Canadian pork producers say they are on the verge of heavy losses and can’t stay in business with high corn-fed ethanol requirements on both sides of the border and low crop yields in the United States due to drought conditions that have caused grain prices to soar.

"Grain is by far the largest cost component of raising pigs and marketplace realities are such that pork producers cannot simply pass along added costs to buyers," said the Canadian Pork Council’s chair Jean Guy Vincent.

"Margins become squeezed and producers need to either absorb heavy losses or, unfortunately, get out of business."

The next few months are now expected to be ones of very heavy losses at a time when, only weeks ago, pork farmers were expecting to be in a much-awaited period of favourable economic conditions, Vincent said.

He added that the current feed situation and lack of carryover stock from last year’s crop supports the argument that it is necessary to reduce grain usage for ethanol and to consider the amounts of grain essential for feeding livestock that is used to feed people.

The United States Department of Agriculture cut its estimate of U.S. corn production and cut its forecast of U.S. 2012/13 corn ending stock to 650 million bushels, the smallest ending stock since 1995/96. This has contributed to the 50 % increase in future pricing in a relatively short period of time.

The Canadian Pork Council wants governments to temporarily relax the mandates and targets for biofuel production in response to the crisis. The United States estimates that 40 % of the corn crop will be made into fuel for cars and trucks, compared to 36 % for feed.

"The status quo is not sustainable for the hog industry," Vincent said. "Producers should not have to decide between losing their farm or increasing their debt to pay for unsustainable feed costs. We need the market to pay for the cost of providing consumers a healthy and safe food supply."

The United States government has intervened to support U.S. pork producers through the USDA’s $100 million supplemental pork purchase.