price outlook

Everyone is hearing the call to reduce weights as an industry strategy to force the pass-through of higher costs up the chain. Every time the industry cycles through the oversupply phase, joint action is recommended to pull back supply.

This can be an effective strategy but the problem we face is that the industry has not consolidated to the point where joint action is likely to succeed. The reason is the benefit of cheating.

When there are hundreds or thousands of competitors in an industry, each seeks to optimize its output based on its own costs and price offerings without regard to the actions of others.

One of the most revealing quotes I heard recently was “What would we be talking about if we didn’t talk about ethanol?” No doubt it is the elephant in the room for most livestock producers so it is important to spend some time on it but there are so many other interesting and important topics flying under the radar of the ethanol intoxication. We need to and will break out of this fixation and take a wider view soon. Regardless, here are some thoughts about the ethanol situation as it impacts corn prices and cost of production for pigs just to make sure the groundwork is set for future comments.