An old adage says, “Where there's smoke, there's fire.” Fire needs fuel, oxygen and an ignition source. These three are often referred to as the fire triangle. If any one of these components is missing, a fire cannot start or continue to burn.
The feeder pig market is smoking hot right now, and it has a triangle too. Its three components are expected market hog profit, changes in the U.S. pig crop and changes in Canadian feeder pig imports.
Feeder pig prices up double or more
Prices for early weaned 10-12 pound pigs ended 2024 remarkably strong and carried that momentum into 2025. That’s according to USDA’s National Direct Feeder Pig Report. For the week ending Jan. 10, USDA reported the weighted average price at $82.37 per head on a cash basis (Figure 1) and $76.24 per head on a formula basis. The price ranges were $52.50 - $95 and $49.51 - $90, respectively. During the same week last year, the cash price was $35.43 and the formula price was $43.43 with ranges of $11 - $45 and $35.06 - $53.93. Cash prices for 10-12-pound pigs more than doubled (up $46.94 per head or 132%) since last year.
Cash prices for 40 pound feeder pigs averaged $98.98 per head with a range of $85.00 - $107 during the first full week of January 2025. The weighted average price was 100% above the same week last year, or $49.42 per head higher.
The profitability expectations driver
Higher expected market hog prices are helping support higher feeder pig prices. Typically, prices for 10-12 pound pigs reach a seasonal high in January or February. Forty-pound pigs reach a seasonal price high in March or April. Knowing the elasticity of pig prices with respect to market hog prices can help in projecting how much higher pig prices could go from these early January heights.
A working paper, “Production Dynamics and Disruption Responses in the Pork Supply Chain: A Structural Model of Hog and Pig Markets” by Ezra Butcher and Lee Schulz finds that a 1% rise in expected market hog prices will lift cash prices for 10-12 pound pigs 1.196%. Similarly, a 1% rise in expected market hog prices will hike cash prices for 40 pound pigs 1.875%. The lesser lift for 10-12 pound pigs says they are less sensitive to changes in expected market hog prices than 40 pound pigs. Time to market could play a role here as it is roughly five weeks longer for buyers of 10-12 pound pigs compared to buyers of 40 pound pigs.
A 10-12 pound pig purchased in January will be marketed as a finished hog in July. Using an $82 per head purchase price and lean hog, corn and soybean meal futures prices to represent the market’s current expectations, the parameters from the Iowa State University Estimated Returns Model for wean to finish production suggest a breakeven selling price of $108.07 per cwt, which is higher than the July CME Lean Hog futures settlement price of $102.60 per cwt on Jan. 10.
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