The effect of the ethanol on corn prices could mean a significant profit downturn in pork over the next few years, according to Steve Myer, founder and president of Paragon Industries at the 29th Pennsylvania Pork Expo.
“This situation with ethanol is one that’s going to be quite important and more or less permanent,” he said.
Higher oil prices and the increased movement towards ethanol has sent corn prices in the US above $3 per bushel and many experts, including Myer, think prices could reach $4 or even $5 per bushel.
So what does all of this mean for the pig industry? Myer said the higher corn prices will lead to lower average carcass weights on the market and lower selling prices because producers won’t be able to feed hogs as much as they used to.
“We’re going to see weights two to three pounds below average,” pretty regularly he said.
Myer said don’t count on Dry Distillers Grains Solubles (DDGS), which come from the production of ethanol, to be the solution in the face of high corn prices.
He said there are many challenges with DDGS including the work it takes to make the feed usable and its consistency. He also said prices of DDGS will only rise with corn prices. “I think we’re always going to be in the backseat when it comes to DDGS,” he said.
With many obstacles in the way of pricing pis for profit, Myer said there is still a light at the end of the tunnel. That light is export markets.
Lou Moore, agriculture economist at Penn State, said over 90% of the pig market is outside of the US Myer said producers should pay close attention to the corn and soybean markets this spring as well as the lean pig markets to possibly lock in good prices for the future.
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