While growers enjoy high corn prices, another segment of agriculture is mourning them. Pork producers face feed prices that are nearly double what they were a year ago. The effect of these high prices on the bottom line is harsh.
“I wouldn't say it is a panic right now,” reports John Lawrence, Iowa State University economist. “It is a hot topic and it likely isn't going to go away. The next progression is how does the pork industry operate in a $3 to $4 corn world. It will be different than it has been.”
A longtime analyst of the livestock business, Lawrence says the pork industry will contract due to high feed costs. As a result of a smaller industry, the price of pork in the retail counter will rise until it is profitable for producers to add numbers again. But even then, he says, the industry will remain smaller than it is today. Lawrence calls this basic economics.
Pork producers also can't make great use of distiller's grains from ethanol production. The acceptable rate of distiller's grains in a hog diet is only 10%.
Unfortunately, the pork industry is facing another momentous change. The country's largest pork producer, Smithfield Foods, recently announced it is getting rid of the sow gestation crates that house its one-million-sow herd. Over the next decade, the company will replace gestation crates with group housing for sows.
Smithfield's announcement surprised many in the pork business. Some European countries with strong animal welfare groups have legislated group housing. But in the U.S., these animal welfare issues have not reached legislative status. Swine research generally shows gestation crates produce more live pigs than group housing does. I can assume that Smithfield will look at high-tech options, such as electronic sow feeders, to alleviate sow aggression in a pen.
Smithfield's decision on gestation crates will trickle through the entire industry so that most producers eventually will need to consider group housing for sows. Again, this could mean higher production costs.
The irony of this situation is that growers today are just realizing the benefits of hog manure as a fertilizer. (Take a look at the manure-buying story on page 66.) Manure commands top dollar in some areas. It would be unfortunate if growers lost this fertilizer source because of a major contraction in the hog business. Let's hope pork producers can weather the high feed prices in the next year or two.