The new normal: $5-plus corn and $300-plus soybean meal

News
Feb 8, 2013
by WLJ

The new normal for animal feed costs will be at least $5 corn and $300 soybean meal, according to Thomas Elam of FarmEcon during his presentation on the Economic State of the Industry. He was speaking at the Meat and Poultry Research Conference held at the 2013 International Production and Processing Expo. The conference was cosponsored by the American Meat Institute, U.S. Poultry & Egg Association, the American Meat Science Association, and the Poultry Science Association.

“Will we see $10 corn and $650 soybean meal?” Elam questioned. “It’s very possible. Also, $5 corn and $300 soybean meal is equally probable.”

But, he believes those are minimums in the future.

“We will continue to see volatile feed costs for the next 18-20 months,” Elam continued. “There will be no significant change through March and April. Then, it will depend on the weather this summer. If there is no rain again this year, we’re in serious trouble. And, there has not been enough snow this winter so far. Then, there is the ethanol squeeze.”

From 1950-2005, for meat and poultry producers, consumer demand was the major driver, Elam explained.

Now, feed cost is the driver, and consumer demand has slowed. And, it is slowing the recovery from the recession, because more personal income is required for food.

On the positive side, “exports have held up incredibly well. However, there are always opportunities,” Elam remarked. “They include product innovation, distressed asset sales, more flexible price contracts, upselling export markets, and continued cost cutting for increased efficiency.” — WLJ

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