March 13, 2007

Corn-fuel demand may cut US meat output: USDA
 

High feed costs, created by the explosive growth of the fuel ethanol industry, will lower US beef and broiler chicken output this year by a quarter billion pounds from earlier forecasts, the US government said on Friday.

The Agriculture Department said beef output would dip by 62 million pounds and chicken by 124 million pounds from last month's estimate, with total red meat and poultry production forecast for 90.359 billion pounds. Cattle, hog and poultry feeders say abrupt increases in feed costs--predominantly corn--are squeezing their operations.

To save on feed, farmers will keep their cattle on grass for longer, taking fewer animals to the slaughter houses, it added. For similar reasons, fewer chicks are being hatched. This move, said the USDA, means 60 million pounds of beef and 163 million pounds of chicken may not make its way onto supermarket shelves.

Since the US switched from using the fuel additive MTBE (methyl tertiary-butyl ether) to ethanol last year to reduce smog, corn prices have doubled as the ethanol industry is expected to use 2.15 billion bushels of the 2006 corn crop and 3.2 billion bushels of this year's crop.

The USDA said the decline in beef carcass weights reflects several factors, including higher feed costs, harsh winter weather and higher-than-expected first quarter beef slaughter.

Based on low slaughter numbers in January, broiler output is also expected to fall in the first half of this year but will rebound in the final half.

Brazil and Argentina are forecast to grow record corn crops in 2006/07, said USDA. It pegged Brazil's crop at 48 million tonnes, up 2 million tonnes from February, and Argentina's at 21.5 million tonnes, up 500,000 tonnes from last month.

USDA estimated Brazil's soybean crop at a record 57 million tonnes, up 1 million tonnes from its February estimate.

Private consultant John Schnittker said US soybean plantings are expected to fall sharply as corn production zoom, drawn upward by prices that could hit a farm-gate high.

At the Chicago Board of Trade, soybean futures prices fell at mid-morning. Soybeans for May delivery sold for US$7.52, down 6-3/4 cents a bushel. May corn was US$4.18-1/2, down 3-1/2 cents a bushel, and May wheat sold for US$4.74-1/2 a bushel, down one-half cent.