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Pork production profits forecast for 2012
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- Activist’s video turns lens on Hawkeye Sow Centers, Hormel
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- U.S./South Korea FTA begins March 15
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- EU farmers lose out as consumers oppose GMOs
- Indiana bill targets frivolous lawsuits against livestock farms
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- Commentary: Gestation stalls now lead HSUS' list
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With U.S. commodity markets increasingly influenced by world grain production and demand, Joe Kerms, vice president, International Agribusiness Group, Ames, Iowa, keeps a close eye on overseas markets in addition to those here in the United States.
The risk management specialist believes U.S. soybean prices will come under pressure, as well as corn, which will lead to opportunities for U.S. pork producers to improve margins. “2012 looks very profitable for the U.S. pork industry as we look at markets currently. It is advisable to lock in some profits at this point.”
With the 2011 corn crop yield close to final, the big remaining question is demand. “Ethanol has its foot to the floor and it won’t let up, with or without the blenders’ credit subsidy. After all, why do you need a subsidy as long as there is a (ethanol production) mandate?,” according to Kerns.
The ethanol industry, which consumes the largest share of U.S. corn production, can pay $8.00 per bushel or more for corn and still maintain its margin, Kerns says. “They are not going away.”
The world situation has storm clouds on the horizon which will likely lead to softer grain prices in the future, the risk strategist says. The European financial situation is also having a dampening effect on commodity prices. “Europe is in huge trouble.”
Corn acres for 2012 is a key. Kerns estimates that 2012 corn acreage must be around 95 million acres if we will “grow ourselves out of a shortage in corn stocks.” Kerns is projecting an average 2012 farm price for corn in the $5.00 to $6.00 per bushel range if South America continues to have good weather. Lower values could be realized if the United States has good growing conditions.
Ethanol production, on-farm storage and cattle feeding have bitten deeply into corn stocks and Kerns says corn rationing will be a must. “The market is rationing corn right now and forcing pork producers to consider alternative ingredients to feed pigs.”
The price of soybeans should fall under pressure because of supplies from growers in South America as the United States falls from preeminence in that market, Kerns says. “The price of soybeans is going to be under pressure as long as South American production stays strong. The (U.S.) price of soybeans could get pounded.”
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