Corn Basis Determines Impact of Out-of-state Corn on Animal Ag Profits

By Nicholas E. Piggott, professor and Extension specialist, NC State Department of Agricultural and Resource Economics

With a deficit of feed grain to nourish North Carolina’s “tails and feathers” production – hogs, broiler chickens and turkeys – the profitability of our state’s livestock industry hinges on adequate, reliable and low-cost out-of-state sources for corn.

As North Carolina agriculture competes in a global agricultural economy, it may be prudent to invest in our infrastructure – depending on the numbers.

The Southeast in general and North Carolina, in particular, are a region with a feed grain deficit: the significant number of hogs, broilers and turkeys produced consume more feed grains annually than what is produced in the state. The prominent components fed to hogs and poultry are corn, wheat, sorghum, and soybean meal – and corn is an essential component.

Historically, the North Carolina livestock industry has sourced corn imports from regions that have excess supplies of corn, such as the Midwestern Corn Belt, and transported this corn to North Carolina by rail. They have also imported corn through the Port of Wilmington from international destinations like Brazil or Argentina.

In this NC State Economist, we discuss using corn basis to calculate changes in the transportation cost of importing corn into North Carolina, and take a look forward at possible steps to preserve the vitality of North Carolina’s animal agriculture industry – the largest segment of our $84 billion agricultural economy – potentially lowering the costs of importing corn and increasing livestock profits.

Topics include:

• Arbitrage and how it impacts the cost of corn for feed
• Corn basis defined and how it is used in determining costs
• Historical references
• Estimated change in transportation costs
• Summary of importance

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