The corn-to-hog ratio is a calculation to understand the economic opportunity of raising livestock, used to determine the profitability of raising pigs versus growing and selling corn feed. It is a comparison that takes the price of a pig and divides it by the cost of the corn needed to support the pig. Let's see what the corn-pork ratio is, what it is for and what its modern application is.
What is the corn-pork relationship?
The corn-to-hog ratio is used to determine the profitability of raising livestock, particularly pigs. The corn-to-hog ratio calculation is the price of a hundredweight (cwt) of live hogs divided by the cost of a bushel of corn. The ratio is used to help farmers determine the value of a corn crop compared to the value of a pig, which they would have to feed the same corn crop. For example, if the price of a pig is 70 euros/quintal and the cost of a bushel of corn is 5 euros, the corn-pig ratio would be €70 / €5 = €14.
What is the corn-pork relationship for?
Corn is used in this proportion because it is the main type of feed used in livestock raising. It is estimated that corn makes up between 65% and 70% of pigs' diet. Many farmers who grow feed corn can sell the corn as raw material or feed it to their pigs and then sell them. If corn is determined to be more valuable than pork, the farmer would sell the corn and reduce his livestock stock. If pigs are more valuable than corn, the farmer will use the corn as feed, thus selling less corn in the market. The profitability ratio is determined to be profitable above 1:12. Anything below is considered unprofitable.
Corn-pork ratio from 2013 to 2023. Source: Bloomberg.
Modern Application of the Corn-Pork Ratio
In the modern era, many ranchers do not grow the corn needed to feed their livestock. With advanced technology and wide availability of transportation and delivery, most farmers now choose to have their feed delivered to them on the farm. The corn-to-hog ratio remains a reliable way to determine whether or not hog farming will be profitable during the year. A mathematical ratio cannot take into account some events. In 2014, an epidemic devastated the piglet population, causing massive stock loss. These figures altered pork predictions for that year due to fears of subsequent pork shortages. However, the ratio remains the benchmark for farmers trying to decide whether to increase their live pig inventories or cull them.