Bloodbath Continues for Hog, Dairy Producers

No short-term relief expected for livestock industry.

Published on: Oct 10, 2012

If you're in a large hog operation, no one needs to tell you that you're losing a chunk of change on every hog that walks out the door. Chris Hurt, Purdue University Extension ag economist, says there doesn't appear to be much you can do about it in the short term.

"Farmers made the decision on size of herds for the pigs on the ground now back when corn was considerably cheaper and soybean meal significantly less expensive," he says. "They can cut breeding herds now, but it won't have an effect on the pigs that they have on the ground that they must finish out."

He sees red ink into next year. At some point cutbacks in breeding and other factors may alleviate the bleeding, but it may take a while. Part of the problem for many producers, Hurt says, is that they had a couple years of losses, then meager profits in 2010 and 2011, only to get hit with big losses again in 2012. The high feed prices brought on by the drought could not have been anticipated when producers were deciding how many pigs to raise for current production.

Tough haul: The next few months may remain tough for pork and dairy producers.
Tough haul: The next few months may remain tough for pork and dairy producers.

Some producers may try to take the sting out of part of the losses by shopping for cheaper feedstuffs. In areas with aflatoxin corn, USDA has set higher standards for finishing animals. Producers may be able to purchase rejected corn or corn someone has dried in a bin that they know has aflatoxin for a sizable discount. Elevators can also now legally blend clean corn with afaltoxin corn.

This move won't help dairymen, however. Dairy grain can only contain 20 parts per billion of aflatoxin because the milk can only contain 9.5 parts per billion.

Others may try to seed wheat or even barley for feed next spring or in early June when those corps mature. That may help them cut feed costs for hog production, Hurt says.

If the South American soybean crop comes in at a good level in late winter, soybean meal prices may also drop. Until then, it may be a rocky road, he concludes.