Shakespeare – Chad Hart, a University of Iowa agriculture
economist specializing in grains, brought nothing but bad news to about 150
people, 20 of them students at Ridgetown, to the Shakespeare Swine Seminar here today.
He said the current hog-industry crisis, with losses of $30
to $50 per hog, will be worse than the record-breaking crisis of 2008-2009.
He said losses will persist until at least a year from now
and perhaps for two to three years.
He said the drought-reduced corn crop, which is responsible
for the losses, carries more bad news – lighter bushel weights and therefore
less nutrition than last year’s high-quality harvest and aflotoxin
contamination from pockets of Southern Iowa.
Aflotoxin-contaminated corn used to be banned from the
market, but this week the United States government waived that rule, allowing
that corn to be “blended off” with toxin-free corn to the point that there
ought not to be a problem for hogs consuming the feed.
But Hart said farmers will need to be cautious about the corn
quality they buy and how they feed it.
Although he didn’t say so, it’s likely to be riskier to feed
rations with any aflotoxin content to sows than to near market-ready hogs.
He said ethanol plants are extremely wary of aflotoxin-laced
corn, so that means it’s going to be pushed into feed.
Ethanol producers are cutting back so there will be less
dried distillers grains and that’s going to hurt hog farmers who have come to
depend on that for feed. Some will have to switch to other feed sources and the
hogs won’t like that change in their ration.
Hart said it will be at least six months – when corn and
soybean crops in South America reach harvest – before there will be any relief
on the cost of feed.
But he also said it’s unlikely that there will be another
drought disaster in the U.S. Midwest next year because back-to-back droughts
have seldom happened.
However, if there is another drought next year, he said corn
prices could go from just under $8 a bushel now to $10.
He said hog marketings will continue to increase as farmers
ship at lighter weights and cull sows, pushing volumes to packing-plant
capacity in October and November. He said whenever hog marketings reach plant
capacity, hog prices go down.
If farmers react swiftly to the bad markets to quit hog
production or to drastically cut back, hog prices could pick up enough to cover
cash costs by late next summer, he said.
If production persists, it could be 2014 before hog prices
go high enough to cover cash costs and 2015 before they’re high enough to
restore reasonable profit margins.
He said consumers are in a bad economy and unlikely to be
willing to pay high prices for meat.
He compared costs of production calculated by Iowa State
University and by the Ontario Ministry of Agriculture, Food and Rural Affairs
and said he’s surprised that Canadians hold a cost advantage over Iowa on
weaner pig production costs.
Iowa farmers hold an advantage on finishing hogs which, he
said, explains why Canadians sell weaner pigs to Iowa finishers and then U.S.
packers market pork to Canadian supermarket chains.
He said production practices, genetics and efficiencies are
similar, so the cost gap between Ontario and Iowa has narrowed over the last
four to five years.
He said Iowa lost half of its hog farmers in the 2008-09
crisis, but none of its production volume. He anticipates a similar pattern
will prevail in this crisis.
