Hog Prices Join Corn and Wheat at Ten-Year Lows

It is interesting to be an observer of agricultural price movements. However, for many producers of agricultural commodities, prices are a key driver of their financial wellbeing. Wide ranging price movements over time can vastly alter their financial conditions. It is clear that the financial impacts of price movements affect many agricultural input businesses as well. What can happen to prices of agricultural commodities in a decade, and why look at the last decade? It is because it was 10 years ago in the fall of 2006 that agricultural commodity prices began to head upward in what can be described as a boom/moderation price cycle. Nearby futures prices are used to compare prices over time. Measured this way, prices for wheat, corn and lean hogs in the fall of this year fell to 10-year lows, dating back to 2006 or earlier. Unfortunately, costs of production are not at 10-year lows and this means narrow margins or losses are likely for many producing these commodities.Focusing on lean hog futures prices, the low this fall was on the October 2016 contract at $40.70. The previous time lean hog futures had been this low was in October of 2002. This means lean hog futures in the fall of 2016 were the lowest lead contract price in 14 years. Lean hog futures have recovered somewhat since October, with the lead contract currently trading around $50, a level that is at the lower end of the ten-year range.Cash prices also reflect these multi-year lows. Live prices of hogs for 51 percent to 52 percent carcasses are expected to average about $36.25 in the final quarter of this year. This will be the lowest fourth quarter price since 2002, the lowest cash prices in 14 years, the same as lean hog futures. The current quarter is shaping up to have the worst losses since the first quarter of 2008 when cash corn prices moved above $4 per bushel after many years around $2.