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Hog Market Update, from Dr. Lee Schulz, ISU Extension livestock economist

Adjustments and Opportunities

Lean hog prices are off to a good start in 2017. USDA AMS report LM_HG204 shows Iowa/Minnesota prices rose to $71.28 per cwt during the week ending Friday, February 10. That was the highest weekly average lean price since the third week of July 2016. It also represents a 75% increase since mid-November, when 2016 prices bottomed at $40.75 per cwt. Concurrently, the February lean hog futures contract gained $19 per cwt, or 36% and April, May, June, July, August, and October contracts 2017 contracts gained over $6 per cwt, or 9%, on average.

The main implication of this is that expected hog returns have strengthened notably. Estimates of returns offered in ISU’s Estimated Livestock Return Series indicate the return in January for farrow to finish production was a $2.76 profit per head. This is a welcome development as sale prices have not covered cost of production, as calculated by Iowa State University, since August. Plus, the picture continues to improve.

Recognize that the ISU series mimics a cash market situation without price risk management. In using a cash strategy, a hog producer paid the cash price for corn, soybean meal, DDGS and other feedstuffs over the feeding period, and received the cash market price for 270 pound hogs in January. Anyone who locked in corn, soybean meal, and/or hog prices would have a different result, maybe better or maybe worse.

Iowa/Minnesota lean hog prices are forecasted to be about $69 in 2017, almost $8 higher than in 2016. Prices are forecasted to average $67 in the first quarter, $72 to $73 in the second and the third quarters, and $63 in the final quarter of 2017.

Total cost for farrow to finish production in Iowa is forecasted to be around $64 per cwt in 2017 based on current price expectations. This compares to around $62 per cwt in 2016.

With hog prices in the mid $40s last fall, estimated losses averaged over $27 per head. Returns in the first quarter of 2017 are projected to be about $12 per head. By the second and third quarters, returns could reach over $16 per head before turning negative in the final quarter. For the year 2016, estimated returns were about -$1 per head and for 2017, projected returns are at $10 per head.

Opportunities appear and disappear as markets continue to adjust and producers should look for chances to take advantage of those opportunities. When profitable margins present themselves, careful consideration should be paid to locking-in those profits. Remember the goal of price risk management is to minimize risk by limiting losses and increasing the probability of profit.

Veterinary Feed Directive takes effect Jan. 1, 2017 Are you ready?

See our VFD page of general and specific information.

In 2012, the U.S. Food and Drug Administration began issuing Compliance Policy Guides (CPG) regarding antibiotic usage in animal agriculture. Compliance Policy Guide 209 established FDA’s position that medically important antibiotics should not be used for production enhancement (rate of gain or feed efficiency) and that veterinary oversight should be required when using medically important antibiotics for treatment, prevention or control.

This ISU publication provides an overview of the veterinary feed directive and how to comply with the law: Veterinary Feed Directive

View the recent Veterinary Feed Directive: "What You Need to Know" webinar provided by Iowa Farm Bureau in two parts: segment #1 (25:14) and segment #2 (44:36)

Manure pumping and application safety


By Dr. Dan Andersen, excerpt from September 2016 IMMAG newsletter

Hydrogen Sulfide Safety
When working around manure, safety should be practiced all year. Manure decomposition releases methane, ammonia, carbon dioxide and hydrogen sulfide. During agitation and pumping we are particularly concerned with the release of hydrogen sulfide, when levels of the gas can reach deadly levels in a short amount of time. At low levels, hydrogen sulfide is recognized by its rotten egg smell, but after a short period of time you lose the ability to detect the gas. Even at low concentrations hydrogen sulfide can have serious health impacts.

During the 2016 Manure Applicator Certification programs, commercial and confinement applicators were surveyed about the usage of hydrogen sulfide safety equipment. At this time, five percent of commercial applicators and two percent of confinement applicators were using hydrogen sulfide monitoring equipment. Monitoring equipment, which ranges in price from $99-$800, will alert you when the gas has reached dangerous levels, making you aware of your surrounding and the need, if necessary, to remove yourself from the potential danger.

Good management practices to follow when agitating and pumping manure include:

  • Verify all fans are working and air inlets are open
  • Place a tarp over pump-out to protect the applicator
  • Communicate with farmer and crew
  • Listen for pig distress
  • Be aware and alert as dangerous conditions can develop quickly

Watch: "Foaming and Deep-Pit Manure Pumping Safety" video (17:11)

Leon Sheets, northeast Iowa producer, shares his story about a flash fire at his barn. His message, “Farmers need to be careful whether they are pumping, power washing, or doing maintenance, when it comes to these accidents, we want no more, nobody else.”

Watch: Leon Sheets Manure Safety HD (12:25)