Help! Higher Feed Cost and Lower Market Prices

Marcia Shannon, PhD
University of Missouri
S133 Animal Sciences Center
Columbia, MO 65211
(573) 882-7859

Thomas J Fangman, DVM, MS, Dipl-SHM
Extension Swine Veterinarian
University of Missouri
A331 Clydesdale Hall
Columbia, MO 65211
(573) 882-7848

Ann Ulmer, MS
Extension Swine Economist
University of Missouri
223E Mumford Hall
Columbia, MO 65211
(573) 882-9893

Raymond Massey, PhD
Extension Agricultural Economist
University of Missouri
223C Mumford Hall
Columbia, MO 65211
(573) 884-7788

As prices of corn has increased and market hog prices do not increase, swine producers are forced to find additional ways to reduce total production costs. The first place to focus is on growth performance (average daily gain and feed efficiency) and the management factors that impact performance. If growth performance is poor, then less profit or more losses will occur during these times of high feed prices. This article will try to provide some helpful tips to ensure that maximum performance can be achieved in order to minimize profit losses during these times of small profit margins.

First, one must look at feed quality. Feed quality issues that need to be monitored include grinding or particle size, diet formulations, feeder adjustment, and storage. Feed costs can be as much as 70% of the total production costs and when market prices are low, profitability depends on minimizing feed costs. Anything that improves feed efficiency will be more economical in times of high feed costs. Producers should monitor particle size and keep the average size at 700 to 800 microns with less than 5 % variability. Many times, if particle size is not determined frequently, it will creep up to 1,000 microns as the grinder screens wear. This may increase feed cost for a producer by $.50 to $1.00 per pig due to poorer feed efficiency. Producers may want to evaluate dietary formulations and make sure that they are not overfeeding any nutrients unnecessarily and possibly evaluate alternative energy sources such as using supplemental fat or high energy by-products.

With increasing feed costs, producers might want to think about feeding to lighter weights, which will increase feed efficiency. Today's average market weight exceeds 260 lbs and continues to increase. The main reason for the increase market weights could be packers emphasizing the importance of larger pigs as more pounds of pork per given shackle space, producers maximizing pounds of pork produced per square foot and cheap feed costs. If only feed cost is considered in the breakeven price of producing additional pounds of pork, a producer can afford to feed $5.00 to $6.00 per bushel corn depending on finish weight and still realize a net profit from feeding. However when additional costs of production are considered the breakeven cost for corn is much lower. These additional production costs include facilities and labor costs as well as a marketing dock for pigs outside the marketing window. Table 1 provides the optimal marketing weight for hogs when the base market price is $40 per cwt. The table includes a marketing dock for pigs outside of 240-270 live market weight and a $.15 per day charge for facilities and labor (assuming it takes 10 days to add 10 pounds of gain and a decreasing feed efficiency with additional weight gain - averaging 3.87). The table suggests that as corn prices rise there is a smaller window where profit can be made. If corn prices are $2.00 per bushel a profit can be made (including the marketing discount) on hogs from 220-300. However when corn is $3.25 per bushel, a profit can be made on pigs weighing between 240 and 260. If corn prices exceed $3.25 per bushel, no profit can be realized; loss is minimized by marketing between 240 and 250. Therefore, producers may want to evaluate if pigs should be marketed at a lighter weight with high feed costs and low markets prices, which would allow for more time between groups and potentially more time for clean up or repairs before the next group of pigs.

Table 1. Optimal Marketing Weight of Hog Given a $40 cwt Base Price
Weight GainCorn Price/bushel
* Includes marketing discount

In conclusion, it is probably a good time to fine tune feed management practices on the farm, such as the grain quality, grinding efficiency, diet formulations, and feeder adjustments. A slight alteration in feed quality and formulations can dramatically impact growth performance resulting in $.50 to $3.00 drop in feed costs per pig. Additionally, producers might also want to consider a price signal on feed cost and market price as to when they need to start selling hogs at lighter weights.

Helpful Hints to Minimize Feed Costs:

  • Monitor grain quality (particle size, mycotoxins, etc.)
  • Adjust feeders properly
  • Evaluate market weights based on feed costs and market weight discounts