The primary discussion at the 2008 World Pork Expo wasn't about hogs. It was about corn!
Corn — the real thing — or any reasonable facsimile that could serve to replace it.
Cost and availability was top of mind. “How high do you think corn will go?” was the question of the day.
How did this industry's reliance on a single source of feed energy get so out of whack?
More corn-based ethanol = more demand for corn = higher corn prices.
Higher crude oil prices = more demand for corn-based ethanol = higher corn prices.
More corn-based ethanol = more demand for corn = higher food prices.
Spin it any way you'd like. Point fingers at whomever you choose. Chances are, you're at least partially right. Livestock producers are livid about skyrocketing feed prices. Consumers are infuriated with soaring food costs.
It's a classic chicken-and-egg question that is unlikely to gain consensus.
Will corn/feed grain prices ever return to what we once considered “normal”? Not likely. The feed cost challenge is multi-factorial and it's likely to be with us for the foreseeable future.
Estimates of corn topping out at $7, $8, maybe $10, were more common at Expo than anyone was comfortable with. Then the rains came.
Floods blanketed up to 20% of Iowa's crop acreage and, eventually, thousands of acres on both sides of the Mississippi River heading south.
According to a mid-June report, the USDA described the condition of 43% of the U.S. corn crop as “very poor, poor or fair.” But the June 30 USDA crop report brought better news, citing better growing conditions than expected, 1.3 million more corn acres than the March estimate, and slightly higher corn stocks than previously thought.
Perhaps Iowa State Economist John Lawrence put it best in the Iowa Farm Outlook recently: “….there is universal agreement that higher grain prices are not a passing fad. Eventually, we expect livestock and poultry prices to increase in response to the higher feed costs and reach a level that yields enough margin to sustain the industry. However, the transition may not be smooth or timely. The challenge for producers is to survive the short-term transition and prepare for long-run success.
“Recognizing that things have changed isn't worth much unless you adjust to the change,” he adds.
Some changes Lawrence sees on the horizon include:
More land being placed into grain production, worldwide.
Crop yields will increase.
Livestock demand for grain will decrease; and
Cellulosic ethanol production will become commercially viable to fill a portion of the ethanol demand. Some or all of these changes will help corn prices moderate.
He cites a recent study by the Center for Agricultural and Rural Development (CARD), which indicates that even with a bumper crop, corn would likely average $4/bu., although “bumper” will not likely be an adjective used to describe this year's crop yields.
“Do you have a strategic reserve of corn to get through a period of very high prices or will you have to buy grain during these volatile times?” Lawrence asks. “Do you have the borrowing capacity and storage to purchase some or all of your feed needs if the opportunity presents itself?”
Bottom line is this — market awareness, smart buying and some creative thinking will be essential to weather this tenuous period of high grain prices.
I'd also like to give our readers a heads up about the August 15 edition of National Hog Farmer. Instead of your regular monthly magazine, you will be receiving an all new Pork Producers Buyers' Guide, featuring 10 general categories and hundreds of product listings — from air inlets to zinc.
As profit margins continue to challenge pork producers, it is critically important to have access to the most complete information on products and services available. The 2008 Buyers' Guide will serve as an essential resource to allow you to do some comparative shopping and find the right product for the job.
Company listings will provide full contact information, plus Web site addresses so you can effectively gather information, study and compare products.
Soon after you receive the published edition, you will also be able to access a fully functional, fully searchable Web site featuring an electronic version of the Buyers' Guide. Simply go to our Web site, www.nationalhogfarmer.com, where you will find a link to this new industry resource.
Going forward, the site will be updated regularly as new products and services are introduced to the swine industry. We welcome your thoughts and comments about the all new Pork Producers Buyers' Guide; please feel free to give me a call (952) 851-4661 or write: dpmiller@nationalhogfarmer.com