from 2000 to 2006, and $4.60 per bushel from 2007 to the current month.”

He said soy meal price averaged $187 per ton from 2000-06, and $357 per ton from 2007 to last month, with corn price above $4.60 from February-September 2008.

“Since July 2014, corn price has been below $4.60 per bushel,” Langemeier said. “Soybean meal price was above $357 per ton in June and July of 2008. Since June of this year, soybean prices have been below $357 per ton.

“Current feed costs are 6 percent above the average for 2017. Swine finishing feed costs for the rest of 2018 and for 2019 are expected to be from 2 to 3 percent above those experienced in 2017.”

However, he said feed costs are sensitive to changes in corn and soybean meal prices. “Regression analysis was used to examine the relationship between hog finishing costs and corn and soybean meal prices. Each 10-cent increase in corn prices increases feed cost per cwt. by 46 cents, and each $10 increase in soybean meal prices increases feed cost per cwt. by 34 cents.”

Langemeier said feed cost per cwt. in September was approximately $32.50, with the recent $60 decrease in soybean meal prices decreasing feed cost by about $2.05 per cwt.

“Using expected corn and soybean meal prices, feed cost per cwt. is expected to range from $30.75 to $31.75 in the fourth quarter of 2018 and from $30.50 to $32 in 2019,” he explained. “At the lower range of prices, feed cost per cwt. would be approximately $26.25; at the higher range of prices, feed cost per cwt. would be approximately $34.50.”

Dave Miller, Iowa Farm Bureau Federation director of research and commodity services, said pork production is expected to increase 4-5 percent, with about half of that increase coming through increased numbers of animals and half coming from increased weights.

“Feed prices in 2017 were the lowest in almost a decade and increased modestly in 2018,” he said. “Despite large inventories of poultry in cold storage and continued large production of beef and pork, poultry production in the coming year is likely to increase 1 to 2 percent.

“But since mid-2018, feed prices have declined, with corn and soybean meal prices back to 2017 levels. The decline in feed cost has improved profitability of the pork and poultry industry, and makes it more likely that moderate expansion of both will continue into 2019.”

Langemeier said it is important to gauge the impact of changes in corn and soybean meal prices on feed cost.

“Each 10-cent per bushel change in corn price changes feed cost by 46 cents per cwt.,” he noted. “Similarly, each $10 per ton change in soybean meal price changes feed cost by 34 cents per cwt.”

He said the swine finishing enterprise represented in his forecast assumes the finishing of an early-weaned pig. “The ration for this enterprise consists of corn, soybean meal, dry distillers’ grain and supplements,” he said.

Overall, Miller predicted hog carcass prices in the fourth quarter of 2018 are likely to be $5-$7 per cwt. lower than a year ago, with the national average weighted base price expected to be in the $55-$57 range.

“Looking ahead into 2019, prices are expected to be $60 to $63 in the first quarter of 2019; $67 to $71 in the second quarter of 2019; $63 to $68 in the third quarter of 2019; and $54 to $60 in the fourth quarter of 2019,” he said.