September 5, 2012

Surging corn, soy prices cut livestock output

As the surge in soy and corn prices to record levels this summer raises animal feed costs, signs are intensifying that livestock farmers are cutting production.

"Livestock producers have started to react to the high costs of soymeal, corn and other ingredients," Oil World said Tuesday (Sep 4). "Margins have become negative, leading to increased animal slaughtering."

US soy and corn futures hit record highs this summer as scorching temperatures and drought ravaged crops in the US, while drought also severely cut soy harvests in major exporters Brazil and Argentina. Both soy and corn are key animal feed ingredients.

"These high prices are painful for livestock producers and will initiate a cutback in production, primarily in poultry and pig industries," Oil World said.

In Brazil, production costs for poultry have increased by 25% following the soy and corn price rises, it said. "As a result, poultry production has started to decline and it is now expected to fall to only around 12 million tonnes in calendar year 2012, down 7% from last year," it said.

"Poultry production has also started to decline in the US and other countries."

Global soymeal consumption is likely to fall in October-December 2012 as the high prices reduce livestock output, it said. The trend is likely to continue in the early months of 2013 until new crop soy supplies arrive from South America, it said.