By Theopolis Waters
CHICAGO, Dec 11 (Reuters) - Cheap grain has encouraged some
U.S. hog farmers to switch away from a controversial drug to
bulk up their animals, giving them the added benefit of being
able to sell to big customers such as China, which have banned
the supplement.
Ractopamine, known by the brand name Paylean, cuts the total
cost of producing a hog by at least $2, or about two percent,
experts said. Safety concerns have prompted 23 countries,
including major importers Russia and China, to refuse meat
containing the additive.
Christina Gaines, a spokeswoman for Elanco, one of the
producers of ractopamine, said the drug "has been safely used in
livestock production for more than a decade and affirmed by 30
regulatory authorities."
While corn prices hovering near five-year lows have prompted
U.S. hog farmers to use more grain and less ractopamine,
supplies remain tight.
Nebraska hog farmer Brian Zimmerman now has Smithfield Foods
SFII.UL , owned by China's Shuanghui International Holdings
Ltd. 1241.HK , fighting over his ractopamine-free hogs with
Hormel Foods (N:HRL) HRL.N .
All of Smithfield's own hogs are raised free from
ractopamine and most go to China, the world's largest pork
consumer.
China took $353 million of pork from the United States from
January to October this year, the U.S. Department of Agriculture
(USDA) said, down about $67 million from the same period last
year which represents 8 percent of overall U.S. pork exports.
That could rise as the USDA said in October China would
resume imports from 14 domestic pork plants and warehouses after
halting some shipments in 2014 over the use of ractopamine.
"They need us, we need them. Hopefully they can be the goose
that lays the golden egg for us," said Zimmerman.
Ractopamine was used by roughly 80 percent of U.S. hog farms
in 2012, when corn prices topped $8 per bushel. Corn costs have
fallen to about $3.70 per bushel.
At the same time, profits for pork producers in the United
States have deteriorated. Purdue University estimated 2014 hog
farmer profits at $54.37 per head versus a projected loss of
$3.20 for 2015 after hog numbers ballooned in the industry's
efforts to recover from a deadly pig virus.
Ron Plain, a University of Missouri economist, said the
economics must add up.
"The fact that you lose some export markets matters. And,
the value of the improved animal performance becomes a little
less valuable when corn is cheap," said Plain.