Local Grain Important To Future Of Southeast Livestock Industry
By: Roy Roberson, Southeast Farm Press
1/15/2013 3:05:37 PM
Grain sorghum acreage in North Carolina jumped more than 10-fold from 2011 to 2012, and wheat acreage in the state is expected to reach an all-time high with the 2012-2013 crop.
Despite the momentum, many growers still wonder: Are the big grain buyers in this for the long-term?
Warsaw, N.C.-based Murphy-Brown is the largest grain buyer in the Upper Southeast, and its parent company Smithfield Foods, headquartered in Smithfield, Va., is the largest pork producer in the world.
Both companies have been instrumental in re-kindling an interest among growers to grow grain sorghum and in promoting educational programs that are helping growers improve grain yields in the company's primary basin for local grains: North Carolina, northern South Carolina, and southeast Virginia.
Increasing local production of feed grains is absolutely critical to the future of the livestock industry in the Southeast, and Murphy-Brown is committed to long-term sustainability of grain production in the Upper Southeast, says Terry Coffey, chief science & technology Officer.
Coffey has worked in the livestock industry for most of his professional career, first as a professor at North Carolina State University and since the early 1990s with Murphy-Brown.
He says that changes in the feed production and distribution end of the business in the past few years have put producers in the Southeast in a tough spot when it comes to competing with other parts of the U.S.
Prior to 2007-2008, the cost of getting corn from the Midwest to livestock facilities in the Carolinas and Virginia was about 65 cents per bushel - just for transportation, basis and delivery.
Now, those same costs are $1.15 a bushel, and at some times during the 2012 grain production season, these costs hit $1.40 a bushel.
"We used to be able to offset that 65 cent per bushel cost by blending fat from fast food restaurants and other sources into our diets," Coffey says.
"Now, demand for the same fat has pushed prices to levels that make it less economically beneficial in livestock rations. And, now, we're not trying to offset 65 cents, but sometimes $1.40 per bushel of grain," he adds.
The use of more and more corn for ethanol has been blamed for pushing corn prices higher. More ethanol means more dried distiller grains and solubles (DDGS), a by-product of ethanol production and a good source of feed for some livestock producers.
Getting DDGS to hog operations in the Southeast is more expensive in some cases than corn, because it isn't practical to regularly fill 90 boxcars, which is the magic number for lowering rail costs.
FEED ENERGY BIGGEST COST
"Feed energy is the biggest cost in livestock production, and right now it costs our hog producers about $10 per animal more in feed cost compared with a producer in the Midwest," Coffey says.
"When you have that kind of economic disadvantage, solely based on where in the U.S. you are located, you have some real long-term sustainability issues," he adds.
About two years ago Murhphy-Brown and Smithfield Foods made a commitment to change the dynamics of raising livestock in the Southeast.
To be competitive, they determined they will need at least 50 percent of their feed to be grown in their primary procurement area of North Carolina, northern South Carolina, and southeast Virginia.
The company fed about 80 million bushels of grain to livestock in 2011.
Overall, North Carolina alone has a need for about 300 million bushels of corn and produces on a good year about one-third that much.
Despite efforts by dedicated university researchers like North Carolina State University Corn Specialist Ronnie Heiniger and other industry leaders, the trend line for corn production in the region has gone down over the past 20 years.
Murphy-Brown has stepped up with research dollars to help change that trend, but Coffey says they realize this will be a long-term change and not one livestock producers can wait for, considering the economic disadvantage they have faced for the past 4-5 years.
The company recognized an opportunity to increase grain sorghum in the region by identifying land that is not ideally suited to corn production, is highly susceptible to deer damage, and is good for double-cropping with soybeans.
To sweeten the pot, Murphy-Brown provided the ultimate incentive - money. The company paid growers 95 percent the value of corn for their grain sorghum. For some growers the profit from sorghum was better than corn.
In response to the financial opportunity, according to FSA growers responded by planting more than 70,000 acres of grain sorghum last year.
Some contend North Carolina may top 100,000 acres of grain in 2013 - that remains to be seen.
One hold back among growers is concern over crop insurance for sorghum. Coffey says they have initiated efforts through the National Sorghum Producers and the United Sorghum Check-off Program to update sorghum crop insurance in the region through RMA.
The big question for growers about grain sorghum remains marketability.
Whether Murphy-Brown will offer the same contracts for sorghum in 2013 is an often asked question at grower meetings.
WILL TAKE IT ALL
"Absolutely, we will take as much grain sorghum as we can get," Coffey says. "Our lab studies show that grain sorghum has about 95 percent the energy benefits of corn in our rations, so we are excited about using more sorghum, and we are willing to pay for it," he adds.
Another primary way Murphy-Brown has chosen to increase grain production in the three-state area is to find ways to increase wheat yields and to spur increased wheat production.
With prices good and marketing opportunities plentiful, North Carolina wheat growers responded with one of the largest crops on record.
Dan Weathington, executive director of the North Carolina Grain Growers Association, says when all the 2012 planting is done, there will likely be close to a million acres of wheat in North Carolina alone.
Improving acreage is one thing, but increasing yields is a different story.
Weather related problems, including a damaging April freeze, held yields down last year in the Upper Southeast, but optimism is high for the 2012-2013 crop.
"Based on what we have seen, wheat yields over the past few years remain about 10 bushels per acre below realistic yield potential," Coffey says. "Getting both acreage and yield up will give growers the best opportunity to make a profit," he adds.
In addition to wheat and grain sorghum, Murphy-Brown has funded research initiatives to evaluate triticale and other grain crops for use in the Southeast.
"We understand our long-term sustainability in the livestock business is directly related to the long-term viability of grain production in our back yard," Coffey says. A big part of sustainability is profitability, and we are dedicated to helping our growers be profitable, regardless of what grain crop they grow, he adds.
Murphy-Brown isn't the only grain buyer in the Carolinas and Virginia, but with roughly a billion dollars invested in the infrastructure of grain and livestock and with another billion dollars a year in feed ingredient purchases, they are a major player.
"We understand we have to get at least half the grain we feed to livestock from our three-state area, and we are committed to doing that. In a little more than a year, we've seen grain sorghum acreage go up dramatically and a renewed interest in wheat production that give us 30 million bushels of new local production this coming year," Coffey says.
We also understand that helping growers be more efficient and profitable in grain production is vital to our success, and we are committed to being a sustainable livestock and grain purchasing company in the Southeast for a long time."
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