An agricultural economist with the University of Manitoba predicts the demand for corn for ethanol will mean a smaller North American swine herd even after feed grain availability returns to normal.
Reduced U.S. corn production due to drought and ongoing demand for corn for ethanol have resulted in record high feed prices.
Dr. Derek Brewin, an associate professor of agribusiness and agricultural economics with the University of Manitoba, says as a result some of the hog barns across North America are selling off not just their regular pig crop but also their breeding sows which has worsened the situation by depressing hog prices.
To some extent we have a blip caused by the drought so the corn prices will probably come down.
We will probably get a reasonable corn crop in the next couple of years and fill up the stocks that they had drained down and so prices will come back.
But I think the ethanol demand has led to kind of a new price level in the feed grain structure, I think.
We used to think that a two dollar corn price was sort of a regular price and I think everybody is getting more used to a four dollar corn price.
That means that a certain amount of the hogs that used to be fed are probably not going to be fed in North America at least because some of the feed grain is going into ethanol production so the entire North American hog sector is probably going to shrink a little bit.
Some of the sows that were killed off will never be replaced.
As long as that feed grain price is high I think we’re going to have less total hog production in North America.
In Manitoba we had excess capacity.
We were exporting some of our finished animals, we were exporting some of the young animals, we were exporting some feed grains so we had a little bit of room to keep our processing plants full.
Dr. Brewin believes the economics of having two processing plants in Manitoba will provide an incentive to continue to grow hogs in Manitoba.
