Corn Prices Expected to Go Through the Roof

It’s remarkable to think about, but corn production in the United States, or the lack of corn production in this country, quite literally has an effect on almost every aspect of our lives and especially on the lives or restaurateurs.

The USDA recently announced a severe cut in the corn prospects for the corn crop, causing a severe spike in the price of futures. The price of a bushel of corn is expected to hit $6 for December deliveries.

Cutbacks in Various Meat Products

The expected shortage of corn is said to be leading to the rise of prices of poultry, beef and pork. In addition, there may be a spike in the costs of high fructose corn syrup and possibly even ethanol.  Below, we’ve detailed expected cost increases for various products:

Pork

The general consensus is that pork producers need to be paying no more than $4 per bushel for corn in order to break even when they sell live hogs. At current corn prices, it is expected that the cost of pork is going to skyrocket as producers begin trying to make up for the extra cost of the feed they need to provide for their herd.

The price of Smithfield Food for example, a major pork producer, is expected to go down in fiscal 2012 as the price of feed skyrockets.

Cattle and Poultry

Cattle and poultry prices are expected to continue to rise as well. Of course, the fact that beef and poultry prices have been steadily rising for the past few years already is just an indicator that we can expect to see even faster price increases now that the cost of feed is expected to skyrocket as well.

Export Products

The one bright spot on the horizon is exports. As the value of the dollar continues to fall relative to world currencies, exports are expected to continue to grow. The recent price increases in the cost of corn futures are expected to lead to a significant rise in the value of cattle, poultry and hog exports.

Is It Time to Start Pigging Out on Hogs?

The USDA recently released their quarterly report on the number of hogs available for slaughter, breeding and sowing in the United States. The numbers are showing some improvement over last quarter, with a slight uptick since the previous report. However, the numbers are down overall since the same time last year. That said, some analysts examining the reports say they expect to see the numbers continuing to increase over the coming months due to increased survival rates.

So does that mean you should start adding more hog products to your menus or lowering prices? Well, the answer is a definite maybe…

Down for Now, But Possibly Up Longer Term

The pig population in the United States as of June 1 was 64.4 million head. That’s down 4% from the same date last year, however it is up 1% from March and the numbers look set to continue to rise at a slow, but steady pace.

What it All Means

Right now, Wall Street analysts say that they expect the numbers to continue to rise meaning that there will be a slight glut in the inventory available in the coming months. This should theoretically cause a slight decline in fresh pork prices, meaning better bottom lines for restaurateurs and other food service professionals who use pork and other hog related products extensively in their menu.

So Does This Mean Prices Will Come Down Substantially?

On the one hand, the number of pigs available on the market should increase, theoretically showing a slight decline in prices. On the other hand, the pig population is still at its lowest level since 2007 and the United States is now exporting pork to the Russian market, which means demand should keep up with supply.

The only question is how high the numbers will go. If they go too high, supply will begin to outstrip demand, leading to lower prices. But will that actually happen? As we said, the answer is a definite…maybe.