While I don't want to stand among the increasing crown of doomsayers during the current market blowout, I am looking at this phenomenon from the perspective of a grain grower. For our best customers, the story is looking much grimmer. As we zoom past $5 corn, livestock feeders are feeling the cost pressure.
Consider this comment below which I thought deserved to be raised up to a full post:
"John please do a spot on alternative feeds for hogs. Thanks from an independent producer in a corn poor area running out of corn and cash."We are way past my expertise here, Anon, so how about these words from Chris Hurt at Purdue:
All you have to say to a pork producer is "1998" and the most jovial fellow will turn red with rage, or drop his shoulders in a feeling of helplessness. Unfortunately, those emotions may be relived as 2008 may replace 1998 as the worst financial year for pork producers in modern history.Nor does Chris brighten up much as he examines the options:
The number one culprit is high feed costs and the second is too many hogs. The current unrelenting climb of corn and soybean meal prices may drive 2008 costs to the highest annual level ever. In addition, there continues to be more slaughter hogs than accounted for in USDA inventory reports, with no signs of moderation. [More scary reading here]
Costs prospects for 2008 at $55.60 are extraordinary. Estimated costs average for the previous ten years was $40.64 per live hundredweight. The previous record annual estimated high costs were $48.93 in 1996. The largest losses are expected in the first quarter of the year, when they could reach $36 per head, and then be around $20 per head for the rest of the year.As for alternative feeds, I have no idea. If any one can offer a suggestion, post a comment or e-mail me. But I think we're going to force a liquidation of hogs, cows, and chickens until retail prices for all take huge leaps upward (my uninformed guess is 25-40% higher) to pay for feed costs.
How do producers get out of this one? Nothing is going to come easy. Producers may want to base their strategies on a "survival mode" for 2008. If they can get through 2008, hog prices will likely recover in the spring or summer of 2009.
Note that eggs - a much faster turnaround commodity have already risen by 40%. This is the crude comparison for my price increase forecast. Maybe, in a way, corn growers are right in saying there is no food vs. fuel fight.
Clearly there is a savage feed vs. fuel fight, however.
[source via farmgate]