What is the Corn/Hog Ratio
The corn/hog ratio is a calculation in which the comparison of the price of a hog is divided by the cost of the corn needed to sustain him. It is used to determine the profitability of raising hogs versus growing and selling the feed corn.
BREAKING DOWN Corn/Hog Ratio
The corn/hog ratio is used to determine the profitability of raising livestock, hogs in particular. The calculation for corn/hog ratio is the price of one hundredweight (cwt) of live, on-the-hoof hogs divided by the cost of a bushel of corn. The ratio is used to help farmers determine the value of a crop of corn as compared to the value of a hog, which they would have to feed with the same crop of corn.
For example, if the price of a hog is $50/cwt and the cost of a bushel of corn is $4, the corn/hog ratio would be $50/$4 = 12.5.
Corn is used in this feed ratio because it is a primary type of feed used in raising livestock. Estimations show feed corn makes up between 65% and 70% of hog's diet. Many farmers who grow feed corn could either sell the corn itself as a commodity or feed it to their hogs and then sell the hogs.
If corn is determined to be more valuable than the hog, the farmer would sell the corn and reduce their livestock inventory. If hogs are more valuable than the corn, the farmer will use the corn as feed, 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 Application of the Corn/Hog Ratio
Today many farmers do not grow the feed corn required for their livestock. With advanced technology and the wide availability of shipping and delivery, most farmers now opt to have their feed delivered to the farm. The corn/hog ratio is still a reliable way to determine whether or not pork farming will be profitable for the year.
A mathematical ratio cannot account for some events. In 2014, as reported by National Geographic, an epidemic swept through the piglet population, causing massive loss of inventory. These numbers altered the pork predictions for that year due to the fear of a subsequent pork shortage. However, the ratio remains the benchmark for farmers trying to decide whether to increase their live hog inventories or to cull it.