Source: Rita Jane Gabbett, MEATINGPLACE, 8/23/11

On average, U.S. pork producers could pay about $6.65 per bushel for corn and still meet all their costs this year, Purdue University Extension Economist Chris Hurt projected in his weekly outlook report.

Taking the midpoint of USDA’s current average price forecast, corn prices could average closer to $7 per bushel in the 2011/12 marketing year, pushing pork producers to a loss of about $4 per head, he noted.
“This potential loss is small enough to keep the industry at about the same size,” Hurt wrote. “An alternative way to say this is that corn and meal prices above current levels could cause the industry to begin to shift toward moderate liquidation.” Corn prices above $7 per bushel would be required for the domestic livestock industry to cut back on usage, he said.  

Hurt noted that pork producers have kept expansion plans on hold because of this season’s corn price uncertainty. “Those decisions appear fortuitous now,” he wrote.

Pork export strength may in the end determine how much pork producers can pay for corn. The industry remains hopeful that both China and South Korea will buy more pork from the United States.

“Greater pork exports would stimulate hog prices and enable the industry to pay more for feed. Unfortunately, domestic consumer demand is expected to be weak as consumer income growth is expected to remain modest in coming months,” Hurt concluded.

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