You might remember a time when farmers just let pigs grow as fast and large as they could. Consumers revolted against pork products that were mostly fat. In the 1990s, the pork industry moved to a system that prices slaughtered pigs not solely on the weight, but also the fat/lean ratio and quality of the animal. Increased automation, food wholesalers, and restaurants like a nice uniform commodity.
The CME price is for carcass weight, after the blood has been drained and the internal organs removed. The typical pig averages 250 pounds live weight, which comes out to about 180 pound carcass weight, which winds up with about 144 pounds after the carcass is made into ham, bacon, loin roasts, shoulder roasts, Boston butt, sausage, lard, and head cheese.
So how can a farmer raise a pig to 250 pounds and make a profit selling the pig for $75? About 2/3 of the cost is the feed, which at current corn prices is about $30 per hundred weight, or $75 per pig.
McDonalds says the reason they don’t offer the McRib all year is they take advantage of the seasonal nature of pork production and buy the pork only when the price is low. The McRib is made from the pork shoulder, which is the front legs.
I’m afraid I am lost – lean hogs for delivery on what date were .42/lb? Odd as it seems, hogs are somewhat seasonal as I learned in Iowa some years ago. Choose the wrong delivery date and you’re likely to make a very slim profit. I would recommend beef cattle. Less muss and fuss and usually a stronger presence in the marketplace.
December 2016 delivery… by summer the futures are up to $.71
This is partly a follow up to the falling food prices. Obviously you can’t make money at $.42 a pound unless you make it up on volume ?