Strong Dollar Could Offset Feed Cost Advantage

CANADA - A US-based agricultural economist says the strong value of the Canadian dollar will likely offset a feed cost advantage being created for western Canadian pork producers as a result of the rising value of US corn, writes Bruce Cochrane.
calendar icon 23 November 2010
clock icon 3 minute read

As the result of a disappointing US corn crop, the USDA is forecasting the average farm price of corn will hit 5.20 per bushel, a dollar a bushel above the previous record, which will translate into higher feed costs for all livestock.

Dr Ron Plain, an agricultural economics professor with the University of Missouri, says feed is something all hog producers will need to keep an eye on.

Dr Ron Plain-University of Missouri

Corn is the dominant feed crop in North America and when its prices go up feed wheat and barley tends to go along with it.

Actually some of the data I've been looking at, it looks like the increase in barley prices hasn't quite been as strong as the increase in corn prices and so a little bit of a competitive advantage there maybe for Canada.

In fact, it's my understanding that we have some feeder cattle moving north from the US into feedlots in Canada to take advantage of some of the lower cost barley.

It's a very competitive world.

Many times getting a little advantage is important if you can maintain a little price advantage on your barley, it should allow you to keep the cost production perhaps a little bit lower and that'll be important for the hog industry. One of the other challenges right now is the Canadian dollar has been fairly strong recently against the US dollar and that makes things a little bit tougher sometimes to be competitive.

Dr Plain says the higher Canadian dollar may offset any feed cost advantage in western Canada, especially if you're looking to export live hogs rather than slaughter them in Canada.

He notes Iowa State calculations showed the average hog sold in the US for about a 30 dollar profit in September but a four dollar loss in October and he expects red ink in most months this winter before hopefully returning to profitability in the spring.

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