FAIRBANK -- Corn and soybean prices are falling like a rock, to the delight of struggling livestock producers, but the damage is done.

With harvest under way, prices have retreated by almost half or more from midsummer highs, thanks to favorable production and supply-and-demand reports. Corn and soybeans have been strong in 2008 but soared to nearly $8 and $16 per bushel, respectively, in June after a poor start to the growing season and record flooding in the Midwest scared buyers. Good export demand and biofuels also fueled the frenzy.

As a result, hog and cattle producers nationwide have taken it on the chin for most of the year, experiencing double- and even triple-digit losses, primarily due to sky-high feed costs. Poultry and dairy profitability have diminished as well.

While lower feed costs will help livestock producers now, it wasn't in time to prevent farmers from reducing herd sizes or getting out of the business. As supply dwindles, officials expect higher food prices to follow.

"Higher grain will lead to lower production, and in the end consumers will bear part of that cost," said John Lawrence, Iowa State University Extension livestock economist.

Disappearing act

According to the U.S. Department of Agriculture, cattle placements in feedlots with a capacity of 1,000 head or more fell 9 percent nationwide to 10 million in September compared to last year. In Iowa, placements plummeted 27 percent in feedlots under 1,000 head to 190,000 during the same time period.

Harlan Hartman sees the impact every day when feeding Holstein calves in barns and feedlots that are half empty. Hartman buys male calves a week old, feeds them until they're about 300 pounds and then sells the animals to feedlot operators.

However, demand has dropped off considerably and operating costs got to the point that he is feeding only about 700 head at this time. Capacity at his farm north of Fairbank and two others he utilizes is 3,000.

"Everything (feed costs) damn near doubled within the past two years," Hartman said. "(Cattle buyers) used to be beating my door down. I'm having trouble getting rid of them now."

If things don't improve soon, Hartman said, he may have to shutter one or both remote growing sites.

"I'm just lucky the bank is working with us to stay in business," Hartman said. "It's been a big change for us (rise and fall of feed), but everything will work out if I hold on long enough."

Losses this year on market cattle are staggering. ISU calculations show feedlot operators finishing 550-pounders lost between $20 to $133.45 per head from January through September. Corn to feed one animal cost $171.63 in January and $249.58 in September.

Returns on 750-pound steers during the same time period were just as bad. Only August showed a profit of $1.81 per head, while the rest of this year was in the red. The worst loss was $167.14 per head.

Feedlot operator Tom Schrader of rural Waterloo still plans to buy 120 head of steers this fall.

"When you're buying $7 (per bushel) corn, it doesn't work when you can produce it for maybe $4. We're still waiting to see if feed prices come down (more)," he said.

This year hasn't treated pork producers much better. Only two of the first nine months were profitable for farrow-to-finish operations, earning nearly $6 per hog in May and almost $9 in August. During the rest of the months, high feed costs and lower selling prices throttled the industry, with losses ranging from nearly $10 to nearly $40 per head.

The latest USDA hogs and pigs report indicates the swine industry nationwide has scaled back its breeding herd by 3 percent to 6 million head in an effort to reduce costs and boost prices.

Ed Juhl, who farrows about 1,800 sows with partner Rod Degner near Hudson, is not cutting back since they raise they're own grain and have buildings to pay off. However, the longtime hog farmer said he can see why others might, especially if producers are older and don't have a substantial capital investment.

"If you're growing grain it isn't as bad as those buying all their feed. That gives us more staying power than others," Juhl said.

The supply of hogs and pigs from Canada entering the U.S. has slowed, reports say.

Poultry production is scaling back as feed costs continue to impact profitability. It will likely be down 3 percent in the fourth quarter, reports said.

The number of milk cows on farms in the 23 major dairy states was 8.74 million head according to the Sept. 19 USDA milk production report, about 3,000 less than July 2008.

Farm to fork

Consumers will eventually feel the pain -- even more so than right now -- if demand for meat, eggs and dairy products is strong domestically and abroad. The U.S. Department of Agriculture predicted food prices will rise 4.5 percent to 5.5 percent this year as retailers pass on higher wholesale and operating costs.

Reduced supplies often lead to bigger grocery bills, retailers said. Lawrence says the USDA predicts meat, poultry and fish prices will increase 3 percent to 4 percent next year. In 2009, prices are expected to shoot up 5 percent to 6 percent.

"We anticipate this spring to see some increases. It's always a supply and demand situation," said Jerry Fleagle, president of the Iowa Grocery Industry Association and former grocery store owner in the Cedar Valley.

But don't expect to see any sudden prices adjustments, he said. Production downturns are just starting. Cattle and hogs born now won't be ready for market for several months to more than a year.

"That's when consumers will see it," Fleagle said.

Bob Van Gorp, meat department manager at Fareway in Cedar Falls, said prices haven't jumped yet. In fact, he's been "pricing things tighter" due to a downturn in the economy.

Meat demand is good, Van Gorp said. He believes more people are eating at home and rather than restaurants. People are choosing more economical cuts of beef, pork and chicken than before.

Eventually, he said, lower meat supplies will make prices rise, but how much will be determined by demand. Van Gorp said pricing is cyclical, and what goes up will eventually come back down.

"I wouldn't recommend going out and selling the freezer just yet," he said.

Contact Matthew Wilde at (319) 291-1579 or matt.wilde@wcfcourier.com.