Lower Feed Costs Improve Outlook for Producers

by 5m Editor
29 June 2011, at 11:14am

US - A Des Moines-based agricultural economist estimates a drop in the price of corn has helped shift the profit outlook for North American pork producers over the next year from one of losses to profitability, writes Bruce Cochrane.

Since early June corn futures have dropped by a dollar a bushel fueled by a combination of factors including a sell off of corn sparked by news that most of the intended corn acres in the U.S. have been planted and a sell off of oil which has pushed oil futures below 90 dollars from a peak of 130 something in the spring.

Dr Steve Meyer, the president of Paragon Economics estimates the lower corn price combined with a drop in soybean prices have shaved five dollars off projected break-evens for the coming year.

Dr Steve Meyer-Paragon Economics

Back the first week in June I ran my profit models and it showed a loss of I believe it was about two bucks a head for all of 2011 and a loss of about ten dollars for the next 12 months which would have been June through May of 2012.

I re-ran those numbers again this morning and they were a profit of about two dollars for 2011 and a profit of about 2.70 or so for the next 12 months, so a pretty dramatic increase in profitability.

I think that's going to be pretty general across the US.

We won't have much hard red winter wheat used as feed at all this year but we do have some soft red winter wheat in the eastern part of the country that's going to be used.

Canada is having a lot of trouble getting some of your grain supplies in the west planted because of wet weather so I would think it would probably be a disadvantage to them as the rest of the country could have this corn available to them.

It'll have some differences but I think in general it's going to have pretty much a national impact on both countries.

Dr Meyer advises pork producers keep an eye on the price of corn and soybean meal, on hog prices and, in Canada, exchange rates and figure out their impact on margins.

He notes there will be spots in the US where it will be hard to find corn toward the end of the crop year and advises US producers to watch availability of corn so they don't end up being caught short.

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