The pork industry had an unbelievable last decade. Pork producers were swept up in the drama of surging grain prices and, more recently, feed price moderation. Feed costs are a big deal to pork production, accounting for about half of the total cost to raise hogs.

According to my estimates, in 2006, feed costs were about $17 per live cwt of pig produced. Feed was 46% of the total cost to raise hogs. Corn prices were $2.28 per bushel, and Decatur, Ill.-based high-protein soybean meal was $176 per ton. Then the pork world began to change.

Run-up in feed costs

By 2012, the yearly corn price had exploded to $6.67 per bushel, and bean meal prices were $439 per ton. Estimated feed costs had risen to $44 per live cwt and total cost to a record $67. Between 2006 and 2012, total costs of production rose by $30 per cwt, and higher feed prices accounted for $27 of that increase. Feed now accounted for a remarkable 66% of the cost to raise hogs.

Since 2012, feed prices have been moderating. In 2017, feed prices are expected to return to decade lows. Corn prices are expected to average about $3.30 per bushel, with soybean meal near $320 per ton. Those are the lowest corn prices since 2006, and the lowest annual soybean meal prices since 2010. The estimated $25 feed cost per cwt will be the lowest since 2007. Not surprisingly, feed costs in 2017 will be back to about 50% of total hog production cost — closer to the long-run average.

In the dynamic past decade, feed prices have been the single-most important influence on the total cost of hog production.

Future cost trends

So will the cost to raise hogs continue to drop, ultimately returning to the low $40s per cwt, as was often the case prior to 2007? The answer to that question will be tied to what happens to corn and bean meal prices. It seems unlikely that we’ll see a return to the era of $2-per-bushel corn and $180-per-ton bean meal prices that existed from the 1998 through 2005 crops, before the launch of the feed price boom.

As further evidence, futures markets for 2018 and 2019 are suggesting corn prices will be 30 to 40 cents per bushel higher than in 2017. But soybean meal futures are about $12 per ton lower for 2018 and 2019 compared to 2017.

Lower bean meal prices are not enough to offset the impact of higher corn prices. The cost of feed would rise by about $1 per cwt in 2018 and 2019. These indicators suggest the impact of declining feed prices for hog production will continue in 2017, but will reach a bottom, stabilize and turn a bit higher in 2018 and 2019. Total production costs may be reaching a low over the next year and will not drop further.

Hurt is a Purdue University agricultural economist. He writes from West Lafayette, Ind.