Fort Dodge Messenger, IA
11-25-06
High grain prices leave swine industry reeling
Corn prices expected to rise to $4 a bushel
By RANDY MUDGETT, Messenger staff writer
AMES — The numbers are clear, but the future is not as clear for Iowa pork
producers.
With the increasing rise in corn prices, agricultural economists fear the pork and
poultry sectors will shrink as prices rise in the wake of more ethanol demand.
The resulting shift from food and feed supplier to energy provider, pork producers
look to take the biggest hit.
John Lawrence, Iowa State University Extension livestock economist, said if
corn prices continue to rise to $4 a bushel as expected, the pork industry will lose
from 10 to 15 percent of its animals nationwide.
‘‘Looking at this from a job creation scenario, we are not gaining much if we shift
to making ethanol,’’ Lawrence said. ‘‘In fact, if you used the same 37 million
bushels of corn that creates 100 million gallons of ethanol and fed it to hogs
instead, the number of jobs created isn’t even close. Those bushels create 800
jobs in the pork industry and just 80 jobs in the ethanol industry.’’
Glenn Grimes, University of Missouri economist, said he expects farmers who
are corn producers and also raise hogs to be some of the first to exit the swine
industry.
‘‘Right now, farmers are feeding hogs to make extra money and have a source of
fertilizer for their farm,’’ Grimes said. ‘‘Once they begin to lose money on those
hogs, their interest in raising them dissipates.’’
Grimes said of the 78,000 pork producers in the United States, all but about
10,000 producers are considered to have small herds or producers who raise
less than 10,000 head of hogs a year. ‘‘Feed cost is about 60 percent of the
costs in raising hogs,’’ Grimes said. ‘‘The surprising thing is we do expect the
U.S. sow herd to grow in the coming years. We also expect the Canadian sow
herd to get much smaller. Because of costs, the industry will move production of
sows into the Midwest in order to keep costs lower.’’
The fact that pork exports continue to grow has kept hog prices high. Grimes said
there is little indication of rising backlogs in freezer capacity in the sector despite
the fact that slaughter numbers have been 2.5 percent higher this year.
Grimes said because of the high costs of building new facilities, producers who
have invested well into the industry will have to lose a lot of money before they
are forced out of pork production. There has been large runs of market hogs the
past few weeks and that has resulted in lower prices, according to Grimes as
prices fell about $5 last week making top live prices $40 in St. Paul, Minn. and
$40.50 in Sioux Falls, S.D.
Grimes said he is optimistic about the long run in the swine industry despite the
predictions of higher corn prices. ‘‘Researchers will find a solution to getting the
fiber and the fat out of distillers grains, and then we will be able to feed that to
hogs like you can to cattle,’’ he said.