Highest Ever Corn Bills to Curb Hog Farm Profits

by 5m Editor
5 January 2012, at 7:04am

SOUTH AMERICA - The revival in crop prices on South America weather concerns has left livestock farmers on track for their most expensive year for corn, crimping hopes for hog farm profitability.

Purdue University cut by one-third, to $10 an animal, its estimate for hog farm profitability this year, the weakest margin since the sector's 2008-09 recession.

The decline reflects in part lower hog values, with the university trimming to $65 a hundredweight, from a November forecast of $67 a hundredweight, its estimates for average 2012 prices.

However, the revision also factored in a corn price of $6.18 a bushel for calendar 2012, based on the average that growers of the grain will receive, Chris Hurt, Purdue professor of agricultural economics, said.

"The $6.18 [figure] would be the highest annual price ever, exceeding calendar year 2011 at $5.99 a bushel," Professor Hurt told

"This most recent increase of about $0.70 per bushel in corn prices from mid-December, from a bit under $6.00 a bushel on the July 2012 contract, has reduced the optimism for hog profitability over the past three weeks."

Corn prices have been lifted by fears for the impact of hot and dry weather on crops in Argentina and southern Brazil, concerns which have raised soybeans too, as well as reviving values of other grains.

The US Department of Agriculture estimates farmgate corn prices averaging $5.90-6.90 a bushel for the 2011-12 crop year.

Hog farmers' prospects would have been even worse if they had not followed a "prudent path" by limiting plans for expanding herds, as highlighted in a USDA report late last month.

Producers plan slightly higher farrowings in the December-to-February period, but fewer in the following months than a year before, the quarterly Hogs and Pigs briefing said.

"March-to-May farrowing intentions were significantly lower than expected and somewhat lower than a [marginally larger] breeding herd would suggest," Paragon Consulting and Steiner Consulting said.

Professor Hurt said that while the data implied a rise in US pork production of 2-2.5 per cent in 2012, "most of that increase is due to more pigs per litter rather than from larger farrowings".

"Pork producers have remained cautious about expansion," he added, attributing this response to a difficult outlook for US and European economies, memories of large losses in 2008 and 2009 and to "uncertainty" in feed prices.

Meanwhile, demand will be spurred both by US exports, set for a record in 2012, and in the domestic market by lower supplies of other meats on a per capita basis.

"Beef availability will be down about 6 per cent, with poultry supplies per person down about 3 per cent," Professor Hurt said, a factor which would keep hog prices relatively firm and meant that "another year of profitability is likely."

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