Drought & Federal Mandate to affect Bacon Supply

Daily News Article   —   Posted on September 28, 2012

(by Paul Tharp, New York Post) – The world is facing a looming pork shortage next year as farmers struggling with soaring feed costs driven up by this summer’s drought ship their herds to the slaughterhouse, experts warn.

“Producers [pig farmers] are going broke and can’t afford anymore to keep feeding herds,” economist Steve Meyer of the National Pork Producers Council told The Post.

U.S. farmers are dealing with their worst hog losses in 14 years. Instead of reaping profits on their herds, pork producers are losing close to $45 per head trying to fatten them with corn feed, Meyer said.

“They just can’t keep up with that,” he said. “All they can do is reduce their herds by slaughtering them for market.”

The slaughter in recent weeks came at the fastest pace in three years and has thinned the US herd to its lowest per-capita level since 1975, according to the US Department of Agriculture.

“This fall consumers will find a lot of values at the retail level,” said Meyer.

“But by this time next year,” he added, “the glut will disappear and prices will soar to new highs.”

With as much as half the U.S. corn crop distilled into ethanol to use in gasoline, corn prices have doubled since July after the worst droughts in a half-century baked fields in the United States, Europe and South America.

“It’s only going to get worse on the higher feed prices,” portfolio chief Mark Greenwood at AgStar Financial Services commented to Bloomberg News.

Farmers planted a record corn crop this spring of 96.4 million acres to handle ethanol demand but lost about 25 percent of the crop to drought, Meyer said.

Currently, the pork market is laden with too much inventory, which has knocked wholesale prices to new yearly lows. Pork futures traded at 71 cents a pound yesterday — well off the $1.05 record in early July.

The average retail price for all pork cuts is currently $3.53 a pound but could soar past $4 by next September, Meyer predicted.

Normally, it takes six months to fatten a 280-pound pig for slaughter, but sky-high corn prices are leading farmers to ship their stock off to the slaughterhouse sooner.

Right now it costs producers money to raise a pig. Meyer said a young pig will eat more than 10 bushels of corn during that period, bringing his meal tab to $195, while the grower fetches only about $150 for the animal at current prices.

Producers of poultry and cattle are in the same boat because of corn’s runaway climb to more than $8.20 a bushel from about $4.50 earlier this season.

Reprinted here for educational purposes only. May not be reproduced on other websites without permission from The New York Post.


Background

OTHER FACTORS AFFECTING CORN PRICES (the Ethanol mandate):
 
The government requires that 13.2 billion gallons of corn ethanol be produced in 2012 according to the Associated Press.
 
The severe drought affecting the Midwest this year has caused the latest corn projections to be the lowest since 1995. With such a small corn crop, the government mandates [requirements] that make some of that corn be used for ethanol make even less sense, and will raise prices even further.
 
An editorial published on Aug. 6 in The Washington Post acknowledged what a problem the government mandate has been for the price of corn. “Federally supported ethanol is a key factor in the steady rise of corn prices since 2005; this year, with supplies likely to be short due to drought, ethanol’s impact on prices will be magnified.”
 
Ethanol was blamed for global food riots in 2008, because, as ABC’s David Muir put it: “Many farmers around the world, who once grew wheat and rice, now grow corn and sugar cane instead to produce ethanol, a more lucrative market.” Yet, in the past six months the networks [rarely mentioned] that the ethanol mandates could make corn even more scarce (and therefore expensive) during the current severe drought. 
 
(from studentnewsdaily.com/biased-item/networks-ignore-ethanol-mandates)
  • Read "Nestle blames biofuels for high food prices" at:  studentnewsdaily.com/daily-news-article/nestle-blames-biofuels-for-high-food-prices