Gas prices keep climbing higher

Government subsidies promoting and protecting the nation's corn-to-ethanol industry should be phased out, according to the Nebraska Pork Producers Association (NPPA).

Specifically, NPPA is calling for the phaseout of the blender's credits and import duties dealing with ethanol on their expiration dates. 

To promote the domestic ethanol industry, Congress implemented a 54-cent-per-gallon tariff on foreign ethanol, along with a 51-cent-per-gallon blender's tax credit for ethanol production.

What's hurting pork and other livestock producers is the high cost of grain, especially corn and soybeans, said Larry E. Sitzman, NPPA executive director.

"I'm getting phone calls from different producers saying they can't hang on any longer and they will be out of business in six months if this doesn't change," Sitzman said.

Corn prices at the Aurora Co-op on Monday closed at $5.83 per bushel and soybeans at $12.36 per bushel.

"I'm at the point where I'm fearful that we are going to lose a substantial amount of independent and small producers, if we haven't already," Sitzman said.

One of the factors driving up corn prices is ethanol production.

In Nebraska, more and more motorists are filling their tanks with a blend of 90 percent gas and 10 percent ethanol. According to the Nebraska Ethanol Board, gasoline blended with ethanol makes up 80 percent of gasoline sales in Nebraska.

The reason is that E10 is selling for 8 cents to 10 cents cheaper at the pump as the price of regular gasoline continues to skyrocket.

On Monday, Nebraska AAA daily fuel gauge reported new record highs for Grand Island as regular gasoline was averaging $3.685 per gallon and diesel was at $4.319 per gallon. Compared to a year ago, regular gasoline has gone up 49 cents per gallon and diesel up $1.46 per gallon. Compared to a month ago, regular gasoline has gone up 36 cents per gallon and diesel 31 cents.

Sitzman said concerns focused on high input costs of feed caused a liquidation of hogs in Canada that are flowing into the U.S. market.

He said past market signals indicated the need for additional animals that caused even additional flows into the marketplace.

And to complicate the problem facing pork producers and other livestock producers, tight supplies and strong demand mean prices for corn and soybeans are likely to remain high for the foreseeable future, according to Terry Francl, American Farm Bureau Federation senior economist.

A report released by the U.S. Department of Agriculture last week, Francl said, showed a slight reduction -- of a bushel an acre -- in corn yield estimates for the current crop year compared to a report published in February. The latest estimate predicts corn yields of 153.9 bushels an acre, due to weather delays in corn planting.

"With the exception of wheat, supply and demand balances, particularly for corn and beans, will remain tight and prices high," he said. "Moreover, despite the high crop prices of the past year or so, it is not clear that demand rationing has truly begun."

Francl said corn prices could go as high as $7 a bushel and $15 a bushel for soybeans -- before the rationing process truly sets in.

"I sense we are getting close to that point, but we are not there quite yet," he said.

Francl said demand for corn to be used for ethanol was reduced by 100 million bushels in both the 2007-08 and 2008-09 crop years.

"Less corn will be sold to ethanol plants because construction of new plants has not been as rapid as anticipated," he said.

State pork producers currently are losing as much or more than $50 per head due to the high feed costs, which Sitzman said makes up about 60 percent of a pork producers cost.

"Nebraska and other states are losing independent family farm pork producers due to input costs and the resulting difficulties to obtain operating capital," Sitzman said. "Small- and large-volume producers are losing their equity at a 4- to 5-percent rate per month. The resulting effect will be further consolidation of the pork industry."

Nebraska is one of the nation's top pork producing states.

According to the U.S. Department of Agriculture, in March Nebraska pork slaughter facilities killed 669,400 head, which made the state the nation's sixth leading pork slaughtering state.

But, Sitzman said, if the supply of hogs continue to decline, it could jeopardize the state's pork packing industry.

"I have heard conversations that if this continues, I think the packer industry will have to look at the type of facilities they have and where they are going to have them," he said.