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Pork Commentary: Feed Corn Usage to Drop

by 5m Editor
16 December 2008, at 6:52am

CANADA - This week's North American Pork Commentary from Jim Long.

The US Crop Report released last Thursday projects a 10.4 per cent drop in corn for feed usage in 2009. Down from an estimated 5.974 billion bushels in 2008 to 5.350 billion bushels in 2009. Over 600 million less bushels of corn for US feed production. Does this mean there will be 10% less meat production? Not necessarily but in our books it magnifies the premise we have been working for months. There will be less meat in 2009. Less poultry, beef, and pork. You do not need as much corn for a livestock and poultry inventory that has plummeted.

To take it a step further the USDA projects US Corn exports in 2009 to drop 26 per cent. Down from 2.436 billion bushels in 2008 to an estimated 1.8 billion bushels in 2009. A decrease of approximately 600 million bushels. Just like in the United States the USDA also expects large decreases in global demand for corn where there have been similar large decreases in global livestock and poultry inventories.

There will be less domestic and global pork, beef, and poultry production in 2009. The last time US beef, poultry, and pork production all decreased year over year was 1973. 35 years ago.

More often than Haley’s Comet returns, but longer than almost all in the hog industry can remember.

Corn Ethanol

The USDA is projecting Corn for Ethanol usage to be up 22.3 per cent in 2009 or just over 600 million bushels (2008-3.026; 2009 – 3.700). I wonder how this is going to play out if oil stays under $50.00 per barrel. Already there are corn ethanol plants that are shut down and some are bankrupt. Certainly the luster of burning our food for fuel is gone. We expect oil under $50.00 will cut corn usage for ethanol in the coming months. You would have to be an excellent Ponzi promoter to find investors for new ethanol plants. We had said in the summer it was over. The corn ethanol craze is like the dot.com bubble. It won’t go away but the growth is done. Now all that is left, is the opportunists who will buy existing plants cents on the dollar.

Other Observations

  • The price of hogs in Australia is over $1.00 US liveweight per pound. Their pork production is down – hammered by high feed prices.
  • The price of hogs in Russia are currently $1.20 US liveweight per pound. This should continue to encourage pork exports from North America.
  • We have all heard about so called less Pork Demand due to the domestic and global economy. We do not believe it. Pork exports in October verify demand is increasing. Year over year Pork exports were up 25.4 per cent. That’s a lot. Russia pork exports are up 19.9 per cent ($1.20 US pound), Australia up 126.8 oer cent (over $1.00 US pound). Mexico plus 74.4 per cent, South Korea plus 9.6 per cent, Korean hogs $1.40 per pound. Japan plus 30.7 per cent. Not exactly a collapse of pork exports is it? The only countries down for US exports are Canada – 3 per cent and what would you expect when Country of Origin Labelling is keeping more hogs in Canada for processing, which leads to increased Canadian Pork Production.

China and Hong Kong are down 29.1 per cent which is troublesome but not so much when total US pork exports up 25.4 per cent. Bottom line: Pork exports continue to be strong. This is price supportive. Come January when US weekly marketings decrease from the current plus 2.3 million a week lean hog prices will move towards 70 cents in February.

Genuses

Swine Cast

A few weeks ago we participated in a Webinar sponsored by Pfizer, Elanco, JBS United, and Zinpro. It was simultaneously broadcast at 130 sites in Canada and the United States. Our audio presentation is now available at http://www.swinecast.com/swine-forecast-2009-jim-long-and-international-swine-production-picture You might find it interesting, and for what it’s worth a couple of our readers told us they sent it to their banker.