Reduced Feed Costs Could Boost Profitability

by 5m Editor
20 January 2012, at 8:46am

CANADA - The President of Westside Economics predicts reduced feed costs will translate into improved profitability for North American pork producers throughout 2012 and into 2013, according to Bruce Cochrane.

"Prediction of Future Prices and Cost of Production" was among the topics discussed yesterday as part of the 2012 Banff Pork Seminar.

Dr Karl Skold, the President of Westside Economics, says, with corn prices moving up toward seven dollars per bushel, this past year was challenging on the cost side but thanks to strong demand led by export growth 2011 was a good year in terms of profitability.

Dr Karl Skold-Westside Economics

I think what you've seen is very high record feed grain prices and very strong prices that give incentive throughout the world to grow production.

That's been number one.

Number two, we're seeing a slower growth of US ethanol production.

Where it was both mandate led and a lot of incentives and subsidies to grow production quite quickly, those subsides went away at the end of this last calendar year.

With that, given that in the US we're not using as much gasoline and we've pretty much added all the ethanol we can, the growth is only going to be driven by exports.

So the combination of more supplies of grain world-wide and a slower ethanol picture is going to help give more supplies next year.

A lot of it's going to be predicated, we're going to see a large jump in corn plantings likely next spring in the U.S. which is going to loosen up the balance sheet.

Plus these incremental supplies world-wide should help us make feed costs lower for calendar 2012 and likely into 2013 if we have good crops in the US.

Dr Skold anticipates any increased profitability will come more from feed cost reductions than from gains in hog prices as export demand is expected to remain flat this year.

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