WEST LAFAYETTE, Ind. — An expanding livestock production
sector could add value to corn in coming months — welcome news for growers who
saw corn and soybean prices fall in the wake of an EPA-proposed decrease in the
Renewable Fuel Standard for 2014, Purdue Extension agricultural economist Chris
The bad news for growers, however, is that it could take
several months before the effects of expanding animal numbers translate to
stronger crop demand.
Hurt said the profit incentive for expansion of animal
numbers is large and animal production was traditionally the way farms added
value to abundant and cheap corn supplies. He used hogs as an example.
For the 2013-2014 corn-marketing year, live hog prices
should average about $67 per hundredweight with a cost of production around $56,
the economist said. That translates to an approximate $32-per-head profit and
increases the value of corn marketed through hogs.
“For the current corn marketing year, hogs are offering an
estimated $6.85 per bushel if the profits from hog production are assigned to
the value of corn,” Hurt said. “This compares to a U.S. Department of
Agriculture-estimated price of $4.50 for corn producers.
“Unfortunately, it takes time to get into hog production,
and gilts retained now will not have market-ready pigs until late 2014 when much
of the profit incentive will be eroded.”
Feed prices are expected to move into a period of moderation
over the next several years, which means lower livestock production costs, and
increases the likelihood that livestock producers will continue
For hogs, specifically, an expected 1 percent to 3 percent
breeding herd increase is already under way. Pork production increases should
start to appear late in the summer of 2014, which likely will take hog prices
down to $58 per hundredweight by late in 2014, Hurt said.
“The big profits for hog producers will come during the
2013-2014 corn marketing year, reaching $37 per head of profits, on average,
during the second and third quarters of 2014,” he said. “While hog prices are
strong, it is really lower feed costs that are providing the strong
A growing hog industry, while helpful in providing
additional demand for corn, won’t be enough on its own to boost corn prices to
previously high levels, Hurt said.
“The hog industry expansion will not be large enough to
return corn prices to the previous lofty levels. However, when all animal
industries are included it will be a period of growing feed-use base for corn
growers,” he said. “It’s anticipated that in coming years there will be a better
balance between the crop production sector and the animal sector.
“Assuming ethanol use is relatively level in the future,
this means that corn farmers have achieved the goal of providing sufficient
production for both food and fuel.”
Hurt’s full report, “Hogs Provide Near $7 per Bushel Corn
Value,” is available in both text and podcast formats via Farmdoc Daily from the
University of Illinois at