Hog producers are now able to compete with ethanol producers for corn, according to Purdue agricultural economist Dr. Chris Hurt.
Dr. Hurt spoke to swine veterinarians on the topic of “Global Feed Economics in a Biofuel World” during the Boehringer Ingelheim Vetmedica (BIVI) Swine Health Seminar in Denver on Friday.
“This is an amazing difference from just five years ago,” Dr. Hurt said about the hog industry’s adjustment to higher corn prices. “The hog industry was largely set up with $2-2.50 corn going into 2006. After that we saw major increases in those corn prices.”
Hog producers initially absorbed those higher costs by reducing margins, which meant big losses and ultimately resulted in reduced supplies. “You reduce the supply enough, you bring those hog prices up. That’s where we are today. Hog producers can pay $6-7 for corn with the prices they’re getting for hogs,” he said. “That up to $7 is higher than ethanol plants can pay for corn and still cover all their costs.”
Dr. Hurt talked about the demand drivers for both corn and soybeans that are causing increased acreage globally and how he expects feed prices to moderate in the next several years. “That brings us back to more like in the $5-5.50 corn range.”
Listen to my interview with Dr. Hurt here: Dr. Chris Hurt