Market News

Analysts: Smaller producers may exit

Livestock industry analysts say one consequence of the drought and the resulting high corn prices will be another decline in the number of farmer-cattle feeders and smaller, independent pork producers.

Jim Robb of the Livestock Marketing Information Center tells Feedstuffs that the cattle industry will continue to transition to fewer and larger feeding operations as more one-yard commercial feeders and farmer-feeders go out of business.

While not necessarily predicting long-term structural change, market analyst Kevin Good of CattleFax agrees that many farmer-feeders will likely head to the sidelines over the next few months.

“With elevated corn values, the smaller farmer-feeder—more than likely as we go on into 2013—is not going to feed as many cattle,” Good told those attending the recent Cattle Industry Conference in Denver. “He’s going to be content to sell that corn and bypass the feeding operation.”

Pork industry economist Steve Meyer of Paragon Economics says it’s much the same situation in the hog business.

“The brunt of this is going to fall on the smaller producers,” Meyer says. “We haven’t even made up half of the losses from 2008 and 2009 in the last couple of years—and now we’re faced with record high feed costs.

“My forecast for production costs for next year is 95 dollars per hundredweight on a carcass weight basis.  That’s far and away the highest ever.”

Meyer says there are two categories of producers who will be most affected.

“One is, if you’re not right up there with the best on efficiencies, you’re not going to handle this,” he says, “and number two, if you have some other things like a grain enterprise in the operation, I think that’s probably going to facilitate a little faster response to this.”