What is in this article?:
- Farmers face reducing use of feed corn
- Foreign sector
- With the 2011 corn crop not likely big enough to meet demand and as prices continue to rise, livestock producers soon might be facing a critical decision: whether they should reduce their use of corn for feed.
"There has been a general assumption that foreign customers would reduce consumption as prices rise; however, in 2007 and 2008 foreign customers increased purchases," Hurt said. "Given the low value of the dollar and strong desire of many foreign governments to do what they can to moderate food inflation, the question remains whether the foreign sector will cut their imports of U.S. corn this year."
The difference between 2007-2008 and now, Hurt said, is that just a few years ago the livestock industry couldn't afford to pay more than $6 per bushel for corn. As per capita supplies of livestock have shrunk in the last four years, prices farmers receive for animal products have increased. But even with those increases, Hurt said the limited corn supply and market volatility have caused most pork producers to put expansion plans on the back burner.
"Those decisions appear fortuitous now with the small corn crop becoming a reality," he said. "Estimated farrow-to-finish margins for the 2011-2012 corn marketing year now appear to be negative, with an average loss of $7 per head. This potential loss likely will cause some reduction in the size of the industry"
Hurt said he expects domestic consumer meat demand to be weak because of modest income growth. But there is a bright spot for pork producers in the form of strong economies in China and South Korea.
"Greater pork exports would stimulate hog prices and enable the industry to pay more for feed," he said.