The Comstock Report

Written on:April 1, 2011
 
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by David Kruse
President, ComStock Investments (With Permission to Reproduce)
Copyright 2011@ CommStock Investments, Inc., David Kruse

The National Pork Producers Council (NPPC) believes that hog producers have a birthright to buy cheap, below the cost of production, corn for feed. They never ever complained about farm subsidies keeping corn farmers producing burdensome stocks of corn, but have focused a lot of ire on ethanol subsidies that helped develop an industry that pays farmers what their corn should be worth, something the hog industry rarely did, so that farm subsidies can be eliminated. That was why farmers produced hogs, so that they would walk their corn off the farm at a profit.

In the 1980’s and 90’s we entered a period when there was no incentive from the market to produce corn. Farmers literally lived off of farm subsidies. Hog producers could buy corn cheaper than they could raise it allowing commercial production to expand, eventually eliminating any advantage that farmer feeders who grew their own feed had over commercials producers who bought it.

Those were the old days before ethanol. It has been a hard adjustment for hog producers to make since. The NPPC suffers from selective subsidy revulsion. They want cheap corn so bad, the NPPC now wants the CRP reduced by 4-8 million acres. I was surprised. I would never have guessed that a sector of agriculture would ever be as blatantly self focused as the pork industry has revealed itself to be, to attack another sector of agriculture as they have corn growers. They want cheap corn and they could give a hoot about absolutely nothing else. . . U.S. energy security, the Midwest economy, pheasants, other farmers and so on … The NPPC wants cheap corn and everybody and everything else can go to heck.

The pork industry has evolved into a cold corporate self centered mentality that is only focused on what is good for “the industry.” The people that used to produce the hogs, are almost all done with the industry … .and they should be, because that verse about gaining the world, but losing your soul applies to the NPPC today. Traditional values went the way of the traditional pork industry. When it restructured, it lost much of who and what it was.

There has not been a physical shortage of corn. In fact, the hog industry has continued to expand production despite the development of the ethanol industry as well as expand pork exports. What changed is that they can’t steal corn below the cost of production anymore like they used to.

The pork industry today is structured so that pork has value while hogs do not, favoring integrated producers. If there were really any independent producers left, industry structure is the issue they would be most focused upon. The fact the industry is instead focused on ethanol is evidence the subjugation of independent hog producers is complete.

If the hog producers do not appear to care, then no one else will either. They think their problem is ethanol as they can no longer buy LDP subsidized corn below the cost of production. If you don’t know what your problem is, it is very hard for anyone to help you. DK

David Kruse is president of CommStock Investments,Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet. CommStock Investments is a registered CTA, as well as an introducing brokerage. Mr. Kruse is also president of AgriVantage Crop Insurance and Brazil Iowa Farms, an investor owned farming operation n Bahia, Brazil.(Futures Trading involves risk. Past performance is not indicative of future performance.)


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