"The rapid development of the corn-based ethanol industry – prompted mostly by federal subsidies and policy mandates – coupled with weather issues and economic conditions, have created challenges for pork producers,” according to National Pork Producers Council testimony on Wednesday.
NPPC provided testimony to a House of Representative Agriculture Subcommittee hearing on future availability of animal feed. The testimony centers around the U.S. pork industry's concern of the growing amounts of corn being used by the nation's ethanol industry and the resulting soaring cost of pork production.
Corn futures traded at the Chicago Mercantile Exchange already have climbed to the highest levels in more than three years. Warnings of even higher prices were also included in NPPC’s testimony. “Depending on the size of the 2011 harvest and on the crop inventories at the beginning of the 2011-2012 marketing year, weaker demand may not be enough to ration supplies. Grain prices may need to go even higher,” said Randy Spronk, NPPC vice president and Minnesota pork producer in the testimony.
The testimony also warned of herd liquidation occurring if corn prices continue to rise. “If corn goes to $10 a bushel or higher, there could be an unprecedented contraction in the pork industry, with many producers forced to liquidate herds as losses grow,” said Spronk.
The testimony also points to increased pork prices for consumers resulting from skyrocketing corn prices. “Higher pork production costs are now being passed along to consumers in the form of higher retail pork prices, which set six record monthly highs during 2010 and are almost certain to set new highs this year,” he said.
NPPC warned of probable losses in the U.S. pork industry through 2012. “Pork producers now are projected for next year to see production costs above hog prices, with average losses of around $10 a head,” Spronk added.
Read the full written testimony.