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Positive Margins Likely to Stick Around, for Now | Third Quarter Outlook


This is an abridged version of the swine outlook for Q3 2024 from Terrain, our service for agricultural insights. For the full text of this article, visit terrainag.com.

Sow slaughter during the first half of Q2 2024 was up about 4.4% versus a year earlier and is up 5.6% year to date through mid-May. If sow productivity and pigs saved per litter continue to increase at about 4% like they did in the last two quarters reported by the USDA, then pig crop and eventual slaughter hog numbers aren’t likely to decline very much, if at all, in Q4 2024 versus a year earlier.

The wild card to estimating breeding herd inventories will continue to be how much more gilt retention has been occurring since early March, when summer lean hog futures rallied through $100/cwt. The rally signaled the impending shift to profitability after hog producers had lost nearly $20/head during the 18 months from November 2022 through April 2024.

The March 1 USDA Hogs and Pigs report revealed that the breeding herd was down just 2.2% year over year and was 0.8% larger than I had forecast (with much of the error due to the number of gilts retained). The June 1 Hogs and Pigs report slated for release on June 27 will give us an idea of this activity among survey participants.

Iowa State University’s estimated returns to farrow-to finish operations posted profits of $11.92/head for April 2024, marking an end to seven consecutive months of losses that averaged $21.69/head (see Chart). April’s swing to profitability for the average producer was a welcome shift from the all-time record-setting losses in April 2023 of $49.47 per market hog sold and $555 per sow farrowed.

Futures price action from March through May suggests producers can expect a solid six months of profitability. I expect that break-even selling prices will hover in the $85/cwt to $88/cwt range during Q3 2024 before declining to the low to mid-$80s for Q4 2024 (the lowest since Q4 2021) because of expected lower feed costs.

Continue reading outlook at TerrainAg.com.

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