Pork Commentary – Oct 6, 2014 – National Corn Index Lowest in 5 Years

Pork Commentary

Jim Long President – CEO Genesus Inc.

info@genesus.com October 6, 2014

National Corn Index Lowest in 5 Years

Last week the DTN National Corn Index went to $2.83/bushel, the lowest in five years. Remember $7.00 corn? Wasn’t there experts that thought corn would never go below $5.00? The lowest cash price for corn last week was in North Dakota – Minnesota $2.28/bushel. We wouldn’t be surprised to see corn below $2.00! Its hog producers time to make some real money with cost of production dropping like a rock.

Futures

Last week the US National Price of hogs was $1.06 per lean pound with hog marketings of 2,090,000. A very strong price and a strong reflection of demand. June lean hog futures closed at 94.30. We cannot in any way comprehend that next June we will market in excess of 2.1 million hogs like we did last week. When we look at futures relative to today’s cash and weekly marketings we see no reason why June hogs will not be at least $1.06. Summer futures are undervalued in our opinion.

$2.00 Corn?

Corn in the 2’s is going to affect many things in the Ag sector. We expect it will if it has not already taken the edge off farm land values and farmland demand. The US has close to one billion acres of farmland. If what we expect will happen, there will be a large decrease in land value equity, probably in the billions of dollars. The impact on Ag will be large. $2.00 corn will not only affect US farmland but also in much of the rest of the world. Countries like Russia and Brazil will be impacted in a major way as grain prices plummet, low equity levels and large debt on farmland with little government support will hit them hard. Tractor – combine etc. companies have had a 65 year run of great sales. Expect the next while to lead to big sales declines. The USDA estimates its costs about $4.00 a bushel to grow corn. US corn production is estimated to be almost 15 billion bushels. It doesn’t take a rocket scientist to multiply bushels times how much under cost of production corn is selling for! E.g. 15 billion bushels multiplied by $1.00 = $15 billion. Good time to be a hog producer!! At current feed prices and using lean hog futures at average production for farrow to finish over the next twelve months, hog producers should make $60 plus per head. Sure the heck is better than growing corn. Pay down bills, build equity, the hog cycle is alive and well, and sooner or later hogs will lose money.
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