New Barn Survey
Last week we asked our readers to send in any details of new sow barns under construction.
Quotes from different readers
“10,000 sow barn getting built in South Dakota this year. This one definitely breaking ground this year or already has hole dug replacing some old batch farrow farms but for the most part this will be new sows on feed.”
“Heard of new sows in South Dakota two 6,000 and one 9,000 sows – this was chatter from a construction crew in Iowa.”
“You did not hear from me, Jim, but heard from a construction firm that a certain vet clinic was planning a something like 4 or 5 10k sow units…”
“6,000 in Illinois burnt down… being worked on right now.
10,000 sow new in South Dakota… in bidding
6,000 sow new in Indiana… in bidding”
“10,000 sow barn being built in South Dakota this year 3,000 sow barn being built in SW Minnesota + next year in 2022 and 5,000 – 10,000 barn being built in South Dakota next year 2022??? Not official”
This is what we got. Seems the only sow barn that is actually being built at this time with any confidence is the 6,000-sow barn that burnt down. The others are varying degree of planning it appears. If you talk to builders or equipment people, lots of sow barns get quoted but for whatever reason they don’t get built. High feed prices are measured building costs have moved break evens up.
Generally, the vet clinics put little of their own money in projects, they search for investors. In our opinion today there is little bullish optimism in our industry for the future. Producers realize prices are good today but high feed prices dampen the long-term view. It’s like everyone is ready for a rock coming from nowhere to land on their head. Hello Coronavirus.
We believe October and December lean hogs are undervalued. We decided to look at Iowa – S Minnesota prices over the last ten years 2010 – 2019 (excluding 2020 pandemic). Last week May Iowa/S Minnesota price was $1.12; October Futures 93¢; December 83¢. The price difference May to October 19¢ lb; May to December 29¢.
To put in context, the 10-year average Iowa/S Minnesota May-October spread is 7.7¢ lb. (largest year 21¢); May to December spread 12.3¢ (largest year 22¢ lb.). Currently October and December Lean futures are both near or beyond the widest 10-year spread.
If we take October 7.7¢ lb. 10-year average May to October spread from current Iowa/S Minnesota 1.12 – 7.7¢ lb., October is 1.04 lb. (current future 93¢); same arithmetic on December-May $1.12 less 12.3 = 99¢ lb. (current futures 83.5).
Seems to us not overly a reach to believe both October and December lean hog futures are below where Iowa/S Minnesota lean hog prices will be in both months. Upside to market in our opinion.
“If you think you can or think you can’t, you’re right.”
– Henry Ford –