Feed supply, prices worry hog sector

Feed available after harvest | Demand from south of the border may drive feed exports

A task force of hog producers and federal government officials is being formed to address concerns over unaffordable feed that could drive some producers out of the business.

Livestock feed prices have spiked because of recent drought-induced American reductions in corn crop estimates.

The new forecast of 650 million bushels in ending stocks for 2012-13 is the lowest since 1995-96, causing concern about feed availability and raising prices for corn, barley and feed wheat.

“Canadian pork producers are worried that ethanol policies and low crop yields in the United States due to drought conditions are causing grain prices to soar to a point where it is not economical to raise pigs in Canada,” said an Aug. 17 news release from the Canadian Pork Council.

It encouraged review of biofuel policies that subsidize ethanol production from corn.

But Chris Panter, Alberta’s provincial livestock market analyst, said drought is a much bigger factor than ethanol production when it comes to recent feed cost increases.

A good harvest in Western Canada could alleviate some of the anxiety, provided livestock producers can get their hands on it at a reasonable price.

Grain prices typically drop after harvest when feed appears more abundant.

“Because we have an integrated North American feed grain market now, this may not happen because what you see is that feed barley and wheat prices are connected to the corn price in the States, so if the corn prices stay high, barley prices are also likely to stay high just because there is that opportunity to arbitrage across the two markets,” Panter said.

He said ethanol production has been around for several years and that demand is already built into feed prices. Based on what he’s read in the trade, Panter said changes to ethanol production wouldn’t have much impact on grain prices, at least in the short term.

Gary Stordy, public relations manager for the pork council, said a good Canadian harvest would improve feed availability, but cost is another question.

“Here in Canada, certainly, we have areas that have feed available and now unfortunately it’s a bit of a competition how it’s going to be used. Is it going to stay here? Is it going down to the States? That’s yet to be seen.”

Stordy said the sudden upward swing in feed prices has wreaked havoc in the Canadian pork industry, with producers burning through their lines of credit faster than expected.

It’s particularly galling because pork prices were up earlier this year and producers were anticipating a good year after a string of bad ones that saw many people leave the industry.

“Over the past at least five years, our industry has cut more than half the number of producers,” he said.

Exports of live animals have dropped, though domestic slaughter numbers were relatively stable.

Stordy said many hog producers are getting close to money-losing positions on hogs.

“Each individual producer hopefully and ideally has taken precautions over the past couple months and years to adjust to these types of signals, but it can only go on for so long,” he said.

Survival will depend on farmers’ abilities to access credit, hedge feed prices and find affordable feed from their own farm production or nearby sources.

In the meantime, Stordy said the pork council is gathering data from across the country for use by the task force when it meets to discuss solutions.

In the Aug. 17 CPC news release, president Jean Guy Vincent emphasized the depth of worry.

“The recent market conditions and feed prices were unimaginable two months ago and producers should not have to decide between losing their farm or increasing their debt to pay for unsustainable feed costs,” said Vincent.

“We need the market to pay for the cost of providing consumers a healthy and safe food supply.”

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