What is 'Corn/Hog Ratio'

The corn/hog ratio is a calculation in which the comparison of the price of a hog is divided by the price of the corn needed to sustain him. It is used to determine the profitability of raising pigs versus growing and selling corn.

BREAKING DOWN 'Corn/Hog Ratio'

The corn/hog ratio is used to determine the profitability of raising livestock, pigs in particular. The calculation for corn/hog ratio is the price of one hundred pounds of live hog (cwt) divided by the price of a bushel of corn. The ratio is used to help farmers determine the value of a crop of corn compared to the value of a hog, that they would have to feed with the same crop of corn.

For example, if the price of a hog is $50/cwt and the price of a bushel of corn is $4, the corn/hog ratio would be $50/$4, or 12.5.

Corn is used in this feed ratio because it is a major feed type used in raising livestock, estimated to make up between 65 and 70 percent of pig feed. Many farmers who grow corn could either sell the corn itself as a commodity, or could feed it to their hogs and then sell the hogs. 

If corn is determined to be more valuable than the hog, then the farmer would sell the corn and reduce the livestock inventory. If hogs are more valuable than the corn, then the farmer would feed the corn to the hog, thus selling less corn on the market. The profitability ratio is determined to be profitable at above 1:12. Anything below that is considered to be unprofitable.

Modern applications of the 'Corn/Hog Ratio'

These days many farmers don’t actually grow their own corn to feed their livestock. With modern technology, and the wide availability of shipping and delivery, some farmers now opt to have their feed delivered to their farms. The corn/hog ratio is still a reliable way to determine whether or not pork farming will be profitable for the year.

In 2014, an epidemic swept through piglet populations, causing massive loss of life and inventory. These numbers have altered a lot of pork predictions due to the fear of subsequent pork shortages. Only time will tell if these numbers will right themselves in the coming years as supply and demand stabilize, but the ratio still remains the benchmark for farmers trying to decide whether to increase their supplies or to cull their inventory.

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