H@ms Marketing Services says the rising cost of U.S. corn could potentially shift the feed cost advantage for hogs back to western Canada, offsetting the negative impact a strong Canadian dollar.
Over the last several months feed ingredient prices have increased by 20 to 25 percent driven primarily by concerns over tight U.S. corn supplies this crop year and over the next few.
H@ms Marketing Services director of risk management Tyler Fulton says this has had a very bullish influence on ingredients such as feed wheat and barley but those two commodities have actually lagged behind the U.S. corn market in the recent rally to the benefit of Canadian livestock producers.
I think the biggest part if the risk is that feed ingredient price risk over the next year, over 2011.
It’s probably the single biggest risk to profitability for hog producers in Canada.
That said the outlook still currently looks profitable for market hog production in Canada and to go one step further it’s possible that we are looking at a more competitive place for Canadian hog producers when compared against their U.S. counterparts if we continue to see that lag in increasing feed wheat and barley prices compared to corn prices that is typically the big energy component to a hog ration in the U.S.
Fulton says when the dollar was trading at 80 to 85 cents we were probably on an equal footing with U.S. producers but when the dollar approached par as it is today that cut into revenues and has hurt our competitiveness.
However, he says, it is possible that over the past couple of months we have regained some of that competitiveness strictly due to the fact that our feed ingredient prices have not climbed to the same degree as our U.S. competitors.
Source: Farmscape.Ca
