The Maschhoffs buys wheat for feed as prices slide

The third-largest hog producer in the United States is buying more wheat for its animals to eat as prices head ever lower, making it an attractive alternative to corn.


"We're right in the thick of changing feed rations," said Aaron Gaines, vice-president of technical resources and support operations at Carlyle, Ill.-based The Maschhoffs.


Feed rations represent 65 percent of total operating expenses for The Maschhoffs, a family-owned company that says it produces enough hogs for packers to feed 16 million consumers a year.


Typically, hogs eat a mix of 80 percent corn and 20 percent soybean meal, but that can vary depending on cost relative to common alternatives such as distillers' dried grains (DDGs), a corn byproduct.


But wheat, normally too expensive to feed to animals, has tumbled in price recently as a huge harvest rolls in from the U.S. Plains and Midwest.


Futures for wheat in Chicago hit a six-year low on Thursday at $4.36 per bushel while Kansas City hard red winter wheat touched $3.98¾ per bushel, its lowest price for a decade.


Wheat boasts higher protein content than corn and weighs more per bushel. Economists calculate that therefore once it is less than 110 percent the price of corn, producers can benefit from switching feed supplies.


Chris Hurt, economist at Purdue University, said the difference in weight per bushel gave wheat about 7 percent more value than corn while the higher protein levels kick that up to 10-12 percent on a bushel basis.


The Maschhoffs is currently bidding at about 103 percent of the corn price, Gaines said.


"Right now the wheat is pricing into our rations," he said, adding they would start using it as soon as possible to try to stretch out corn until the new harvest arrived in the autumn.


Farmers are holding off sales of their stocks of corn because they think supplies could tighten ahead of harvest, pushing prices higher, Gaines said.


A potential La Niña weather pattern in July and August could result in drier conditions and shrink corn yields.


Wheat can replace about 50 percent of corn for young pigs and 100 percent for adult hogs, Gaines said.


But feeding wheat instead of corn is not always straightforward.


Wheat can carry a fungal disease known as vomitoxin and high concentrations can sicken hogs.


"We test for (vomitoxin) in inbound wheat and we have a discount schedule. At a certain level we'll reject that grain and not feed it at all because it's more costly in terms of the animal performance versus the value of grain," said Gaines.


Experts also recommend grinding wheat a little coarser than corn as it can create ulcers in pigs if ground too fine.


Half the feed used by the company is produced from its own mills, which will use roughly 1 million tons of complete feed this year.


The other half comes from mills that are independently owned and contracted to produce feed to meet The Maschhoffs' specifications.


Of the feed mills owned by The Maschhoffs, about half have on-site grain storage.


"We've got well over 50 percent of our total needs stored on site for the year, all for internal use and not for sale," said Gaines.